Detailed Rationale

Crisil Ratings has assigned its ‘Crisil AAA/Stable’ on the Rs 15,000 crore Non-convertible debentures of Bajaj Finance Limited (BFL). Ratings have been reaffirmed at 'Crisil AAA/Stable/Crisil A1+' on the bank loan facilities and debt instruments of BFL.

CRISIL Rating has also withdrawn its ratings on non-convertible debentures amounting to Rs 3450 crore (see Annexure - Details of rating withdrawn for details) on client’s request and on receipt of requisite documentation as these have been redeemed. The withdrawal is in line with the Crisil Ratings’ policy on withdrawal of ratings.

BFL and its subsidiaries, Bajaj Housing Finance Limited and Bajaj Financial Securities Limited are together referred to as the Bajaj group.

The ratings continue to reflect the Bajaj group’s strong business risk profile, given its position as one of the largest retail asset financing non-banking financial companies (NBFCs) in the country and expectation of sustenance of strong capitalisation metrics. Further, the healthy earnings profile also underpins the ratings. Besides, the ratings also factor in the strategic importance of BFL to its ultimate holding company, Bajaj Holdings and Investments Ltd (BHIL), and parent, Bajaj Finserv Ltd (Bajaj Finserv). These strengths are partially offset by the company’s sizeable exposure to risky asset classes. Nevertheless, Crisil Ratings believes the group’s increased focus on risk management and data analytics will mitigate inherent asset quality challenges in the risky asset segments.

Key Rating Drivers & Detailed Description

Strengths:

• Large, well-diversified NBFC

The Bajaj group has emerged as one of the largest retail-focused NBFCs in India with its two-pronged strategy of building scale and maximising profit. Segments such as mortgage, small business loans and commercial lending are largely focused on building scale while consumer durable loans, personal loans, and two and three-wheeler financing are focused on aiding profitability.

On a consolidated basis, the assets under management (AUM) of BFL continued to grow at a CAGR of 22.5% over the last 5 years to ~Rs 3,30,615 crore as on March 31, 2024 which further grew at 27% on an annualized basis during nine months of fiscal 2026 to ~Rs. 3,98,000 crore as on December 31, 2024. On a standalone basis, the AUM grew 26% to Rs 2,93,370 as on December 31, 2024, from Rs 2,44,826 crore as on March 31, 2024.

As on December 31, 2024, on a consolidated basis, mortgages (including loans against property) and home loans accounted for 33% of AUM (of this, LRD being 5%), personal and consumer durables loans (34%), SME loans (12%), two and three-wheeler financing (5%), loan against securities (5%) and others (11%). Moreover, the secured book (excluding consumer durables) accounts for over 57% of the AUM as against 55% as on March 31, 2023, and sub-50% four fiscals earlier.

The company has recently expanded into new segments, such as new car loans, commercial vehicle loans, tractor financing and gold loans, which currently accounts for very small proportion of overall book on a consolidated basis. BFL is also enhancing its presence through an expanded branch network which will further support growth.

• Strong capitalisation levels

Capitalisation is strong, with sizeable consolidated networth of Rs 91,270 crore as on December  31, 2024 (Rs. 76,695 crore as on March 31, 2024). As on the same date, the standalone networth stood at Rs 83,122 crore (Rs 72,011 crore as on March 31, 2024).

In November 2023, BFL raised Rs.8,800 crore and Rs.1,188 crore through a qualified institutions placement and preferential issue respectively. Of the preferential issue, 25% has been received.  As on March 31, 2024, the gearing levels stood at 3.1 times and 3.8 times on standalone and consolidated basis, respectively.

The group has a conservative gearing policy. Despite strong growth, adjusted gearing was below 6 times in the past five fiscals. Each time gearing inched closer to 6 times, capital raising plans have been initiated and concluded. This is supported by timely and regular equity raise as well as strong internal accrual. We believe the group to continue to maintain gearing of less than 6 times on a steady state basis.

