10 September 2025 India | NBFC | Company Update

Bajaj Finance | BUY

AR Analysis: Expanding horizon; changing mix

We highlight key takeaways from BAF’s FY25 Annual Report. In unsecured loans, BAF gained Ajit Kumar
[email protected] | Tel: (91 22) 66303489
market share of ~420/120bps YoY in consumer durable/personal loans, aided by strong
Raghvesh
growth in EMI cards post lifting of the RBI embargo and rising share of salaried/cross-sell PLs. [email protected] | Tel: (91 22) 66303099
In salaried PL, income criteria was relaxed (INR 0.3mn in FY25 vs. ~INR 0.5mn/0.6mn in Mayank Mistry
FY24/22), which broadens the customer base but raises asset quality risks. Diversification into [email protected] | Tel: (91 22) 62241877
multiple segments remain a key strength, with non-BAF auto, SME and its sub-segments like Shreyas Pimple
[email protected] | Tel: (91 22) 66301881
industrial equipment, CV, tractors and new car financing delivering strong traction,
Shubham Karvande
underscoring BAF’s pivot towards secured lending. Core fee income growth moderated in
[email protected] | Tel: (91 22) 66303696
FY25 due to lower growth in distribution/foreclosure charges, and RBI disallowing
Arun Nalkara
prepayment penalties in a few categories from Jan’26 should put further pressure on core fee [email protected] | Tel: (91 22) 66303640
income growth in FY26. FY25 saw stress in the unsecured book intensifying, with
slippages/write-offs at a 3-year high, driving a rise in Stage 2/3 assets and higher provisioning Recommendation and Price Target
Current Reco. BUY
in unsecured loans. Tech spends has moderated (8% YoY in FY25 vs. 46% CAGR over FY21-
Previous Reco. BUY
24) but earlier heavy spends done on the tech side is leading to improvement in operating Current Price Target (12M) 1,060
leverage. We expect pressure on yields due to movement in secured segments to be offset by Upside/(Downside) 11.8%
decline in cost of funds. Further, pressure on fee income should be largely offset by operating Previous Price Target 1,000
Change 6.0%
leverage. Credit cost in FY26/27 should moderate from FY25 levels but still remain higher
than long-term trends. We expect ~23%/27% AUM/EPS CAGR during FY25-27E and Key Data – BAF IN
maintain our BUY rating with a revised TP of INR 1,060 driven by rollover, valuing BAF at Current Market Price INR948
4.4x/22x Sep’27 BVPS/EPS. Market cap (bn) INR5,901.4/US$67.0
Free Float 40%
 Unsecured loans: Sharp market share gains in PL/CD; criteria of availing salaried personal Shares in issue (mn) 6,180.0
loans coming down and more focus on higher ticket size/longer tenure loans: Diluted share (mn) 6,180.0
3-mon avg daily val (mn) INR7,703.9/US$87.4
In consumer durables, despite AUM YoY growth moderating to 25% YoY in FY25 vs. 52-week range 979/644
32% in FY24, BAF gained a massive ~420bps of market share on YoY basis. This might Sensex/Nifty 81,101/24,869
INR/US$ 88.1
be driven by ~44% YoY growth in O/s EMI Cards in FY25 after a decline of 2% YoY in
FY24 due to RBI lifting embargo on sanction/disbursal of loans under ‘eCOM’/’Insta EMI Price Performance
Card’ in May’24. (Exhibit 1-5) % 1M 6M 12M
Absolute 8.1 13.0 29.3
In Personal loans (ex-Gold loans), YoY AUM growth bounced back to 30% YoY in FY25 Relative* 6.5 3.3 30.6
vs. 23% in FY24 leading to ~120bps YoY market share gains. We also note share of * To the BSE Sensex
salaried personal loans (SPL) and personal loans cross-sell (PLCS) going up in the personal
loans mix. However, annual gross earnings needed to avail SPL has come down to INR
0.3mn in FY25 vs. ~INR 0.5mn/0.6mn in FY24/22. This reduction in income criteria gives
the company a larger customer base to cater to, though asset quality trends in the lower
income salaried segment needs to be watched out for. (Exhibit 6-9)

BAF also highlighted its intention of expanding term loan portfolio from 5% to 20%,
with more focus on longer tenures and larger ticket sizes in this segment.

Financial Summary (INR mn)

Y/E March FY24A FY25A FY26E FY27E FY28E
Net Profit 144,512 167,795 211,964 267,365 332,813
JM Financial Research is also available on:
Net Profit (YoY) (%) 25.6% 16.1% 26.3% 26.1% 24.5%
Bloomberg - JMFR <GO>,
Assets (YoY) (%) 36.5% 24.1% 22.1% 23.3% 21.9%
Thomson Publisher & Reuters,
ROA (%) 5.0% 4.5% 4.5% 4.6% 4.7%
ROE (%) 24.0% 22.2% 22.2% 22.9% 23.8%
S&P Capital IQ, FactSet and Visible Alpha
EPS 23.4 27.0 34.1 43.1 53.6
EPS (YoY) (%) 22.8% 15.6% 26.3% 59.3% 57.0% Please see Appendix I at the end of this
P/E (x) 40.5 35.1 27.8 22.0 17.7 report for Important Disclosures and
BV 124 156 184 221 266 Disclaimers and Research Analyst
BV (YoY) (%) 38.0% 25.5% 18.3% 41.7% 44.5% Certification.
P/BV (x) 7.64 6.09 5.14 4.30 3.56
Source: Company data, JM Financial. Note: Valuations as of 09/Sep/2025

JM Financial Institutional Securities Limited

Bajaj Finance 10 September 2025

 Auto/SME lending: Focus on non-Bajaj auto portfolio; multiple segments to play with: In
auto loans, BAF financed only ~18%/22% of Bajaj Auto’s 2W/3W domestic sales in FY25
vs. ~41%/49% in FY24. However, BAF financed ~0.45mn non-Bajaj Auto 2W vehicles, up
~87% YoY. (Exhibit 10-11)

In SME lending (including car financing), strong growth of 37% YoY in FY25 was
supported by both its existing sub-segments and newer segments (industrial equipment
financing, tractor financing, new car financing, etc.). In FY25, BAF launched industrial
equipment financing (up 72% YoY), CV financing (AUM: INR 9.42bn in FY25), affordable
housing and vehicle leasing reflecting BAF’s broader push into secured lending. Launched
in FY24, new car financing also gained pace with AUM becoming >3x to INR 52.8bn as
of FY25 (~1.3% of consol AUM). Tractor financing portfolio (launched in FY24) also
stood at INR 7.1bn as of FY25 (~0.2% of consol AUM).

