Bajaj Finance vs L&T Finance (2026): AUM Growth, ROA, Credit Cost & Which Is Better?
Bajaj Finance versus L&T Finance is a test of how much investors should pay for superior lending economics.
Bajaj Finance is approximately four times larger by lending assets.
Q1 FY2027 assets under management:
₹5.47 lakh crore.
L&T Finance consolidated loan book:
₹1.30 lakh crore.
L&T Finance is actually growing slightly faster.
Its book increased 27% year on year.
Bajaj Finance AUM increased 24%.
Profit growth is also similar:
Bajaj Finance +28%.
L&T Finance +29%.
Then profitability separates them.
Bajaj Finance ROA:
4.7%.
L&T Finance:
2.48%.
The central commercial question is whether Bajaj's almost two-times ROA deserves a valuation of roughly 5.6x book versus L&T Finance around 2.8x.
What happens to every ₹100 of lending assets?
Annualised ROA of 4.7% means the franchise produces roughly ₹4.70 of profit for each ₹100 of assets, versus L&T Finance at approximately ₹2.48.
Bajaj Finance's annualised loan loss to average AUF was around 1.54%. L&T Finance reported credit cost around 2.54%.
L&T Finance's consolidated book grew 27%; Bajaj Finance AUM grew 24%. The growth difference is much smaller than the return difference.
This is why the cheaper NBFC is not automatically the better-value NBFC.
Bajaj Finance vs L&T Finance: Q1 FY2027 scoreboard
| Metric | Bajaj Finance | L&T Finance | Current Reading |
|---|---|---|---|
| Q1 PAT | ₹6,081 Cr | ₹902 Cr management presentation | Bajaj scale |
| PAT growth | +28% | +29% | Essentially tied |
| AUM / consolidated book | ₹5,46,944 Cr AUM | ₹1,29,634 Cr book | Bajaj scale |
| Book growth | +24% | +27% | L&T Finance |
| Quarterly AUM addition | ~₹36,969 Cr | Strong sequential book growth | Bajaj absolute addition |
| New loans / retail disbursements | 16.13 million new loans, +20% | ₹23,852 Cr retail disbursements, +36% | Different models |
| Customer franchise | 124.43 million | 2.9 Cr+ broader customer database | Bajaj scale |
| Retailisation | Highly diversified consumer/SME portfolio | 98% of consolidated book | LTF transformation |
| NII | ₹12,571 Cr, +23% | NIM + fees 10.47% | Not same disclosure basis |
| PPOP growth | +22% | ~+35% | L&T Finance growth |
| ROA | 4.7% | 2.48% | Bajaj Finance |
| ROE | 20.4% | 12.71% | Bajaj Finance |
| GNPA / Gross Stage 3 | 0.96% GNPA | 2.86% GS3 | Bajaj, labels differ |
| NNPA / Net Stage 3 | 0.39% NNPA | 0.90% NS3 | Bajaj, labels differ |
| Provision coverage | 60% on Stage 3 assets | Strong retail provisioning | Different portfolio mix |
| Loan loss / credit cost | 1.54% annualised loan loss to avg AUF | 2.54% credit cost | Bajaj |
| Cost of borrowing | Diversified funding franchise | WACB 7.20% | LTF improving |
| Capital adequacy | 20.90% | Comfortable regulatory capital | Bajaj disclosed buffer |
| Tier 1 | 20.01% | Strong capital position | Bajaj |
| 28 Aug P/E | 33.03x | ~24.0x | L&T Finance cheaper |
| 28 Aug P/B | 5.64x | ~2.8x | L&T Finance cheaper |
Bajaj Finance's biggest moat is not growth
Many lenders can grow quickly for several quarters.
Bajaj Finance's distinguishing characteristic is the combination of:
- 24% AUM growth.
- 4.7% ROA.
- 20.4% ROE.
- sub-1% GNPA.
- 20%+ capital adequacy.
Fast growth and high returns are occurring at the same time.
That combination is difficult because lending growth normally consumes quality
A lender can increase originations simply by:
- lowering underwriting standards.
- reducing pricing.
- increasing leverage.
- entering riskier borrower segments.
Bajaj Finance's current asset-quality numbers suggest that Q1 growth has not required a visible deterioration in recognised credit quality.
