Bajaj Housing Finance Q4 FY25 Results: PAT Up 54%, Clean Book at 6.6x P/B

24-26% AUM growth in FY26, led by affordable housing & digital scale-up. ROE lag & spread compression are near-term risks. Clean book, premium play with high execution bar.

Money Muscle

Apr 23, 2025

Bajaj Housing Finance Q4 & FY25 Financial Performance: A Deep Dive
Management Commentary & Outlook: Steady Growth, Prudent Risk, and Digital Scalability
Valuation Check: Premium Earnings, Discounted Book, and Embedded Optionality
Implications for Investors: What This Means for Your Portfolio

1. Bajaj Housing Finance Q4 & FY25 Financial Performance: A Deep Dive

1.1 Quarter Ended March 2025 (Q4 FY25): Strong Operating Momentum

Bajaj Housing Finance delivered an impressive Q4 with broad-based growth across metrics:

Net Profit (PAT) surged 54% YoY to ₹587 Cr (vs ₹381 Cr in Q4 FY24), driven by higher income and operating leverage.
Profit Before Tax (PBT) rose 48% YoY to ₹720 Cr, indicating robust core profitability.
Net Interest Income (NII) jumped 31% YoY to ₹823 Cr (vs ₹629 Cr), thanks to rising disbursals and stable margins.
Net Total Income (NTI) climbed 34% YoY to ₹958 Cr.
Net Interest Margin (NIM) held steady at 4.0%, while Gross Spread moderated slightly to 1.8%.
Disbursements reached ₹14,254 Cr, up 25% YoY — reflecting continued demand and strong execution.
Operating expenses grew only 7% YoY, far lower than revenue, bringing Opex to NTI down to 21.7% from 27.1%, highlighting strong operational efficiency gains.
Credit Cost was well-controlled at 0.12%, down from 0.18% YoY.
GNPA/NNPA remained best-in-class at 0.29% / 0.11%, with a provision coverage ratio (PCR) of over 60%.

1.2 Full Year FY25: Consistent Compounding and Resilient Margins

Assets Under Management (AUM) rose 26% YoY to ₹1.14 Lakh Cr, with well-diversified exposure across Home Loans (56%), LAP, LRD, and Developer Finance.
Loan Assets reached ₹99,513 Cr, also up 25% YoY.
Interest Income grew 25% YoY to ₹8,986 Cr.
Net Total Income (NTI) rose 23% YoY to ₹3,597 Cr.
Operating expenses grew just 6% YoY, enabling Pre-Provision Operating Profit (PPOP) to expand by 28% to ₹2,850 Cr.
Loan Losses & Provisions rose modestly to ₹80 Cr (vs ₹61 Cr in FY24), keeping Credit Cost stable at 0.09% of average loan assets.
Net Profit (PAT) for FY25 stood at ₹2,163 Cr, up 25% YoY from ₹1,731 Cr in FY24.
Return on Average Assets (ROA) remained stable at 2.4%, while Return on Average Equity (ROE) dipped slightly to 13.4%, largely due to the equity dilution from the IPO and rights issue.

1.3 Balance Sheet Strength

Capital Adequacy Ratio (CRAR) stood at a healthy 28.24%, with Tier-1 Capital at 27.72%, well above the 15% regulatory requirement.
Liquidity Coverage Ratio (LCR) was an impressive 191%, supported by a ₹2,394 Cr buffer.
Leverage stood at 5.2x, with Debt-to-Equity at 4.1x, indicating ample capacity for future expansion without overstretching the balance sheet.

2. Management Commentary & Outlook: Steady Growth, Prudent Risk, and Digital Scalability

Bajaj Housing Finance's management remains optimistic about the company’s long-term trajectory, backed by consistent growth, a rock-solid balance sheet, and disciplined underwriting. The Q4 FY25 commentary signals a confident roadmap for scaling sustainably while enhancing profitability.

