Bajaj Fin set to report 22% profit growth on increased AUM and margins

Bajaj Finance Ltd. is poised to deliver a solid performance for the December quarter, with analysts anticipating steady growth in assets under management (AUM) and stable margins. The non-banking financial company is expected to maintain its growth trajectory, supported by sustained traction in loan bookings and customer additions.

Analysts project that Bajaj Finance will report a consolidated net interest income of INR 116.33 billion for the December quarter, marking a 12% sequential decline but remaining flat year-on-year. Net profit estimates stand at INR 51.83 billion, reflecting a 22% sequential increase and a 6% year-on-year growth, indicating a steady performance despite a moderation in sequential income.

The company’s highest net profit estimate is projected at INR 60.97 billion by Nirmal Bang Equities Pvt. Ltd., while the lowest estimate stands at INR 44.53 billion by ICICI Securities Ltd. On the other hand, YES Securities (India) Ltd. forecasts the highest net interest income at INR 138.75 billion, with ICICI Securities offering the lowest estimate at INR 101.79 billion. Bajaj Finance is set to announce its earnings for the December quarter on Tuesday.

Despite a 14% decline in Nifty 50 constituent shares following the previous quarter’s earnings report, Bajaj Finance remains optimistic about its growth potential for the fiscal year 2025-26. Management has revised its growth guidance downwards to 22-23% from the previous 23-24% range. Shares of Bajaj Finance concluded 3% lower at INR 902.35 on the National Stock Exchange.

Analysts anticipate that continued expansion in the company’s loan book will be the primary driver of growth. Emkay Global Financial Services highlighted Bajaj Finance’s robust balance sheet expansion, reporting that AUM reached INR 4.9 trillion, reflecting a 5% quarter-on-quarter growth and a 22% year-on-year increase. The strong AUM growth is expected to be supported by substantial customer acquisitions, with new loan accounts rising by 15% year-on-year to 13.9 million and customer additions totaling 4.8 million, bringing the total customer base to over 115 million.

As of December 31, Bajaj Finance’s assets under management had surged by 22% year-on-year to reach INR 4.86 trillion. Analysts anticipate that the company’s margins will remain broadly stable in the quarter, supported by easing cost of funds. While some brokerages foresee a slight contraction in margins due to a moderation in advance yields, others expect profitability metrics to remain stable.

Furthermore, the company is expected to benefit from a moderation in credit costs, which have been elevated in recent quarters due to stress in segments like loans to micro, small, and medium enterprises. Kotak Institutional Equities anticipates a decline in credit costs to around 1.95% during the quarter, compared to a range of 2.0-2.3% in the previous four quarters. Analysts predict that asset quality will remain robust overall, with gross and net stage-3 assets expected to be around 1.2% and 0.6% of total assets, respectively.