Credit cost fell to 1.6 per cent (from 2.9 per cent in Q3FY26) as gross stage 3 and net stage 3 both declined by 21 bps and 7 bps respectively Q-o-Q. Guidance is for 22–24 per cent AUM growth, marginal moderation in NIM (net interest margin), improvement in operating expenses-to-net total income ratio by 25–40 bps and credit cost of 1.45–1.60 per cent (net of recoveries) for FY27. The return on assets (RoA) was 4.1 per cent, and return on equity (RoE) was at 20 per cent, with management confident of profit growth exceeding balance sheet growth in FY27.
AUM growth to ₹5.1 trillion was driven by mortgages, consumer B2C, rural B2C, and gold loans. Gold loans was the fastest-growing segment (management projects it to be 5 per cent of AUM by end FY27). The customer base crossed 120 million with cross-sell momentum and repeat sourcing across vehicle finance and personal loans. MSME growth was low, with tight underwriting and portfolio pruning. Management expects MSME to rebound to double-digit growth by Q2 or Q3FY27.
NIM moderated by 9 bps to 9.5 per cent, with lower yields offset by a 27 bps Q-o-Q decline in cost of borrowings. Operating expenses rose due to labour code impact, investments in AI, and accelerated gold loan branch rollout, pushing the cost-to-income ratio up by 47 bps Q-o-Q (management expects 25–40 bps improvement in FY27). Deposits contributed 15 per cent of consolidated borrowings.
The company booked 12.9 million loans (up 20 per cent Y-o-Y but down 7 per cent Q-o-Q). AUM growth was healthy except in auto financing (winding down captive business, down 60 per cent Y-o-Y) and MSME (up only 6 per cent Y-o-Y, up 1 per cent Q-o-Q). Among loan segments, gold was up 115 per cent Y-o-Y (26 per cent Q-o-Q). MFI (up 75 per cent Y-o-Y and 14 per cent Q-o-Q) and commercial vehicles (CV) and tractors (up 136 per cent Y-o-Y and up 21 per cent Q-o-Q) were both up on smaller bases.
Credit performance improved with credit cost falling by 128 bps Q-o-Q. The captive 2W/3W business contributed more than expected to gross non-performing assets (GNPA) and credit cost. Management guided for credit costs to trend down to 1.45–1.6 per cent (net of recoveries) for FY27 from 2.1 per cent in FY26.
Asset quality improvement may be supported by the winding down of the captive vehicle finance book and MSME normalisation. Further reduction in credit costs are contingent on easing of geopolitical risks. The management highlighted that ECL (expected credit loss) provisioning is driven by a bottom-up, quarterly assessment. BAF has strengthened its provision coverage ratio (PCR) across stage 1 and stage 2, and it may be willing to shore up provisioning further against potential stresses.
BAF’s AUM growth was moderated by conscious pruning of captive two-wheeler financing (expected to wind down to ₹1,500 crore by FY27) and MSME (growth down to 6 per cent vs historical levels of over 20 per cent). Management confidence of double-digit growth in MSME within six months could be a booster. AUM growth is driven by newer segments like CV, tractors, and gold, which contributed to 3.5 per cent of AUM growth in FY26 and is expected to scale further. The gold portfolio is being supported by doubling the distribution network for gold loans and may contribute 5 per cent of the portfolio mix vs 3.5 per cent currently.
BAF will gain 25 bps market share improvement for every ₹1 trillion AUM accretion, given that it is growing at almost 2x of the industry growth rate. The guidance is to add 15–17 million customers during FY27.
The combination of higher growth, better asset quality, and lower credit costs are all reasons why analyst consensus is bullish. The strategic clarity in winding down captive assets and the confident guidance are other positive factors. One key risk is the geopolitical situation.
According to Bloomberg, 22 of the 32 analysts polled post Q4 results are positive, while six are bearish and four are neutral on the stock, which has gained over 2 per cent to ₹939.70 post results. Their average one-year target price is ₹1,052.17.
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