2.1 Growth Strategy: Building a Scalable & Diversified Franchise

AUM Growth Guidance: Management expects 24–26% AUM CAGR over the medium term. This growth is expected to come from a mix of prime home loans, lease rental discounting (LRD), and an emerging push into affordable and near-prime segments.
Geographic Expansion: The company has expanded to 174 locations across 22 States/UTs, with plans to deepen its footprint in non-metro and Tier 2/3 markets in FY26 to access underpenetrated borrower segments.
Digital Origination & Processing: Tech-led initiatives such as digital onboarding (DIY home loans), e-agreements, and WhatsApp-based application flows are driving faster customer acquisition. Over 93% of new loans in March 2025 were e-agreement based, with 80%+ penetration in digital onboarding.

2.2 Operational Leverage: Driving Efficiency at Scale

Opex to NTI is expected to improve further to 14–15% (vs 20.8% in FY25), as the benefits of digitization, centralized hubs, and automation play out. The company is consciously focusing on low-cost, high-volume scalability across key lending products.
Employee count stands at 1,977, indicating lean operations relative to a ₹1.14 Lakh Cr AUM base. The AUM per employee is a robust ₹58 Cr, pointing to high productivity.

2.4 Risk Management & Asset Quality: Maintaining the Gold Standard

Bajaj Housing continues to maintain its position as one of the cleanest books in the housing finance space, with:
- GNPA at 0.29%, NNPA at 0.11%
- Stage-3 PCR at 60.25%
- Stage 2 assets held at a manageable 0.32%
The company expects to keep GNPA in the 40–60 bps range, and credit costs between 20–25 bps over the medium term, ensuring earnings stability.
Monthly portfolio health reviews, a centralized risk team, and tight developer finance monitoring further reinforce quality.

2.4 Capital Adequacy & Leverage: Room to Grow

Management emphasized that the 28.24% CRAR gives the company a significant buffer for growth without needing immediate capital infusion.
The leverage ratio of 5.2x is well within the internal cap of 7–8x, leaving space for balance sheet expansion without compromising credit metrics.
The capital raised via the ₹2,000 Cr rights issue (Apr ’24) and ₹3,560 Cr IPO (Sept ’24) has temporarily diluted return ratios but positioned the company to grow aggressively over FY26–FY28 without additional fundraising pressure.

2.5 FY26 Priorities: What to Expect

Scale Affordable Housing & Near Prime Segments: Expand the new Strategic Business Unit (SBU) with tailored offerings for self-employed and mid-income borrowers.
Deepen Penetration in Tier 2/3 Markets: Drive growth through localized credit teams and partnerships in emerging urban clusters.
Enhance Digital Penetration: Push digital sourcing and real-time loan sanction tools for faster turnarounds.
Strengthen Developer Finance as Retail Funnel: Leverage real estate developer relationships to fuel home loan growth.

3. Valuation Check: Premium Pricing Reflects Quality, Execution Still Key

3.1 P/E Ratio (Earnings Multiple): ~49.4x

With FY25 EPS at ₹2.67, the stock trades at a Price-to-Earnings (P/E) ratio of ~49.4x, placing it in the higher valuation band compared to listed peers in the housing finance and NBFC space.

While this might appear expensive on a near-term earnings basis, the elevated P/E reflects:

High-quality book with near-zero delinquencies
Capital adequacy buffer for multi-year growth without dilution
Long-term structural opportunity in housing finance
Premium for scalability and tech adoption

The recent capital raises have temporarily suppressed ROE and EPS. As leverage improves and the fresh capital is deployed efficiently over FY26–FY28, EPS is expected to scale materially — potentially justifying current P/E.

3.2 P/B Ratio (Book Value Multiple): ~6.6x

With a net worth of ₹19,932 Cr and a market cap of ₹111,000 Cr, Bajaj Housing Finance trades at a Price-to-Book (P/B) ratio of ~6.6x.

This the stock firmly in the “premium financials” category, where investors are:

Paying for capital efficiency (13.4% ROE despite equity dilution)
Anticipating a re-acceleration in ROE to ~15–16% as leverage scales
Expecting sustained compounding without major credit risks

Implication: This is not a “deep value” stock — it’s a “premium compounding” play, similar to Aavas Financiers, but with broader product coverage and higher digital leverage.

3.3 ROE Compression = Near-Term Opportunity

The dip in ROE from 15.2% (FY24) to 13.4% (FY25) was driven by equity infusion (₹2,000 Cr rights issue + ₹3,560 Cr IPO). As the company deploys capital across high-yield segments (LAP, LRD, affordable housing), ROE is expected to trend back to 15–16%.