Unsecured SME loans for businesses and unsecured/secured loans for professionals both
combined stood at INR 483.6bn, growing at 27% YoY in FY25. This needs close
monitoring as far as asset quality trends are concerned. (Exhibit 12-14)

 Fee income: Core fee income comes under pressure as distribution/foreclosure charges
comes under pressure: BAF’s other income grew 28% YoY in FY25 (vs. ~14% in FY24),
but the underlying trend was weak as core fee income grew only ~13% YoY, while the
non-recurring other income grew by ~88% YoY in FY25.

A key drag was moderation in growth of foreclosure charges (~16% YoY in FY25 vs.
~40%-60% YoY growth seen during FY22-24), which are likely to slow further with RBI
disallowing prepayment penalties on LAP/MSME loans from Jan’26. (Exhibit 24-27)

Distribution income also remained muted (1% YoY in FY25) possibly due to BAF stopping
incremental sourcing of co-branded credit cards of RBL/DBS bank in 3QFY25.
Distribution/foreclosure charges both combined constitutes ~47% of total core fee
income and growth in these segments is expected to remain under pressure.

 Rising stress in unsecured loans; higher slippages/write-offs weigh in: In FY25, BAF
reported its highest slippages and write-offs in the past 3 years - up 75%/69% YoY.

This led to a ~10bps YoY rise in both stage 2 and stage 3 assets, with the increase more
pronounced in unsecured loans. (Exhibit 15-19)

Further, BAF strengthened its ECL models during FY25, driving higher ECL/EAD ratio,
primarily on unsecured portfolio. (Exhibit 20-23)

 Deposit granularity weakens: On the liability side, deposit growth slowed to 19% YoY in
FY25 (vs. 35% in FY24), while the share of granular public deposits declined to 59% in
FY25 (from 73% in FY21). (Exhibit 28-31)

We note that ~41% of deposits are maturing within a year, offering potential funding
cost relief in a declining rate cycle.

 Technology & AI: Scaling efficiency through digital capabilities: Tech spends growth
moderated to 8% YoY (vs. 46% CAGR over FY21–24). However, huge investments made
in earlier years in tech/analytics have led to improvement in cost ratios in the last few
years (cost to income ratio of ~33% in FY25 vs. 35% in FY23).

Key digital initiatives included approvals of two blockchain use cases for
Insurance/banking, AI-powered document automation, and AI-led content creation. With
75+ AI deployments planned for FY26, BAF aims to achieve 1.15x–2x productivity gains
across frontline teams. (Exhibit 32-33)

 Valuation and view: We expect pressure on yields due to movement in secured segments
to be offset by decline in cost of funds. Further, pressure on fee income should be largely
offset by operating leverage. Credit cost in FY26/27 should moderate from FY25 levels
but still remain higher than long-term trends. We expect ~23%/27% AUM/EPS CAGR
during FY25-27E and maintain our BUY rating with revised TP of INR 1,060 driven by
rollover, valuing BAF at 4.4x/22x Sep’27 BVPS/EPS.

JM Financial Institutional Securities Limited Page 2

Bajaj Finance 10 September 2025

Trends in retail loans: Mixed trends across segments

Consumer durable loans: Growth slows but gains market share
 In terms of volumes of consumer durable items being financed by BAF, growth came
down materially in FY25 vs. FY24, maybe due to elevated stress in unsecured loans.
Volume growth was only 12% YoY in FY25 vs. 24% in FY24 with urban markets
registering volume growth of only 8% in FY25 vs. 22% in FY24.

Exhibit 1. Consumer durable volumes (mn): Moderation seen in Exhibit 2. Consumer durable volume growth (YoY): Urban sales
consumer durables volume growth financed by BAF growth falls > rural sales growth

Urban sales finance Rural sales finance Total sales finance # mn Urban sales finance Rural sales finance Total sales finance

40 35%
32%
35 30% 25%
30 24%
25%
21%
25
20% 20% 22%
20

36.47
12%
32.46

15% 17%
9.63
26.84
15
26.18

24.78
7.68
20.34
21.8

10%
5.84

10
16.8
5.0

5 5% 8%
0 0%
FY22 FY23 FY24 FY25 FY23 FY24 FY25

Source: Company, JM Financial Source: Company, JM Financial

 Volume growth moderation is in line with moderation in loan growth in consumer

durable for BAF. However, despite moderation in loan growth, BAF has gained market
share in consumer durables in FY25 vs. FY24 by a massive ~420bps YoY.

Exhibit 3. Consumer durable loan growth: Loan growth slowed Exhibit 4. However, BAF still gained market share by ~420bps in
down , in line with volume growth slowdown consumer durable in FY25 vs. FY24
51%
Urban sales finance Rural sales finance Total sales finance Market share
50%
50%
32%

49%
49%
40% 35%
25%

35% 30% 48%

30% 25%
17%

47%
25%
20%
20% 46%
36%

15% 46%
31%

46%
28%

15% 45%
24%

10%
19%

10%
11%

5% 5% 44%
0% 0% 43%
FY23 FY24 FY25 FY22 FY23 FY24 FY25
Source: Company, JM Financial Source: Company, CRIF, JM Financial

 Further, outstanding EMI cards grew at a strong pace of 44% YoY in FY25 to ~59mn,
following a decline of 2% YoY in FY24. This is driven by RBI lifting embargo on sanction
and disbursal of loans under ‘eCOM’ and ‘Insta EMI Card’ in May’24.