AUM reached approximately ₹5.47 lakh crore
Year-on-year growth:
24%.
Quarterly AUM addition:
approximately ₹36,969 crore.
That single-quarter addition is more than a quarter of L&T Finance's entire consolidated loan book.
This highlights the absolute scale difference.
Bajaj's customer engine is equally difficult to replicate
Customer franchise:
124.43 million.
Customers added during Q1:
5.10 million.
New loans booked:
16.13 million, up 20%.
The company can generate lending growth from an enormous installed customer base rather than acquiring every borrower from scratch.
That reduces the marginal cost of future growth
A large existing customer base creates opportunities for:
- cross-sell.
- repeat consumer finance.
- personal loans.
- SME lending.
- gold loans.
- insurance distribution.
- payments and digital products.
This customer reuse is one reason Bajaj Finance has historically produced exceptional operating economics.
Q1 profitability improved faster than the balance sheet
AUM:
+24%.
PAT:
+28%.
ROA:
4.7% versus 4.5% a year earlier.
ROE:
20.4% versus 19.0%.
This is the ideal lending pattern: profits and returns improve while assets grow rapidly.
Bajaj's credit cost also improved
Annualised loan loss to average assets under finance was approximately 1.54%.
The quarter included prudent management and macroeconomic provisioning.
Even with that conservatism, asset quality improved.
Gross and net NPAs moved lower
GNPA:
0.96%.
NNPA:
0.39%.
A year earlier:
1.03% and 0.50%.
The loan book is becoming larger without a corresponding rise in recognised bad-loan ratios.
There is still risk below the aggregate numbers
Bajaj Finance operates across many categories with different credit characteristics:
- consumer durable finance.
- personal loans.
- SME.
- commercial lending.
- gold loans.
- rural finance.
- microfinance.
Portfolio-level stress can therefore rise in one segment without immediately appearing as a dramatic company-wide GNPA movement.
The expansion into gold loans is strategically important
Gold loans have become an increasingly important growth vector.
Secured lending can diversify the portfolio away from unsecured consumer credit.
It also introduces:
- auction risk.
- operational risk.
- gold-price volatility.
- branch-execution requirements.
The diversification is useful, but it is not risk-free.
L&T Finance is a fundamentally different story: transformation rather than dominance
The company spent years converting itself from a mixed wholesale-and-infrastructure lender into a predominantly retail NBFC.
That transformation is now almost complete.
Retail book:
₹1,27,535 crore.
Retailisation:
98%.
This is one of the most important structural facts in the comparison.
Five years ago, L&T Finance was a very different lender
The historical business contained much larger wholesale and project-finance exposure.
The current company is increasingly driven by:
- rural business finance.
- farmer finance.
- two-wheelers.
- personal loans.
- housing and LAP.
- SME finance.
- gold loans.
This makes today's valuation less comparable with L&T Finance's own historical multiples.
The new retail book is growing faster than Bajaj Finance
Consolidated book:
+27%.
Retail book:
+28%.
Retail disbursements:
+36%.
Bajaj Finance AUM grew 24%.
L&T Finance therefore wins the current percentage-growth contest.
But the smaller base matters
L&T Finance's entire ₹1.30 lakh crore consolidated book is less than one-quarter of Bajaj Finance's ₹5.47 lakh crore AUM.
A 27% growth rate is easier to achieve from the smaller base than from Bajaj's scale.
This does not diminish L&T Finance's execution.
It prevents percentage growth from being interpreted without context.
L&T Finance is also deliberately refusing some growth
Management said it gave up approximately ₹1,000-₹1,200 crore of potential disbursements during Q1 to protect portfolio quality.
This is a useful signal.
It suggests the current 27%-28% book growth is not being pursued at any cost.
Risk-first growth is especially important for L&T Finance
The company still carries higher credit-cost intensity than Bajaj Finance.
Growing faster while simultaneously lowering credit costs is therefore more valuable than maximising disbursements.
L&T Finance's ROA has improved to 2.48%
A year earlier:
approximately 2.37%.
Previous quarter:
around 2.40%.
The improvement looks small in basis points.
Applied across a rapidly growing asset base, it is economically meaningful.