BFL has also received Rs. 3000 crore from the stake sale in BHFL through a recent offer for sale. Healthy capitalisation enhances the ability to absorb potential losses on its portfolio; adjusted networth to net non-performing assets (NPAs) ratio was healthy at 48 times as on December  31, 2024 (63 times as on March 31, 2024), on a consolidated basis and at similar level on a standalone basis.  

Crisil Ratings expects the capital profile to remain comfortable over the medium term supported by regular capital infusion, demonstrated ability to raise capital and healthy internal cash accrual, providing cushion against asset-side risks.

• Healthy earnings profile

The earnings profile of the group is supported by a large proportion of high-yield businesses and competitive borrowing cost. Additionally, the company has increased efforts to diversify earnings by focusing on various fee-based income avenues, such as existing member identification cards, co-branded credit cards and third-party product distribution.

The earnings profile on a consolidated basis is also supported by controlled credit costs and operating expenses. The credit costs although has inched up, it remained within control at 1.8% (annualized) for nine months of fiscal 2025 as against 1.4% in fiscal 2024. The operating expenses remained stable at 3.6% (annualized) against 3.7% during the period. This along with marginal increase in cost of funds has resulted in ~0.40 basis point moderation in return on average managed assets (ROMA). ROMA remained healthy at 4% for nine months of fiscal 2025 against 4.4% in fiscal 2024.

Standalone RoMA also remained healthy at ~5.2% (annualized) in nine months of fiscal 2025, against 4.9% in fiscal 2024.

BFL’s earnings remain susceptible to volatility in credit costs, especially during macroeconomic stress, despite the conservative provisioning policy. While the company has healthy earnings profile, the ability of the company to manage its credit costs and cost of borrowings will remain a key monitorable.

• Strategic importance to the ultimate holding company BHIL, and parent Bajaj Finserv

BFL is strategically important to the Bajaj group as the company gets significant financial, managerial and operational support from its parent, Bajaj Finserv. BFL is one of the crucial entities of the group's financial services business and its established track record of profitable growth enhances its strategic importance. Crisil Ratings believes BFL will continue to benefit from synergies with the Bajaj group.

The financial flexibility of Bajaj Finserv has improved supported by the performance of its operating companies, including insurance ventures. In the unlikely event of BFL requiring group support in an extraordinary situation, BHIL has sufficient liquidity in the form of cash and bank balance and portfolio of quoted investments to address the requirements. In addition, Crisil Ratings believes there is sufficient flexibility inherent in the market standing of the various listed and unlisted financial services entities in the group. Crisil Ratings also believes that financial flexibility will be sufficient to support any material requirements of BFL even if the group were to step up its stake in the insurance ventures.

Weakness:

• Sizeable exposure on risky asset classes

On a consolidated basis, gross non-performing assets (GNPAs) stood at 1.12% as on December 31, 2024, as against 0.85% as on March 31, 2024, and 0.94% as on March 31, 2023. At standalone level too, GNPAs remained comfortable at 1.41% as on December  31, 2024. Furthermore, at standalone level, BFL made write-offs of Rs. 4940.8crore in 9MFY25 as against Rs 4,136 crore in fiscal 2024. At consolidated level, write-offs were Rs 4182 crore in fiscal 2024. GNPAs including write-offs stood at 2.8% and 3.1% respectively as on March 31, 2024 and  March 31,2023.

The company has large exposure to asset segments such as personal loans and consumer durable loans (including lifestyle and digital loans), which accounted for around 34% of the consolidated loan portfolio as on December  31, 2024, which are vulnerable to economic cycles. Furthermore, BFL offers flexi-loans, which have moratorium on repayment of principal across segments, including consumer B2C, SME and Mortgages.

While the company’s asset quality remains healthy currently, its ability to sustain healthier asset quality metrics going forward while continuing to scale up operations remains a key monitorable.

Key Financial Indicators: (Standalone):

*Annualised

Key Financial Indicators: (Consolidated):

*Annualised

Annexure - Details of Instrument(s)

# Yet to be issued

Annexure - Details of Rating Withdrawn