JM Financial Institutional Securities Limited Page 3

Bajaj Finance 10 September 2025

Exhibit 5. Strong growth in EMI cards post lifting of embargo on eCOM/Insta EMI Card
EMI Cards (# mn) YoY growth
70 1
86%
59 0.9
60
0.8
50 0.7
42 41 0.6
40 46% 44%
40% 0.5
30
30 0.4
22 24
19 25% 0.3
20 9% 0.2
13
7 16% -2% 0.1
10
0
- -0.1
FY18

FY19

FY20

FY22

FY23

FY24
FY17

FY21

FY25
Source: Company, JM Financial

JM Financial Institutional Securities Limited Page 4

Bajaj Finance 10 September 2025

Personal loans: Growth bounces back with market share gains

 After slowing down in FY24 especially in rural B2C, personal loan (excluding Gold loans)
growth was back to a strong ~30% YoY in FY25 vs. ~23% YoY in FY24. ~30% YoY loan
growth in FY25 for BAF was much higher than system personal loan growth of only 9%
YoY, leading to its market share increasing by ~123bps YoY.

Exhibit 6. Personal loan: Growth picks up in FY25 vs. FY24 Exhibit 7. Personal loan: Increasing market share in FY25
7.6%
Urban B2C finance Rural B2C finance Total B2C finance PL Market share
7.4%
7.2% 7.5%
45% 30% 31% 30% 35% 7.0%
40% 30% 6.8%
35% 23%
25% 6.6%
30%
25% 20% 6.4%
6.4%
38%

20% 15% 6.2% 6.4%

33%
32%

29%
27%

15%
26%

10% 6.2%

22%
6.0%
10%
5%
6%

5% 5.8%
0% 0% 5.6%
FY22 FY23 FY24 FY25 FY22 FY23 FY24 FY25

Source: Company, JM Financial *Rural B2C excludes Gold loans Source: Company, CRIF, JM Financial

 More importantly, loan growth in relatively safer segments like existing customers (PLCS-
Personal loan cross sell) and salaried customers (salary>INR300k) was higher than overall
personal loan growth for BAF, leading to higher share of existing and salaried customers
in the personal loan mix.

Exhibit 8. Higher share of existing and salaried customers in the personal loan mix
INR bn FY20 FY21 FY22 FY23 FY24 FY25 FY22-25 (CAGR)

Personal Loan Cross Sell (PLCS) 192 172 214 290 376 503 33%

YoY -10% 24% 35% 30% 34%

% of total PL 47.5% 43.0% 41.1% 42.6% 45.0% 46.1%

Salaried Personal loans 113 121 160 195 263 358 31%

YoY 7% 32% 22% 35% 36%

% of total PL 28.1% 30.2% 30.8% 28.7% 31.4% 32.8%

Total Personal loans 404 400 520 680 837 1,092 28%

YoY -1% 30% 31% 23% 30%

Source: Company, JM Financial

 We also note that the eligibility criteria for taking salaried personal loans (SPL) have been
coming down over the years. As per FY25 AR, average annual gross earnings should be
min. INR 0.3mn for availing SPL vs. INR 0.5mn in FY24. As per FY22 AR disclosure, the
minimum average annual gross earnings for availing SPL were INR 0.6mn.

Exhibit 9. Minimum salary needed to avail SPL

Min. salary needed to avail SPL FY21 FY22 FY23 FY24 FY25

Avg. Annual gross earnings (INR mn) 0.6 0.6 0.5 0.5 0.3
Source: Company, JM Financial

 Further, as per annual report, BAF undertook a significant strategic shift towards
expanding its term loan portfolio from 5% to 20%, with more focus on longer tenures
and larger ticket sizes in this segment.

JM Financial Institutional Securities Limited Page 5

Bajaj Finance 10 September 2025

Auto (2W/3W) loans: Exits legacy; scales up non-Bajaj Auto Portfolio

 In the 2W business, BAF started financing non-Bajaj Auto 2Ws from Jun’22 onwards and
this business has been scaling up well. In FY25, BAF financed ~0.45mn non-Bajaj Auto
2W vehicles, up ~87% YoY. This business operates in 1,750 locations and serving around
35 OEM as of FY25.

Exhibit 10. Non-Bajaj Auto 2Ws business scaling up well in FY25

Non-Bajaj 2W Portfolio FY23 FY24 FY25

2W Financed (# mn) 0.06 0.24 0.45

Locations 767 1,750

Retailers 6,000 14,000

OEMs 14 35
Source: Company, JM Financial

 From Dec’24 onwards, BAF has completely stopped financing Bajaj Auto-2W/3W vehicles.
Hence, in FY25, BAF financed only ~18%/22% of Bajaj Auto’s 2W/3W domestic sales vs.
~41%/49% in FY24.

Exhibit 11. Reducing % of BFL financing to Bajaj Auto

BFL Financing to Bajaj Auto FY21 FY22 FY23 FY24 FY25 YoY

2W (# mn) 0.61 0.64 0.71 0.86 0.30 -65%

3W (# mn) 0.06 0.07 0.13 0.20 0.09 -54%

Total (# mn) 0.67 0.71 0.84 1.06 0.39 -63%

% of Bajaj Auto sales

2W 34% 37% 40% 41% 18% -23%

3W 54% 44% 44% 49% 22% -27%

Total 35% 38% 41% 42% 19% -23%

Source: Company, JM Financial

SME Lending: Multiple segments to play with

 In MSME lending, BAF provides secured/unsecured loans to MSMEs, professionals, tractor
financing and new/used car financing and commercial vehicle financing.

 SME loan for BAF has been growing well with ~37% YoY growth in FY25 (~15% of
AUM including car financing). It is supported by both its existing sub-segments and newer
segments (industrial equipment financing, tractor financing, new car financing, etc.).