ROE is improving even faster
Q1 FY2027:
12.71%.
Q1 FY2026:
10.86%.
The approximately 185-basis-point improvement indicates that the retailisation strategy is beginning to produce stronger shareholder returns.
Yet Bajaj's return gap remains enormous
ROA:
Bajaj 4.7%.
L&T Finance 2.48%.
ROE:
Bajaj 20.4%.
L&T Finance 12.71%.
L&T Finance is improving rapidly from a much lower return base.
This is why the L&T Finance thesis is about convergence, not equality
L&T Finance does not need to reach 4.7% ROA.
Its own strategic targets are much more realistic.
Management is targeting:
- ROA around 2.8% by Q4 FY2027.
- credit cost around 2.0%-2.2% by Q4.
- 20%+ book growth.
Longer-term Lakshya 2031 ambitions point toward still higher return ratios.
Reaching 2.8% ROA would materially change the relative valuation debate
At 2.48% ROA, L&T Finance trades at a large profitability discount to Bajaj Finance.
If it reaches 2.8%-3.0% while keeping growth above 20%, the current 2.8x-ish book multiple becomes easier to defend.
The biggest obstacle is credit cost
L&T Finance Q1 credit cost:
2.54%.
Bajaj Finance annualised loan loss to average AUF:
1.54%.
Definitions are not perfectly identical.
The economic direction is still clear.
L&T Finance currently loses materially more of its lending yield to credit losses.
A 100-basis-point credit-cost gap is huge
If L&T Finance can reduce credit cost from 2.54% toward 2.0%, a meaningful portion of the improvement can flow directly into pre-tax profitability.
This is one of the cleanest routes from 2.48% ROA toward management's higher target.
Asset quality is improving, but Bajaj remains cleaner
L&T Finance consolidated Gross Stage 3:
2.86%.
Net Stage 3:
0.90%.
A year earlier:
3.31% and 0.99%.
The direction is positive.
Do not compare Stage 3 and bank-style NPA labels as though they are perfectly identical
Bajaj Finance reports GNPA and NNPA.
L&T Finance's investor materials prominently use Gross Stage 3 and Net Stage 3.
Both describe recognised stressed credit, but accounting presentation and portfolio composition can differ.
For directional comparison, Bajaj currently has the cleaner book.
L&T Finance's funding cost is moving in the right direction
Weighted average cost of borrowing:
7.20%.
Down approximately 48 basis points year on year.
Lower funding cost creates direct support for lending margins.
Management expects borrowing costs to rise modestly from here
Full-year guidance points toward a weighted average cost of borrowing around 7.35%-7.40%.
This means Q1's 7.20% should not simply be annualised as the permanent funding cost.
The key question is whether pricing, fees and portfolio mix can offset the expected funding increase.
NIM plus fees remained strong at 10.47%
This measure increased approximately 25 basis points year on year.
L&T Finance combines lending spread and fee income because multiple product segments generate different economics.
It is not directly comparable with a bank NIM or Bajaj Finance's NII margin.
What matters is whether the 10%-plus revenue yield survives credit cost
A lender can report high yields and still produce mediocre returns if:
- credit losses are high.
- operating expenses are high.
- funding costs rise.
L&T Finance's improving ROA suggests more of that gross yield is now reaching shareholders.
Bajaj Finance's advantage is that the conversion is already proven
The company converts a diversified lending franchise into:
- 4.7% ROA.
- 20.4% ROE.
- sub-1% GNPA.
- high-20s profit growth.
Those results justify a substantial quality premium.
The premium is substantial
August 28, 2026:
- Bajaj Finance P/E: approximately 33.03x.
- Bajaj Finance P/B: approximately 5.64x.
- L&T Finance P/E: approximately 24x.
- L&T Finance P/B: approximately 2.8x.
Bajaj costs about twice as much per rupee of book value.
It also generates nearly twice the current ROA.
This is a surprisingly rational valuation relationship
Bajaj Finance P/B premium versus L&T Finance:
roughly 100%.
Bajaj ROA premium:
roughly 90%.
Bajaj ROE premium:
roughly 60%.
The valuation premium is large, but the profitability premium is also large.
