Bajaj Finance Q2 FY27 Earnings Call: Announces Rs. 17,500 Cr Raise, Guides 26-27% Loan Growth (BAJFINANCE)

Bajaj Finance Ltd held its Q2 FY27 earnings call on October 19, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Broad-Based Growth With Prudent Overlay Provisioning

• AUM grew 26.5% YoY to Rs.5,84,628 Cr — net AUM addition of ~Rs.38,000 Cr in Q2 FY 2026-2027; management noted a Rs.38,000-39,000 Cr quarterly run-rate over the last two quarters.
• PBT grew 29% to Rs.8,537 Cr (up 34% to Rs.8,874 Cr excluding macro-overlay); PAT grew 29% to Rs.6,367 Cr (34% to Rs.6,619 Cr ex-overlay), with a Rs.337 Cr macroeconomic overlay provision recognized in Q2 FY 2026-2027.
• ROA at 4.6%, ROE at 20.6% — opex-to-total-income at 33%, net NPA at 42 bps, GNPA at 1.06%, PCR at 60% in Q2 FY 2026-2027.
• ~13.5 million new loans booked (up 11% YoY, with YoY noise from season timing shift); 4.42 million new customers added, taking the franchise to ~129 million customers and an 82 million cross-sell franchise.
• Loan losses to average AUM improved to 1.56% from 1.88%; excluding the overlay, loan losses declined 12% YoY (implied ~1.32%) in Q2 FY 2026-2027.
• Cost of funds down 9 bps QoQ to 7.31% — liquidity buffer just below Rs.20,000 Cr; deposit book grew 14% with rates increased in Q2 FY 2026-2027 to build momentum.

Secular Growth Across Verticals; MSME the Laggard

• Urban consumer finance +43%, rural +63%, MFI +54% (low base), CV/tractor +89% (low base), LAS +42% — secular growth across segments in Q2 FY 2026-2027.
• MSME grew only +3% — expected to move to double-digit growth momentum in H2 FY 2026-2027.
• Gold loan book at ~Rs.24,000 Cr (4.1% of balance sheet) — 320 branches added in Q2 FY 2026-2027 taking the network to 2,022 branches; management targeting ~2,800 standalone gold loan branches by end of FY 2026-2027.
• Captive book down to Rs.2,400 Cr — expected to create credit-cost tailwinds.
• BHFL disbursements and AUM grew 25% — affordable-loan disbursements crossed Rs.500 Cr/month, opex-to-NTR improved from 19.7% to 19.1%, PAT grew 18%, ROE improved to 12.7% from 12.2%; BFSL PAT grew 36% and added 121,000 customers in Q2 FY 2026-2027.

Seasonal GNPA Drift, Gold Loan Stage-2 Noise, Resilience Overlays

• Stage 2+3 assets rose Rs.1,601 Cr — including Rs.1,047 Cr in gold loan stage 2 from short-tenor schemes (discontinued since August); Rs.550 Cr of the ~Rs.1,099 Cr already resolved back to stage 1, characterized as transient with no credit-cost impact.
• 10 bps QoQ GNPA increase reflects day-count seasonality — one additional month of GNPA flows into Q2 vs Q1 (Q4 seasonally lowest), a pattern consistent with past records; management sees no blind spots at this juncture.
• Combined stage 2 + stage 3 (ex-gold loans) improved from 1.9% in Q1 FY 2026-2027 to 188 bps in Q2 — the metric management recommends for QoQ comparison.
• Overlay stock as of Q2 FY 2026-2027: Rs.226 Cr macro provision plus Rs.512 Cr management overlay (Rs.185 Cr added in Q1, Rs.327 Cr in Q2); LGD flooring carries an estimated Rs.350-500 Cr of additional provision; management framed overlays as "bulletproofing" for resilience, not a response to building stress.
• Historical credit cost cycle range of 1.75% (low) to 2.15% (peak) — management aims to narrow this band; stress testing was done on unsecured non-salary portfolios, with stage 3 not separately stress-tested given LGD flooring introduced in Q3 FY 2025-2026.
• MSME GNPA deterioration is "nothing else but growth" — 3/6/9/12 MOB vintages tracking close to (management: better than) 2019 levels, supported by origination changes begun July 2025 (FY 2025-2026).
• 3PL share of origination cut from 14% to 7% — mandate is to halve it again to 3.5% by March 2027 (end of FY 2026-2027); 3PL flagged as the single univariate metric troubling management for the past three years.