 The following additional disclosures were available from BAF AR on the new businesses-

- In FY25, BAF introduced industrial equipment financing for machine tools, plastic
processing, textiles and printing and packaging machines. This led to overall
equipment financing portfolio (both medical and Industrial equipment financing)
growing by ~72% YoY in FY25.

- In FY25, BAF launched commercial vehicle financing, with presence in over 50

locations and AUM of ~INR 9.42bn as of FY25 (~0.23% of overall consolidated AUM)

- In tractor financing (launched in FY24), the AUM stands at ~INR 7.05bn as of FY25
(~0.17% of overall consol. AUM) vs. INR 0.3bn as of FY24.

- In new car financing (launched in FY24), the AUM became >3x to INR 52.8bn (~1.3%
of overall consol. AUM). As a result, share of new car financing has gone up in car
financing AUM to ~44% in FY25 from nil in FY23.
- In FY25, BAF launched affordable housing loans, offering credit facilities to make
home ownership accessible to all.

- In FY25, BAF also launched vehicle leasing for corporates and has partnered with over
70 companies to provide this product.

JM Financial Institutional Securities Limited Page 6

Bajaj Finance 10 September 2025

Exhibit 12. SME loans: Several new segments have seen growth pickup in FY25
INR bn FY22 FY23 FY24 FY25
Unsecured SME loans for Business 142.0 189.4 249.6 319.6
YoY growth 33% 32% 28%
Unsecured/Secured loans for professionals
94.2 119.3 130.3 164.1
(Doctors/CAs etc.)
YoY growth 27% 9% 26%
Equipment financing (medical/Industrial) 3.1 5.0 8.5
YoY growth 61% 72%
Secured loans to SME/MSME 18.0 32.7 74.0 105.6
YoY growth 81% 127% 43%
Tractor financing 0.3 7.1
YoY growth 2612%
CV Financing 9.4
YoY growth NA
Auto (Car) Financing 11.7 27.6 70.9 118.8
YoY growth 136% 156% 68%
New 16.8 52.8
YoY growth 214%
Used 11.7 27.6 54.1 66.0
YoY growth 136% 96% 22%
SME loans (including Car financing) 249.8 325.3 455.6 622.2
YoY growth 30% 40% 37%
Source: Company, JM Financial

Exhibit 13. No. of dealer outlets and locations for new and used cars
FY25 New Cars Used Cars
Locations 59 95
Dealer outlets 2,700 1,000
Source: Company, JM Financial

Exhibit 14. Share of new car financing has gone up in car financing AUM to ~44% in FY25
from nil in FY23.
New cars financed Used cars financed

100%

80%
56%
60% 76%
100%
40%

20% 44%
24%
0%
FY23 FY24 FY25

Source: Company, JM Financial

JM Financial Institutional Securities Limited Page 7

Bajaj Finance 10 September 2025

Asset quality: Stress rising in unsecured book

Reported net slippages/write-offs highest in last 3 years
 Net slippages and write-offs (reported) were highest in the last 3 years, both in absolute
terms and as % of AUM. In FY25, write-offs/net slippages in absolute terms were up
~69%/75% YoY.

Exhibit 15. Net slippages increasing in the last 3 years Exhibit 16. Write offs increasing in the last 3 years
Net slippages (INR bn) Net Slippages ratio (%) Write-offs (INR bn) Write-offs (as a % of AUM)
120 6.0% 80 3.8% 4.0%
5.0% 5.0%
70 3.1% 3.5%
100 5.0%
60 3.0%
80 4.0%
50 2.1% 2.5%
3.0%
60 2.1% 3.0% 40 1.7% 2.0%
1.7%
30 1.5%
40 2.4% 2.0%
20 1.0%
20 1.0%
10 0.5%
70.8 74.1 40.3 58.6 98.4 55.5 48.1 33.8 41.8 70.6
0 0.0% 0 0.0%
FY21

FY23

FY25
FY22

FY24

FY21

FY22

FY23

FY24

FY25
Source: Company, JM Financial Source: Company, JM Financial

Inch up in stage 2/3 assets and ECL provisioning mainly in unsecured vs. secured
loans

 Driven by higher net slippages, Stage 2/3 assets went up by ~10bps YoY, each at overall
consolidated level. Disclosures from AR show that inch-up in stage 2/3 assets were
sharper in unsecured loans vs. secured loans.

Exhibit 17. BAF (consol.): Increase in gross stage 2/3 assets in the mix
Gross assets (%) FY21 FY22 FY23 FY24 FY25 YoY

Stage 1 93.7% 96.4% 97.8% 97.9% 97.7% -0.2%

Stage 2 4.5% 2.0% 1.2% 1.2% 1.3% 0.1%

Stage 3 1.8% 1.6% 0.9% 0.8% 1.0% 0.1%

Source: Company, JM Financial

Exhibit 18. BAF (secured loans): Inch up in stage 2/3 assets were lower in secured loans
Secured assets (%) FY21 FY22 FY23 FY24 FY25 YoY change

Stage 1 93.2% 96.1% 98.0% 98.4% 98.3% -0.1%

Stage 2 4.6% 2.2% 1.1% 0.9% 0.9% 0.0%

Stage 3 2.1% 1.7% 0.9% 0.7% 0.8% 0.1%

Source: Company, JM Financial

Exhibit 19. BAF (unsecured loans): Inch up in stage 2/3 assets were sharper in unsecured
Unsecured assets (%) FY21 FY22 FY23 FY24 FY25 YoY change

Stage 1 94.4% 96.8% 97.6% 97.3% 96.9% -0.3%

Stage 2 4.2% 1.7% 1.4% 1.6% 1.8% 0.2%

Stage 3 1.4% 1.5% 1.0% 1.1% 1.2% 0.1%

Source: Company, JM Financial

JM Financial Institutional Securities Limited Page 8

Bajaj Finance 10 September 2025

 During the year, BAF strengthened its ECL modeling leading to increase in ECL
provisioning (ECL/EAD) on YoY basis. Disclosure from AR shows that ECL increase has
been predominantly in unsecured loans vs. secured loans.