L&T Finance therefore cannot be called cheap merely because its P/B is lower
A 2.8x book lender earning 12.7% ROE is not obviously cheap in isolation.
The investment case depends on future returns rising.
That is why management's ROA and credit-cost targets matter so much.
Bajaj Finance cannot be called cheap either
A 5.6x book valuation requires exceptional execution.
To support it over time, Bajaj needs:
- AUM growth around 20%+.
- ROE near 20%.
- ROA above 4%.
- controlled credit costs.
- continued customer-franchise expansion.
A modest deterioration in these metrics can compress the multiple even without a credit crisis.
This is the difference between quality risk and transformation risk
Bajaj Finance risk:
The business remains good but stops being exceptional enough for a 5x-plus book valuation.
L&T Finance risk:
The transformation stalls before return ratios reach the levels implied by the current rerating.
L&T Finance's growth composition is broad enough to matter
Q1 book growth included strong expansion across:
- Rural Business Finance.
- Two-wheeler finance.
- Personal loans.
- Housing and LAP.
- SME finance.
- Gold loans.
This reduces reliance on a single lending product.
Personal loans and gold finance deserve extra scrutiny
Both categories can grow rapidly.
They create very different risk profiles.
Personal loans are unsecured and sensitive to borrower leverage.
Gold loans are secured but operationally intensive and dependent on collateral management.
The mix shift therefore needs to be judged through risk-adjusted yields, not gross growth alone.
Bajaj Finance has the same portfolio-management challenge at much larger scale
Its customer franchise gives it enormous cross-sell power.
The risk is over-monetisation.
When one financial company can offer many products to the same customer, underwriting systems must prevent:
- excess borrower leverage.
- multiple simultaneous unsecured exposures.
- cross-product delinquency contagion.
This is why data and underwriting are part of Bajaj's moat
The value of 124 million customers is not merely distribution.
It is information.
Repayment history, transaction behaviour and prior-product performance allow the lender to make faster credit decisions with more internal data.
That informational advantage can lower acquisition costs and improve risk selection.
L&T Finance is trying to build a similar technology layer
Its strategy increasingly uses proprietary risk and analytics systems across underwriting and collections.
The company has also been building a private-cloud and AI stack designed to reduce infrastructure cost and improve portfolio decisions.
The economic proof will be visible in:
- credit cost.
- operating expenses.
- approval quality.
- collection efficiency.
rather than in technology announcements themselves.
The Bull Run market snapshot shows both stocks have strong momentum—but L&T Finance has rerated faster over one year
| Bull Run Snapshot — 25 Aug 2026 | Bajaj Finance | L&T Finance |
|---|---|---|
| Price | ₹1,087.40 | ₹319.50 |
| Market capitalisation | ₹6,35,920 Cr | ₹78,302 Cr |
| 1-month return | +7.37% | +5.65% |
| 3-month return | +16.78% | +13.42% |
| 6-month return | +7.35% | +6.54% |
| 1-year return | +20.71% | +46.77% |
| 52-week high | ₹1,176.40 | ₹338.60 |
| 52-week low | ₹787.90 | ₹216.60 |
| RSI 14 | 56.59 | 57.38 |
| Dividend yield | 0.53% | 0.88% |
| Bull Run Score | 62.4/100 | 55.2/100 |
L&T Finance's 47% one-year return means the transformation is no longer ignored
The stock has already rerated substantially.
Future performance therefore needs more than a narrative that retailisation is improving.
It needs actual delivery on:
- ROA.
- credit cost.
- ROE.
Bajaj Finance's valuation has also moved with strong operational delivery
The stock gained about 21% over one year in Bull Run's dated snapshot.
Its market capitalisation exceeds ₹6 lakh crore.
At that scale, sustained 20%+ AUM growth increasingly requires very large absolute amounts of annual credit origination.
The law of large numbers is Bajaj's long-term challenge
A 24% increase on ₹5.47 lakh crore becomes harder every year.
Eventually, either:
- growth slows.
- new categories become larger.
- international or adjacent financial products contribute more.
The valuation needs to reflect that scale reality.
L&T Finance has more runway because it is smaller
A ₹1.30 lakh crore book can compound above 20% for longer before absolute market constraints become as severe.