Longer Tenors Over Growth; Industry Risk Context

• Gold loan stage 2 rise attributed to short-tenor (3-6 month) schemes — CFO Sandeep Jain said repeated branch visits for interest payment/rollover inadvertently pushed customers into delinquency; management plans to offer longer 12-month schemes with monthly/quarterly interest options (rollout period unspecified).
• 99% of gold loan customers on bullet repayment as of Q2 FY 2026-2027; they can continue bullet loans at 9-12 month tenors with no prepayment exit cost — management prefers longer flexible tenors over pushing customers into delinquency and auction.
• Peer-cited industry risk: ~Rs.4.7 lakh Cr of gold loan disbursements in CY 2026 (year-to-date) went to deeply delinquent (90+ DPD) customers — Rajeev Jain called disbursal a "vanity number" (average book 6-7 months), with AUM and tonnage the rightful metrics.
• No deterioration in delay metrics or borrower leverage — average ticket size unchanged at Rs.2.2-2.5 lakh vs a year ago (FY 2025-2026), LTV held at 75% inclusive of interest, gold price declined from 5,400 to 4,200 as of Q2 FY 2026-2027.
• Gold loan build-out to remain organic — positioned as a profit builder rather than an AUM builder; management will "take the long route" even at the cost of slower growth versus competitors' short-tenor products.

AI Scaling Across Distribution, Service and Risk

• AI unit scaled to ~328 people — facial recognition deployed in ~535 stores and 1,163 service branches; AI bots handling 75% of DIY customer service volumes; disbursements via AI grew 111% YoY in Q2 FY 2026-2027.
• ~129 agents and 65 agentic applications live — on track for ~118 agentic applications and ~600 agents in FY 2026-2027.
• First custom risk model launched for B2B — testing on 500,000 accounts with CMOV-based evaluation, showing 15-20% improvement in risk outcomes in modeling; B2B/B2C model launch possible by January (FY 2026-2027) if performance holds.
• Opex-to-NTI improvement of 25-40 bps targeted in FY 2026-2027 — despite continued investments in gold loan branches, MFI branches, and technology.

Rs.17,500 Cr Raise, Regulatory Watch Items, Guidance Maintained

• Board approved (subject to shareholder approval) a Rs.11,700 Cr QIP plus Rs.5,800 Cr of preferential warrants to Bajaj Finserv on October 1 — driven principally by the growth story of India, the company, and its subsidiaries, without diluting medium-term ROA/ROE goals; last equity raise of Rs.10,000 Cr was three years ago with the balance sheet since grown 90% (through FY 2026-2027).
• Capital to be raised at a leverage corridor of 5-5.5x — current leverage at 5.1x, versus past raises at 6x and the last at 5.4x; management reaffirmed long-term AUM growth guidance of 20-25% (period unspecified) and the Rs.11 lakh crore AUM target by FY30.
• FY 2026-2027 loan growth guidance of 26-27% confirmed — inclusive of all drought-related calibrations; medium-term growth guidance maintained at 23-25% ("a year lower here and a year higher there"; period unspecified); FY 2026-2027 targets of 60-62 million new loans and 18-20 million new customer additions.
• NIM compression: original FY 2026-2027 guidance of 10-15 bps now carries a "marginal headwind" — Q2 NIM compressed 10-12 bps vs Q1, H1 FY 2026-2027 ~5 bps lower than March (FY 2025-2026); management is baking in two more rate increases in FY 2026-2027 to ~6%, and rising repo rates will have a cascading impact in Q3 and Q4 FY 2026-2027.
• H1 FY 2026-2027 non-interest income grew 20% — ahead of the FY 2026-2027 fee income growth guidance of 16-18%, driven by stronger B2B growth; management said it should sustain 15-18% fee income growth over the longer term (period unspecified).
• RBI draft revolving credit rules: comments submitted; management expects RBI may find a middle path — if a complete ban results, management expects a transient AUM impact and marginal NIM/profitability compression; new term loan variants (without withdrawal features) launch on 1st November 2026 regardless of the RBI outcome. On insurance commission regulation, management will wait for final regulations (currently a discussion paper, with analyst-flagged norms from FY 2027-2028 onwards) before deciding on open architecture vs group product distribution.
• Rural drought management: FY 2026-2027 monsoon at 87% of LPA — management tracking all 720 districts for El Nino/drought impact, pruning MFI business in drought-declared districts; CPL origination committed to drop from 7% to half, and to zero in businesses with no margin; slight sequential uptick in stage two for rural consumer finance as of September (Q2 FY 2026-2027), per analyst-flagged commentary. Long-term commitments reaffirmed: "paid to deliver long-term guidance" on 23-25% profit growth and 19-21% ROE (period unspecified). Next analyst interaction at the end of Q3 FY 2026-2027.