Exhibit 20. BAF (consol.): Increase in ECL provisioning (ECL/EAD) on YoY basis
ECL/EAD (Overall) (%) FY21 FY22 FY23 FY24 FY25 YoY

Stage 1 0.8% 0.8% 0.8% 0.7% 0.8% 0.1%

Stage 2 23.3% 28.0% 30.8% 29.7% 32.4% 2.7%

Stage 3 58.4% 58.0% 63.8% 57.0% 53.7% -3.3%

Overall 2.9% 2.2% 1.8% 1.5% 1.7% 0.2%

Source: Company, JM Financial

Exhibit 21. BAF (secured loans): Lower increase in provisioning in secured loans
ECL/EAD (Secured) FY21 FY22 FY23 FY24 FY25 YoY

Stage 1 0.6% 0.6% 0.5% 0.3% 0.4% 0.0%

Stage 2 17.6% 24.0% 22.0% 17.6% 21.1% 3.5%

Stage 3 49.6% 51.1% 54.0% 54.8% 48.9% -5.9%

Total secured 2.5% 1.9% 1.2% 0.9% 0.9% 0.1%

Source: Company, JM Financial

Exhibit 22. BAF (unsecured loans): Higher increase in provisioning in unsecured loans
ECL/EAD (Unsecured) FY21 FY22 FY23 FY24 FY25 YoY

Stage 1 1.1% 1.1% 1.3% 1.3% 1.4% 0.1%

Stage 2 31.7% 34.7% 41.0% 40.6% 41.0% 0.4%

Stage 3 77.4% 67.9% 75.2% 59.2% 58.4% -0.8%

Total unsecured 3.4% 2.7% 2.6% 2.5% 2.8% 0.3%

Source: Company, JM Financial

Scenario analysis: ECL coverage to be ~12-13bps higher in downside scenario

 BAF provides scenario analysis for ECL coverage needed depending upon future economic
conditions, as given below. In downside scenario, ECL coverage should have been ~12-
13bps higher than current ECL coverage.

Exhibit 23. Scenario analysis for ECL coverage

Scenarios Probability Unemployment rate GDP growth ECL Coverage (ECL/EAD)
RBI projected real GDP growth forecast of 6.5% YoY, Expected to
Central 80% Current 8.4%, 7.6% in next few years 1.68%
moderate to 6.1% over a 3-year period
Optimistic GDP estimate of 10.3% for Q127 before averaging back
Upside 10% Peak 11.7%, 7.6% in next 2 years 1.53%
to 6.1% over two years
GDP growth to reduce to 3.3% in Q127, then expected to normalise
Downside 10% 3.4% by Jun'26, 7.6% in next 2 years 1.82%
to around 6.1% within next 2 years.
Source: Company, JM Financial

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Bajaj Finance 10 September 2025

Fee income: Core fee income is under pressure

 Other income for BAF was up 28% YoY in FY25 vs. ~14% in FY24. However, excluding
non-recurring fee income items like bad debt recoveries, net gain on fair value changes,
interest income on assigned loans, dividend income, etc., core fee income growth was
low at ~13% YoY in FY25.

Exhibit 24. Other income YoY growth increased in FY25

Other income growth (YoY)
Other income (as % of assets)
40% 2.5%
2.1%
35% 2.1%
2.0%
1.8% 2.0%
30% 1.8%
25%
1.5%
20%
15%
1.0%
10%
5% 0.5%
-1% 29% 34% 14% 28%
0%
-5% 0.0%
FY21

FY22

FY24
FY23

Source: Company, JM Financial FY25

Exhibit 25. However, core fee income growth moderates… Exhibit 26. …while non-core fee income growth picks up
Core fee income growth (YoY) Non-core fee income growth (YoY)
Core fee income (as % of assets) Non-core fee income (as % of assets)
45% 1.8% 100% 0.7%
1.6%
40% 1.5% 1.5% 0.6%
1.6% 0.5%
80% 0.5% 0.6%
35% 1.4% 1.3% 1.4%
30% 0.4% 0.5%
1.2% 60%
25%
1.0% 0.4% 0.4%
20%
40%
15% 0.8% 0.3%
10% 20%
0.6%
5% 0.2%
-4% 20% 40% 21% 13% 0.4% 60% 20% -8% 88%
0% 10%
0% 0.1%
-5% 0.2%
-10% 0.0% -20% 0.0%
FY22

FY24

FY25
FY21

FY23
FY22

FY23

FY24

FY25
FY21

Source: Company, JM Financial Source: Company, JM Financial

 Within core fee income streams, distribution income (income from selling third-party
products/services) growth was only 1% YoY in FY25 (~27% of total other income in
FY25). This might be due to BAF stopping incremental sourcing of co-branded credit
cards of RBL/DBS bank in 3QFY25.

 Further, foreclosure income growth came down to ~16% YoY in FY25 vs. ~40%-60%
YoY growth seen during FY22-24. As per the latest RBI circular (link), NBFC-UL cannot
charge prepayment penalties on partial/full repayment of floating rate LAP/MSME loans to
individual/MSMEs from 1st Jan’26. Hence, this stream of income should further show a
slowdown given BAF charges ~4%-5% of outstanding loans in its LAP segment.

