Bajaj Finance Limited Q3 FY26 Earnings Call Summary

Summary

Bajaj Finance Limited - Q3 FY 2026 Earnings Call Summary Tuesday, February 03, 2026 6:00 p.m. IST

Event Participants

Executives 2 Rajeev Jain (Vice Chairman and MD), Sandeep Jain (COO and CFO)

Analysts 6 Abhijit Tibrewal, Abhishek Murarka, Chintan Joshi, Piran Engineer, Shreya Shivani, Viral Shah

Financials & KPIs

Geographic & Segment Commentary

• MSME & Professional Loans: Growth slowed to 11% YoY following conscious management action and tighter credit policies. Volume reduction of 25-30% was implemented to address incipient stress, with a return to 20%+ growth expected by Q2 FY27.
• Two-Wheeler Financing: Captive financing book is winding down, contributing to a slight moderation in overall AUM growth. Core focus is shifting toward sustainable profitability over pure volume in the lifestyle segment.
• Gold Loans: Sustained growth supported by a distribution network that has crossed 1,200 branches. Management views this as a high-ROE business and intends to continue distribution expansion regardless of short-term gold price volatility.
• Auto & Commercial Lending: New car financing grew at 38-39% while used cars grew more slowly due to credit caution. Management maintains a 1% market share in a segment where they have 36% franchise penetration, indicating significant headroom.

Company-Specific & Strategic Commentary

• ECL Framework Strengthening: Implemented a permanent minimum Loss Given Default (LGD) floor across all business lines as a voluntary resiliency measure. This resulted in a ₹1,406 crore accelerated provision, raising Stage 3 PCR to 61% and Stage 1 PCR to nearly 1%.
• FINAI Transformation: Deployed AI across the customer lifecycle, including voice-to-text for 20 million calls and automated image extraction for 43 document types. The firm aims for 800+ autonomous agents and a dedicated Consumer AI platform by FY27.
• New Labor Code Impact: Recognized a one-time exceptional charge of ₹265 crores for gratuity liability following government updates. This initiative will have an estimated annualized impact of ₹100-125 crores starting next fiscal.
• Long-Range Strategy (LRS): Shifting focus from a 60-40 “hunting-farming” mix toward 40-60, prioritizing cross-selling to the 115 million+ franchise. The long-term goal is to serve 200 million customers and process 100 million loans annually by FY30.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

ECL Provisioning Rationale

• Question: What prompted the structural change in LGD floors and the timing of the ₹1,406 crore provision? (Viral Shah)
• Answer: It was a proactive management decision to shockproof the P&L against global volatility. It is a permanent design change, not an overlay, and will have a minor recurring impact of ₹300-400 crores annually (Sandeep Jain/Rajeev Jain).

MSME Recovery

• Question: When will the MSME business return to normal growth levels? (Abhijit Tibrewal)
• Answer: Policy actions led to a 25-30% volume cut. While early readings are good, the company will maintain tight policies until full revival is visible, likely by the July-September 2026 quarter (Sandeep Jain/Rajeev Jain).

Credit Cost Outlook

• Question: Is the 165-175 bps credit cost guidance for next year tangible or directional? (Chintan Joshi)
• Answer: It is based on 3/6/9-month-on-book (MOB) vintage metrics which are performing well. Additionally, the legacy AF portfolio (high GNPA) will be mostly liquidated by September 2026, removing a significant drag (Rajeev Jain).

Automotive Market Share

• Question: Why is the market share in car loans low despite high franchise penetration? (Abhishek Murarka)
• Answer: Every business must meet internal ROE/ROA hurdles. New car margins are fine; management will not chase volume at the expense of sustainable profitability (Rajeev Jain).

Key Takeaway

Bajaj Finance delivered a resilient Q3 FY26, characterized by a 22% core AUM growth and a record 14 million new loans. The quarter was defined by a strategic decision to “bulletproof” the balance sheet, utilizing a ₹1,416 crore exceptional gain from a 2% stake sale in Bajaj Housing Finance to offset a ₹1,406 crore voluntary accelerated ECL provision. This move established permanent LGD floors across all segments, raising Stage 1 PCR to 0.98%. While MSME growth remained subdued at 11% due to deliberate tightening, other segments like Gold Loans and New Car Finance showed robust momentum. Management remains optimistic, guiding for normalized credit costs of 165-175 bps in FY27 as legacy portfolios wind down and AI-driven efficiencies scale. The firm is transitioning toward a “farming-heavy” strategy to deepen wallet share within its 115 million-strong franchise, targeting 200 million customers by FY30.