BAJFINANCE

Delivers Strong Q4, Faces Growth Skepticism

(BFL) posted a 22% YoY rise in Q4FY26 net profit, supported by strong asset growth and stable margins, though higher operating expenses and accelerated provisions weighed on overall profitability. Despite upbeat FY27 guidance, analysts remain cautious about sustainability of growth and margins given the company’s entry into lower-yielding segments and premium valuations. Shares trade at ~3.7x FY28E book value, well above peers, but downside risks to earnings growth are rising. Financial Performance (Q4FY26 & FY26) Net profit (Q4FY26): +22% YoY. FY26 net profit: +15% YoY, dragged by accelerated ECL provisions of ₹1,548 crore and ₹265 crore labour code charge. NII (FY26): ₹6,751 crore (+21% YoY). AUM: ₹5 trillion (+22% YoY). RoA / RoE (FY26): 4.3% / 18.1%. NIM: stable, despite falling rate cycle. Credit cost: 2.09% vs guidance of 1.85–1.95%; adjusted 1.93% before provisions. Segmental Trends Consumer finance AUM: +21% YoY, aided by GST-led demand in H2FY26. Secured loans (mortgages): now 32% of AUM. Gold loans & MFI: aggressive expansion; 1,507 gold loan branches, 447 MFI branches. Vehicle loans: robust growth on small base. 2W/3W financing: <1% of AUM but 13% of GNPAs; book being run down. MSME: weak in FY26, expected recovery in H2FY27. Guidance (FY27) RoA target: 4.4–4.6%. AUM growth: 22–24%. Credit cost: 1.45–1.60% (vs 1.75% in Q4FY26). Cost-to-income ratio: expected to improve 25–40bps via AI-driven efficiencies. Valuation & Risks Trades at ~3.7x FY28E book value (vs banks ~2x). Concerns: ability to sustain growth on large base, profitability dilution from lower-yielding segments, and elevated credit costs. Banking licence possibility could compress valuation multiples closer to private banks.