Target: ₹1,060
CMP: ₹1,003.20
We highlight key takeaways from Bajaj Finance’s FY25 annual report. In unsecured loans, BAF gained market share of about 420/120 bps y-o-y in consumer durable/personal loans, aided by strong growth in EMI cards post lifting of the RBI embargo and rising share of salaried/cross-sell PLs. In salaried PL, income criteria was relaxed (₹0.3 mn in FY25 vs about ₹0.5 mn/0.6 mn in FY24/22), which broadens the customer base but raises asset quality risks. Diversification into multiple segments remain a key strength, with non-BAF auto, SME and its sub-segments like industrial equipment, CV, tractors and new car financing delivering strong traction, underscoring BAF’s pivot towards secured lending.
Tech spends has moderated (8 per cent y-o-y in FY25 vs 46 per cent CAGR over FY21-24) but earlier heavy spends done on the tech side is leading to improvement in operating leverage. 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 about 23/27 per cent AUM/EPS CAGR during FY25-27E and maintain our Buy rating with a revised TP of ₹1,060 driven by rollover, valuing BAF at 4.4x/22x Sep’27 BVPS/EPS.
Published on September 12, 2025