This is the strongest structural argument in favour of L&T Finance's growth premium.
But runway is useful only if returns improve with scale
If L&T Finance reaches ₹2 lakh crore of loans but ROA remains around 2.5%, the business will be larger without becoming proportionately better.
The real target is:
growth plus higher returns.
The metric that matters most for Bajaj Finance
Credit cost.
Its premium valuation already assumes strong growth and high returns.
A meaningful increase in loan losses can hit both earnings and the valuation multiple simultaneously.
The metric that matters most for L&T Finance
ROA.
The book is already growing fast.
The retailisation is already complete.
The next phase needs to prove the transformed franchise produces structurally higher profit per rupee of assets.
What can break each thesis?
Bajaj Finance
- Credit cost rises materially above current levels.
- Unsecured or microfinance stress increases.
- AUM growth slows below the level implied by a 5x-plus book valuation.
- ROA drops materially below 4.5%.
- Customer cross-sell growth comes at the expense of underwriting discipline.
- Premium valuation compresses even while absolute profit keeps rising.
L&T Finance
- Credit cost fails to fall toward the 2.0%-2.2% target.
- Rapid personal-loan growth creates delayed delinquencies.
- ROA stalls near 2.5%.
- Funding costs rise faster than pricing and fees can offset.
- Retail book growth slows before operating leverage is fully realised.
- The stock rerating gets ahead of the improvement in ROE.
Bajaj Finance vs L&T Finance: current conclusion
Bajaj Finance is currently the much stronger NBFC franchise.
L&T Finance currently offers the more significant profitability-convergence opportunity.
Bajaj Finance vs L&T Finance FAQs
Which company is larger?
Bajaj Finance by more than four times on lending assets.
Which is growing its loan book faster?
L&T Finance at approximately 27% versus Bajaj Finance AUM growth of 24%.
Which is growing profit faster?
They are effectively tied: L&T Finance around 29% and Bajaj Finance around 28%.
Which has higher ROA?
Bajaj Finance at approximately 4.7% versus L&T Finance at 2.48%.
Which has higher ROE?
Bajaj Finance at 20.4% versus L&T Finance at 12.71%.
Which has better asset quality?
Bajaj Finance currently has materially lower recognised stressed-asset ratios, although Bajaj's NPA labels and L&T Finance's Stage 3 labels are not perfectly identical accounting measures.
Which has lower credit cost?
Bajaj Finance based on Q1 FY2027 disclosed loan-loss intensity.
What percentage of L&T Finance's book is retail?
Approximately 98% as of June 30, 2026.
What is L&T Finance targeting for ROA?
Management indicated a goal of roughly 2.8% by Q4 FY2027, with longer-term Lakshya 2031 targets above that level.
Which stock is cheaper?
L&T Finance on both late-August P/E and P/B.
Why is Bajaj Finance more expensive?
It currently generates substantially higher ROA and ROE, has lower credit losses, a much larger customer franchise and stronger proven profitability across a much larger loan book.
Where can investors compare them on Bull Run?
Use the Bajaj Finance stock page, L&T Finance stock page and the NBFC sector page.
Research sources
Disclaimer
This article is educational and informational only. Bajaj Finance primarily discloses assets under management and NPA metrics while L&T Finance's management presentation refers to consolidated loan book and Stage 3 asset-quality measures. These are directionally comparable lending indicators but should not be assumed to be perfectly identical accounting definitions. Bajaj Finance's approximately 1.54% figure is annualised loan loss to average assets under finance; L&T Finance's 2.54% is its disclosed credit-cost measure, so the comparison is economic rather than a claim of identical methodology. L&T Finance's management presentation reports PAT of approximately ₹902 crore for its operating performance discussion, while statutory consolidated financial statements may present profit using different accounting attribution lines. L&T Finance's FY27 ROA and credit-cost goals are management targets, not guaranteed outcomes. Credit losses from fast-growing personal, rural, SME, gold-loan or consumer portfolios can emerge with a lag. Bull Run market data is dated August 25, 2026; valuation multiples are late-August point-in-time observations. Nothing here recommends buying, selling or holding Bajaj Finance, L&T Finance or any security. Bull Run is not a SEBI-registered Research Analyst or Investment Adviser.