Bajaj Finance Achieves Milestone AUM, Eyes AI-Driven Growth

Bajaj Finance has achieved a significant milestone, crossing INR 5.1 lakh crore in Assets Under Management (AUM) by the end of Q4 FY26. This marks a substantial 22.4% year-over-year increase in its managed assets. The company also reported a strong Profit After Tax (PAT) growth of 26.7% for the quarter.

During the quarter, Bajaj Finance welcomed 3.93 million new customers, expanding its total customer base to 119.3 million. This growth was accompanied by strategic portfolio adjustments. The MSME portfolio saw muted 6% growth due to proactive risk management, while the gold loan portfolio experienced a significant surge of 115%.

The company has recommended a dividend of INR 6 per share.

Q4 Earnings and Key Milestones

The company announced its Q4 FY26 earnings, confirming it surpassed INR 5 lakh crore in Assets Under Management (AUM), reaching approximately INR 510,000 crores. This figure represents a strong 22.4% growth compared to the previous year. Profit After Tax (PAT) for the quarter saw a robust 26.7% increase. Furthermore, 3.93 million new customers were added in Q4, bringing the total customer franchise to 119.3 million. The firm noted a strategic slowdown in its MSME portfolio growth to 6%, a move attributed to risk mitigation efforts. In contrast, its gold loan portfolio expanded dramatically, with growth reaching 115%.

Strategic Significance

Surpassing INR 5 lakh crore in AUM is a key operational achievement, highlighting Bajaj Finance's consistent growth in a competitive market. The company's aggressive adoption of AI-driven operations, with plans for over 600 autonomous agents in FY27, signals a clear strategy to improve cost efficiencies and refine customer sourcing methods. The deliberate reduction in MSME portfolio growth underscores a commitment to risk management and strengthening the balance sheet rather than pursuing expansion in all areas.

Historical Context

Bajaj Finance has a proven history of aggressive AUM growth, supported by a large and loyal customer base. The company has consistently been an early adopter of technology, viewing digital transformation and AI as essential tools for future expansion and operational excellence. In FY25, Bajaj Finance reported a consolidated AUM of around ₹416,661 crore and a PAT of approximately ₹16,779 crore, demonstrating its strong financial position prior to achieving the latest AUM milestone.

Forward-Looking Guidance

Shareholders can expect a dividend payout of INR 6 per share, reflecting the company's profitability. For FY27, Bajaj Finance has guided for AUM growth to be between 20% and 24%, with a target of adding 15-17 million new customers. The company also projects a Return on Assets (ROA) between 4.4% and 4.6%, and expects credit costs to remain in the range of 145 to 160 basis points. Management has articulated an ambition to become one of India's top 5-6 lenders within the next 5-7 years, aiming for growth rates double that of the overall system credit expansion.

Key Risks and Regulatory Notes

Potential NIM moderation due to interest rate shifts and broader geopolitical tensions are identified as key external risks for FY27. Internally, the strategic pruning of the MSME portfolio, leading to subdued 6% growth, is a choice with potential implications for future segment performance. Separately, it's important to note that in December 2023, the RBI had prohibited Bajaj Finance from issuing new digital loans due to compliance issues. These restrictions were lifted in May 2024 after the company implemented remedial actions.

Competitive Landscape

Bajaj Finance's 22.4% AUM growth in FY26 appears stronger than peers like Shriram Finance, which reported around 17% growth in FY25. Its performance is comparable to Cholamandalam Investment and Finance Company, which saw about 21% growth in FY26. While specific credit cost comparisons for the latest period are pending, Bajaj Finance's guidance of 145-160 bps for FY27 will be closely monitored against industry trends. The competitive dynamics differ significantly with entities like HDFC Bank, which benefit from lower funding costs.

Investor Focus

Investors will be focused on how Bajaj Finance executes its FY27 guidance, particularly its ability to achieve the targeted AUM and customer addition numbers. The return on investment from its 'FinAI' transformation, including the deployment of over 600 autonomous agents, will be crucial for assessing operational efficiency gains. The recovery trajectory of the MSME segment and the company's success in mitigating geopolitical and NIM pressures will also be key indicators. Long-term, performance against its aspiration to become a top-tier lender will remain a continuous point of observation.