JM Financial Institutional Securities Limited Page 10

Bajaj Finance 10 September 2025

Exhibit 27. Distribution/Foreclosure income growth moderated to ~1%/16% YoY in FY25 vs. ~20%-40% YoY growth seen in FY24
Total non-interest income INR bn Growth YoY Mix (%)

Core fee income FY22 FY23 FY24 FY25 FY23 FY24 FY25 FY23 FY24 FY25

Distribution income 12.0 18.9 23.0 23.3 58% 21% 1% 43% 43% 39%

Service and administration charges 11.6 14.8 17.7 21.3 28% 19% 20% 34% 33% 36%

Fees on value added services and products 4.5 6.1 6.5 8.8 35% 8% 35% 14% 12% 15%

Foreclosure income 2.3 3.2 4.4 5.1 41% 38% 16% 7% 8% 8%

Brokerage income 0.3 0.5 1.0 1.2 71% 103% 19% 1% 2% 2%

Sale of Service 0.7 0.4 0.5 0.3 -49% 31% -46% 1% 1% 0%

Total core fee income 31.4 43.9 53.2 60.1 40% 21% 13% 100% 100% 100%

Other non-interest income FY22 FY23 FY24 FY25 FY23 FY24 FY25

Bad debt recoveries 8.9 11.0 8.5 7.1 24% -23% -16%

Net gain on fair value changes 3.3 3.3 3.1 5.4 2% -8% 75%

Income on derecognised (assigned) loans - 0.2 0.1 5.5 NA -42% 4041%

Net realisation on sale of written off loans - - 0.0 1.6 NA NA 27510%

Marketing, branding and allied services - 1.2 4.9 NA NA 313%

Dividend income - 0.0 0.0 0.1 NA 207% 429%

Grant towards QR deployment operating expenditure - - 0.1 0.0 NA NA -83%

Interest on income tax refund 0.0 0.0 0.0 0.3 200% -97% 259200%

Miscellaneous income 0.1 0.1 0.1 0.2 -2% 17% 78%

Others - 0.0 0.5 0.4 NA 1102% -17%

Total other non-interest income 12.3 14.7 13.6 25.5 20% -8% 88%

Total non-interest income 43.7 58.7 66.8 85.6 34% 14% 28%
Source: Company, JM Financial

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Bajaj Finance 10 September 2025

Deposits granularity weakens; in line with Industry

 Deposit growth for BAF has come down in FY25 (~19%/35% YoY growth in FY25/24).
Further, the share of public deposits, which are more granular, has been coming down
over the past few years (~59% in FY25 from 73% in FY21).

 We also note that ~41% of its deposits has a residual maturity of <1Year, which will
provide benefits in this rate cut cycle.

 Further, share of paperless deposit in the mix has been going up in recent times.

Exhibit 28. Deposit growth for BAF has come down in FY25… Exhibit 29. …with share of public deposits falling
Deposit growth (YoY) % of borrowings Public deposits (%) Other deposits (%)
50% 20.6% 21.0%
45% 20.5% 100%
20.5%
90%

27%
40%

31%

36%

37%
19.8%

41%
35% 19.6% 20.0% 80%
30% 19.5% 70%
25% 60%
20% 18.6% 19.0%
50%
15% 18.5% 40%

73%

69%

64%

63%
10%

59%
18.0% 30%
5%
20% 19% 45% 35% 19% 20%
0% 17.5%
10%
FY21

FY22

FY23

FY25
FY24

0%
FY21 FY22 FY23 FY24 FY25

Source: Company, JM Financial Source: Company, JM Financial

Exhibit 30. <41% of deposits have residual maturity of <1Year

Maturity profile of deposits - FY25 Residual Original

<1 Year 41% 18%

1-2 Year 27% 22%

2-3 Years 24% 16%

>3 Years 8% 45%

Source: Company, JM Financial

Exhibit 31. Share of deposits sourced paperless is increasing significantly

Share of deposit sourced paperless

80% 73%
70%

60% 57%

50% 45%

40%

30%

20%

10%

0%
FY23 FY24 FY25

Source: Company, JM Financial

JM Financial Institutional Securities Limited Page 12

Bajaj Finance 10 September 2025

Technology: AI-led efficiency kicks in

 Growth in tech spends moderated to only 8% YoY in FY25 vs. 46% CAGR during FY21-
24. However, huge investments made in earlier years in tech/analytics have led to
improvement in cost ratios in the last few years.

Exhibit 32. Growth in tech spends moderated to 8% YoY in FY25 Exhibit 33. Prior tech investments led to improvement in cost ratios
Technology expenses (INR mn)
Cost to income Cost to AUM
Tech spends as a % of total assets
9,000 0.25% 45.0% 4.9% 6.0%
8,000 0.21% 0.21% 40.0%
0.19% 4.6% 4.2% 4.6% 5.0%
7,000 0.20% 35.0% 4.3% 4.3% 4.3% 4.0%
0.16% 0.17% 3.5%
6,000 30.0% 4.0%
0.14% 0.13% 0.13% 0.15%
5,000 0.13% 25.0%
3.0%
4,000 20.0%
0.10%
3,000 15.0% 2.0%
2,000 0.05% 10.0%
928

41.5%

35.3%

33.5%

30.7%

35.1%

34.0%
40.1%

34.7%

33.2%
1.0%
2,109

2,279

4,381

7,145

7,720
1,640

5,678
1,389

1,000 5.0%
- 0.00% 0.0% 0.0%
FY17

FY18

FY19

FY21

FY22

FY23
FY20

FY24

FY25

FY17

FY18

FY19

FY21

FY22

FY24

FY25
FY20

FY23
Source: Company, JM Financial Source: Company, JM Financial

A few of the important and new pointers on technology given in AR that we found
interesting are given below:

 Blockchain: In FY25, BFL approved two blockchain use cases spanning the insurance and
banking domains.

a. The insurance-related blockchain initiative aims to enhance trust, operational

efficiency, and collaboration by providing near-real-time policy updates across
lifecycle. BAF went live with one partner in Jan’25, contributing 15% to the total
insurance volume. It plans to go live with another partner in Jul’25, contributing an
additional 33% to the total insurance volume, bringing the total coverage to 48%.
This initiative achieves a 100% reduction in manual insurance data exchanges,
ensuring real-time visibility, zero data tampering and seamless integration with the
existing core system and process.

b. In banking, the focus is on implementing pre-debit notifications (UPI-PDN) use cases

to enhance banking operations. BAF plans to go live with a key partner in 1QFY26.
This approach eliminates the need for manual sharing of PDNs with partners,
ensuring real-time processing and providing customers with instant EMI updates
through any BFL Digital channel. This transition aims to increase transaction
efficiency by 25% in FY26.

