Bajaj Finance Ltd.
(Financial Services, NBFC, Lending Sector)
Macroeconomic Analysis
India’s GDP grew by 7.4% in 2025, with expectations of 6.5% growth in FY26, pointing to
continued strong domestic demand. Inflation fell to 3.2% in April 2025, prompting the RBI
to reduce the repo rate to 5.5% in June. These trends have supported robust credit
growth and improved consumer sentiment. Urban credit demand is benefiting from stable
rates and rising incomes, while rural demand is recovering, although monsoons remain a
risk factor. The broader financial services sector—including NBFCs and private lenders—
remains a critical beneficiary of this economic environment as retail and MSME loan
penetration deepens.
Industry Analysis
The Indian NBFC sector is rapidly evolving on the back of digital transformation, growing
financial inclusion, and an expanding credit ecosystem. Key industry drivers and themes
as of FY25:
Digital Focus: Over 95% of Bajaj Finance’s onboarding is now digital, streamlining
costs and scaling consumer reach. The industry trend is toward tech-first lending
experiences.
Expanding Credit Penetration: Rising urban and rural disposable incomes and
consumer awareness drive more demand for credit cards, personal loans, housing
finance, and gold loans.
Competition: Banks, fintechs, and large NBFCs are locked in intense rivalry,
particularly in unsecured lending, impacting margins and necessitating better risk
management.
Asset Quality: Industry-wide, unsecured lending growth has led to marginally
higher NPAs and provisioning, but leading players like Bajaj Finance maintain
healthy asset quality due to prudent underwriting.
Regulatory Environment: Proactive regulatory oversight by the RBI (more risk
weights on unsecured loans) ensures sectoral stability but may limit overly
aggressive growth.
Company Analysis – Bajaj Finance Ltd.
Bajaj Finance remains India’s leading diversified NBFC:
Business/Operational Highlights
Over 101.8 million customer franchise, booking 43.42 million new loans in FY25.
Strong, tech-driven branch and partner network, digital lending KYC at 95%+.
Rapidly diversified loan book: consumer, personal, gold, SME, auto/tractor, and
housing finance.
Mobile app users now number over 70 million.
Bajaj Housing Finance IPO completed in September 2024, expanding its leadership
in affordable housing and mortgages.[2][1]
Prudent provisioning and risk management kept non-performing loans in check
despite overall sector stress.
Investment Rationale
1. Financial Strength and Stability
Bajaj Finance’s large-scale, diversified book and conservative risk approach yield high
ROE (19.2%) and consistent profitability. The balance sheet strength and capital
adequacy (CAR over 21%) support expansion even in volatile times. [3][1][2]
2. Tech-Led Competitive Edge
Aggressive investments in digital acquisition, onboarding, and servicing provide unrivaled
cost efficiency and customer experience, defending market leadership against banks and
fintechs. The company’s digital transformation is a supply chain and operational moat.
3. Multi-Product Franchise
Growing across secured and unsecured lending, insurance, wealth, deposits, and co-
branded cards, Bajaj Finance is more resilient to single-product or cyclical sector risks.
Product innovation (e.g., auto/tractor loans, Bharat Mortgages) opens new verticals for
growth.[1][2]
Peer Comparison: FY25 Key Metrics
Key Risks
Asset Quality: Increased risk in unsecured personal and consumer loan book.
Slowdown or job losses could spike NPAs and require further provisioning.
Competition: Rising threat from digital-first banks and fintechs, which could
compress margins or win shares in emerging lending verticals.
RBI Regulations: Any tightening of risk-related regulations, capital requirements,
or rate caps could impact growth strategies.
Economic Cyclicality: A broad slowdown, inflation shock, or sharp rise in rates
could depress credit demand and impact collections.
Future Growth Possibilities
Deepening rural and affordable credit avenues post-housing finance IPO.
Expansion in new product lines: auto, tractor, commercial vehicle loans.
Fintech partnerships and co-lending models for broader reach.
Leveraging digital infrastructure for high-frequency small-ticket loans and wealth
offerings.
Continued investments in tech to boost efficiency, customer retention, and cross-
sell.
Summary:
Bajaj Finance is the clear NBFC sector leader, set apart by its diversified product mix,
efficient capital usage, strong digital/customer franchise, and prudent risk management.
Its financial performance, innovation, and ability to execute large-scale digital
transformation underpin its long-term secular growth story in India’s evolving credit
economy.[3][2][1]