This is critical—because at 6.6x P/B, the valuation assumes:

ROE improves
Growth remains 24–26%
Credit costs stay sub-20 bps

Any slippage here could trigger derating.

3.5 Bottom Line: Execution Must Match Expectations

At 6.6x P/B and 49.4x P/E, Bajaj Housing Finance is priced for:

Consistent AUM compounding (24–26%)
ROE recovery
Zero credit shocks
Sustained operating leverage from tech

It is no longer a "value pick"—it’s a quality growth stock, with a tight link between execution and valuation sustainability.

If the company delivers, upside will come from earnings compounding.
If it misses guidance or margins slip, there's risk of multiple compression.

3.5 Risk Flags to Watch: What Could Go Wrong

Post-IPO ROE Compression

If credit deployment lags or spreads compress, ROE may take longer to normalize — putting pressure on valuation.

Watch for: Quarterly ROE trend, credit growth vs capital base, and management commentary on capital deployment pace.

Narrowing Interest Spreads

Intense pricing pressure in the affordable segment or repo-rate volatility can erode margins further.

Watch for: Trends in cost of funds, portfolio yield, and NIM guidance. Spread compression could directly impact operating leverage.

Portfolio Concentration in Developer & LRD Segments

These are structurally higher-risk categories, especially in a real estate downcycle or credit event.

Watch for: GNPA trajectory in commercial books, construction activity trends, and exposure to under-construction or non-core real estate markets.

Macro & Regulatory Risks

Any tightening of NBFC regulations (e.g., risk weights, provisioning norms, or leverage caps) could reduce the firm's flexibility.
A spike in interest rates or slowdown in housing demand could affect disbursement growth.

Watch for: RBI circulars affecting NBFC-UL classification, housing market health indicators, and liquidity tightening in debt markets.

4. Implications for Investors: What This Means for Your Portfolio

Bajaj Housing Finance is emerging as a differentiated play in India’s mortgage financing space—combining the prudence of a PSU lender with the agility of a fintech-driven NBFC. Here’s what investors should take away:

4.1 Structural Growth Story with Underappreciated Potential

AUM has grown at a CAGR of 64% over 8 years, and FY25’s 26% YoY growth shows that the momentum is intact.
Despite this growth, the company remains under-the-radar compared to high-profile NBFCs like Aavas, PNB Housing, or LIC Housing, offering early-mover advantage for discerning investors.
Its focus on affordable and near-prime housing, combined with deep Bajaj Group distribution, positions it strongly in India’s evolving credit landscape.

Investor takeaway: Long-term investors seeking exposure to India’s formal housing credit boom can consider this a core portfolio candidate for steady compounding.

4.2 Premium Valuation, But for Premium Quality

The market is clearly pricing in:

Consistent execution,
Pristine asset quality (GNPA 0.29%),
High-growth potential (24–26% AUM CAGR),
And strong digital operating leverage.

This isn’t a value play in the traditional sense — it’s a “growth at reasonable quality premium” stock. Like Aavas or HDFC in its early days, Bajaj HFL is being priced for longevity, not cyclicality.

4.3 Strong Risk Culture = Resilience During Shocks

GNPA of 0.29% and PCR above 60% are best-in-class.
Conservative provisioning, diversified exposure, and a strong internal risk team mean the company can weather credit downturns far better than peers.
Unlike smaller HFCs, its developer and LRD books are professionally underwritten with ESCROW and monitoring systems.

Investor takeaway: This is a high-quality financial stock in the true sense — one that doesn’t chase yield at the cost of future write-offs.

4.4 Final Word: A Core Holding with Compounding Potential

Bajaj Housing Finance is not a hype-driven financial stock. It’s a classic "buy, hold, and let it scale" story backed by:

Pristine asset quality
Smart capital allocation
Tech-first efficiencies
A massive runway in the housing credit space

For long-term investors, especially those looking to build wealth in India’s structural financialization journey, this is a story worth looking at.

Buy for quality. Hold for compounding. Track execution rigorously.

Disclaimer

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