 Early successes in Artificial Intelligence (AI):

a. AI Voice BOTs in Personal Loan Business: An AI-powered voice automation

generated leads, enabling the disbursement of nearly INR 15bn in loans.

b. AI-Enabled Document Processing and Quality Control: AI has been implemented to

extract information from documents across processes. This has eliminated manual
document verification in the processing of over 35mn documents.

c. AI-Powered Service Chat on Bajaj Finserv App: Resulted in accelerated query

resolution and thus reduced 70% of service requests.

d. AI-Agents for Service Email Automation: 18% of service emails are now
autonomously processed through Service CRM AI-agents.

e. Co-Pilot for SDLC Activities: AI-assisted development efficiencies within the

Software Development Life Cycle (SDLC).

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Bajaj Finance 10 September 2025

f. Generative AI for Content Creation: AI now produces 100% of search engine

optimisation (SEO) content, 71% of the videos and 36% of digital banners, marking
a major shift in digital content generation.

 As per Annual report, 75+ AI applications will be deployed in FY26. BAF aims to improve
productivity by ~1.15x to 2x of employee, sales agent, etc. through AI.

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Bajaj Finance 10 September 2025

Financial Tables (Standalone)

Income Statement (INR mn) Balance Sheet (INR mn)
Y/E March FY24A FY25A FY26E FY27E FY28E Y/E March FY24A FY25A FY26E FY27E FY28E
Net Interest Income (NII) 295,819 363,928 457,129 559,920 682,631 Equity Capital 12,360 12,417 12,417 12,417 12,417
Non Interest Income 66,836 85,790 101,601 123,603 151,819 Reserves & Surplus 754,594 954,512 1,131,741 1,357,271 1,640,773
Total Income 362,655 449,718 558,730 683,523 834,450 Stock option outstanding 0 0 0 0 0
Operating Expenses 123,252 149,261 183,010 219,692 260,532 Borrowed Funds 2,933,458 3,612,487 4,449,510 5,542,028 6,781,431
Pre-provisioning Profits 239,403 300,457 375,721 463,831 573,918 Deferred tax liabilities 0 0 0 0 0
Loan-Loss Provisions 46,307 79,660 92,346 106,390 128,981 Preference Shares 57,004 59,413 98,378 108,989 125,793
Others Provisions 0 0 0 0 0 Current Liabilities & Provisions 0 0 0 0 0
Total Provisions 46,307 79,660 92,346 106,390 128,981 Total Liabilities 3,757,416 4,638,828 5,692,046 7,020,705 8,560,413
PBT 193,096 220,796 283,375 357,440 444,937 Net Advances 3,262,933 4,078,441 5,027,946 6,207,072 7,595,203
Tax 48,584 53,002 71,410 90,075 112,124 Investments 308,807 344,408 424,590 524,163 641,385
PAT (Pre-Extra ordinaries) 144,512 167,795 211,964 267,365 332,813 Cash & Bank Balances 106,240 135,435 125,699 148,970 151,904
Extra ordinaries (Net of Tax) 0 0 0 0 0 Loans and Advances 0 0 0 0 0
Reported Profits 144,512 167,795 211,964 267,365 332,813 Other Current Assets 0 0 0 0 0
Dividend 22,248 34,768 34,735 41,836 49,311 Fixed Assets 32,934 38,215 43,947 54,253 66,386
Retained Profits 122,264 133,027 177,229 225,530 283,502 Miscellaneous Expenditure 0 0 0 0 0
Source: Company, JM Financial Deferred Tax Assets 0 0 0 0 0
Total Assets 3,757,416 4,661,268 5,692,046 7,020,705 8,560,413
Source: Company, JM Financial

Key Ratios Dupont Analysis

Y/E March FY24A FY25A FY26E FY27E FY28E Y/E March FY24A FY25A FY26E FY27E FY28E
Growth (YoY) (%) NII / Assets 9.09% 8.65% 8.83% 8.81% 8.76%
Borrowed funds 35.4% 23.1% 23.2% 24.6% 22.4% Other Income / Assets 2.05% 2.04% 1.96% 1.94% 1.95%
Advances 34.7% 25.0% 23.3% 23.5% 22.4% Total Income / Assets 11.14% 10.68% 10.79% 10.75% 10.71%
Total Assets 36.5% 24.1% 22.1% 23.3% 21.9% Cost / Assets 3.79% 3.55% 3.54% 3.46% 3.34%
NII 28.7% 23.0% 25.6% 22.5% 21.9% PPP / Assets 7.36% 7.14% 7.26% 7.30% 7.37%
Non-interest Income 13.9% 28.4% 18.4% 21.7% 22.8% Provisions / Assets 1.42% 1.89% 1.78% 1.67% 1.66%
Operating Expenses 21.5% 21.1% 22.6% 20.0% 18.6% PBT / Assets 5.93% 5.25% 5.47% 5.62% 5.71%
Operating Profits 27.9% 25.5% 25.0% 23.5% 23.7% Tax rate 25.2% 24.0% 25.2% 25.2% 25.2%
Core Operating profit 0.0% 0.0% 0.0% 0.0% 0.0% ROA 4.44% 3.99% 4.09% 4.21% 4.27%
Provisions 45.2% 72.0% 15.9% 15.2% 21.2% Leverage 5.4 5.6 5.4 5.4 5.6
Reported PAT 25.6% 16.1% 26.3% 26.1% 24.5% ROE 24.0% 22.2% 22.2% 22.9% 23.8%
Yields / Margins (%) Source: Company, JM Financial
Interest Spread 9.37% 8.80% 8.88% 8.85% 8.80%
NIM 10.24% 9.74% 9.83% 9.76% 9.68%
Profitability (%) Valuations
ROA 5.02% 4.51% 4.51% 4.62% 4.69% Y/E March FY24A FY25A FY26E FY27E FY28E
ROE 24.0% 22.2% 22.2% 22.9% 23.8% Shares in Issue 6,180.0 6,208.5 6,208.5 6,208.5 6,208.5
Cost to Income 34.0% 33.2% 32.8% 32.1% 31.2% EPS (INR) 23.4 27.0 34.1 43.1 53.6
Asset quality (%) EPS (YoY) (%) 22.8% 15.6% 26.3% 59.3% 57.0%
Gross NPA 0.85% 0.96% 1.07% 1.11% 1.09% P/E (x) 40.5 35.1 27.8 22.0 17.7
LLP 1.60% 2.13% 1.99% 1.85% 1.83% BV (INR) 124 156 184 221 266
Capital Adequacy (%) BV (YoY) (%) 38.0% 25.5% 18.3% 41.7% 44.5%
Tier I 21.51% 21.09% 23.42% 23.27% 23.50% P/BV (x) 7.64 6.09 5.14 4.30 3.56
CAR 22.52% 21.93% 24.18% 23.89% 24.01% DPS (INR) 3.6 5.6 5.6 6.7 7.9
Source: Company, JM Financial Div. yield (%) 0.4% 0.6% 0.6% 0.7% 0.8%
Source: Company, JM Financial

