Moody's Ratings stated that BFL's ratings consider its strong and entrenched franchise as the largest retail oriented non-bank finance company (NBFC) in India with a sizable customer base and distribution network; its diversified loan book, which supports its high risk-adjusted profitability; its capitalization; and its competitive funding costs.
These strengths are counterbalanced by the company's focus on riskier unsecured consumer and small business loans, which are susceptible to higher credit costs during economic duress, and its reliance on wholesale funding.
BFL will likely continue gaining market share and further augmenting its already sizable franchise with consolidated assets under management of INR3.5 trillion (US$42 billion) as of June 2024.
Moody's expects the company to maintain its two-pronged strategy of having a mix of secured lending and unsecured lending. BFL's strong loan diversification gives it flexibility to calibrate loan growth depending on the prevailing asset quality trends in the respective segments.
The diversification also helps in asset-liability management via a judicious mix of short- and long-term loan assets. Apart from product diversification, the company has substantial geographical and customer diversification.
Although BFL's sizable unsecured lending exposes it to economic shocks, the company has employed various risk management processes to ensure adequate risk-adjusted returns. BFL's secured loans have experienced low charge-offs over the years.
Like its industry peers, BFL relies on wholesale sources for its funding needs to a large extent. As of June 2024, its funding mix comprised domestic bonds (35%), bank loans (28%), term deposits (21%) and others. The company's cost of funds is among the lowest compared with all privately owned Indian NBFCs.
BFL's funding and liquidity access also benefit from the company being a part of the large and well-known Bajaj Group.
Bajaj Finance is one of India’s leading and most diversified financial services companies. The company is mainly engaged in the business of lending. BFL has a diversified lending portfolio across retail, SME and commercial customers with a significant presence.
The non-banking financial company (NBFC) reported 13.82% increase in consolidated net profit to Rs 3,911.98 crore on a 24% jump in total income to Rs 10,418 crore in Q1 FY25 as compared with Q1 FY24.
The scrip shed 0.03% to currently trade at Rs 6902 on the BSE.