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Bajaj Finance 10 September 2025

History of Recommendation and Target Price Recommendation History

Date Recommendation Target Price % Chg.

28-Apr-21 Buy 575

21-Jul-21 Buy 685 19.1

27-Oct-21 Buy 900 31.4

19-Jan-22 Buy 900 0.0

4-Mar-22 Buy 900 0.0

27-Apr-22 Buy 900 0.0

11-Jul-22 Buy 900 0.0

27-Jul-22 Buy 900 0.0

21-Oct-22 Buy 900 0.0

27-Jan-23 Buy 800 -11.1

27-Apr-23 Buy 793 -0.9

5-Jul-23 Buy 950 19.9

26-Jul-23 Buy 950 0.0

17-Oct-23 Buy 950 0.0

16-Nov-23 Buy 950 0.0

29-Jan-24 Buy 1,000 5.3

30-Jan-25 Buy 935 -6.5

8-Apr-25 Buy 935 0.0

30-Apr-25 Buy 950 1.6

25-Jul-25 Buy 1,000 5.3

JM Financial Institutional Securities Limited Page 16

Bajaj Finance 10 September 2025

APPENDIX I

JM Financial Inst itut ional Secur ities Lim ited

Corporate Identity Number: U67100MH2017PLC296081
Member of BSE Ltd. and National Stock Exchange of India Ltd.
SEBI Registration Nos.: Stock Broker - INZ000163434, Research Analyst - INH000000610
Registered Office: 7th Floor, Cnergy, Appasaheb Marathe Marg, Prabhadevi, Mumbai 400 025, India.
Board: +91 22 6630 3030 | Fax: +91 22 6630 3488 | Email: [email protected] | www.jmfl.com
Compliance Officer: Mr. Sahil Salastekar | Tel: +91 22 6224 1743 | Email: [email protected]
Grievance officer: Mr. Sahil Salastekar | Tel: +91 22 6224 1743 | Email: [email protected]

Investment in securities market are subject to market risks. Read all the related documents carefully before investing.
Definition of ratings
Rating Meaning
Buy Total expected returns of more than 10% for stocks with market capitalisation in excess of INR 200 billion and REITs* and more than
15% for all other stocks, over the next twelve months. Total expected return includes dividend yields.
Hold Price expected to move in the range of 10% downside to 10% upside from the current market price for stocks with market
capitalisation in excess of INR 200 billion and REITs* and in the range of 10% downside to 15% upside from the current market price
for all other stocks, over the next twelve months.
Sell Price expected to move downwards by more than 10% from the current market price over the next twelve months.
* REITs refers to Real Estate Investment Trusts.
Research Analyst(s) Certification
The Research Analyst(s), with respect to each issuer and its securities covered by them in this research report, certify that:
All of the views expressed in this research report accurately reflect his or her or their personal views about all of the issuers and their securities; and
No part of his or her or their compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this research
report.
Important Disclosures
This research report has been prepared by JM Financial Institutional Securities Limited (JM Financial Institutional Securities) to provide information about the
company(ies) and sector(s), if any, covered in the report and may be distributed by it and/or its associates solely for the purpose of information of the select
recipient of this report. This report and/or any part thereof, may not be duplicated in any form and/or reproduced or redistributed without the prior written
consent of JM Financial Institutional Securities. This report has been prepared independent of the companies covered herein.
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Neither JM Financial Institutional Securities nor its associates or the Research Analyst(s) named in this report or his/her relatives individually own one per cent or
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The Research Analyst(s) principally responsible for the preparation of this research report and their immediate relatives are prohibited from buying or selling debt
or equity securities, including but not limited to any option, right, warrant, future, long or short position issued by company(ies) covered under this report. The
Research Analyst(s) principally responsible for the preparation of this research report or their immediate relatives (as defined under SEBI (Research Analysts)
Regulations, 2014); (a) do not have any financial interest in the company(ies) covered under this report or (b) did not receive any compensation from the
company(ies) covered under this report, or from any third party, in connection with this report or (c) do not have any other material conflict of interest at the time
of publication of this report. Research Analyst(s) are not serving as an officer, director or employee of the company(ies) covered under this report.

JM Financial Institutional Securities Limited Page 17

Bajaj Finance 10 September 2025

While reasonable care has been taken in the preparation of this report, it does not purport to be a complete description of the securities, markets or
developments referred to herein, and JM Financial Institutional Securities does not warrant its accuracy or completeness. JM Financial Institutional Securities may
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representation that you are an “accredited investor” as such term is defined in National Instrument 45-106 Prospectus Exemptions and a “permitted client” as
such term is defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Under no circumstances is the
information contained herein to be construed as investment advice in any province or territory of Canada nor should it be construed as being tailored to the
needs of the recipient. Canadian recipients are advised that JM Financial Securities, Inc., JM Financial Institutional Securities Limited, their affiliates and authorized
agents are not responsible for, nor do they accept, any liability whatsoever for any direct or consequential loss arising from any use of this research report or the
information contained herein.

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