Bajaj Finance Receives Upgrade in Issuer Credit Ratings: A Milestone for Growth
On August 14, 2025, Bajaj Finance Limited, one of India’s leading non-banking financial companies (NBFCs), received a significant boost with an upgrade in its issuer credit ratings from S&P Global Ratings. The long-term issuer credit rating was elevated from BBB-/Positive/A-3 to BBB/Stable/A-2, reflecting the company’s robust financial performance and India’s improving economic landscape. This upgrade, announced in a report by S&P Global Ratings, underscores Bajaj Finance’s strong market position and its ability to thrive amidst a strengthening regulatory environment. Here’s an in-depth look at the upgrade, its drivers, and what it means for Bajaj Finance and its stakeholders.
Details of the Rating Upgrade
S&P Global Ratings upgraded Bajaj Finance’s long-term issuer credit rating to BBB/Stable/A-2 from BBB-/Positive/A-3, with the short-term rating also improving from A-3 to A-2. Notably, the company’s Standalone Credit Profile (SACP) remained unchanged at ‘bbb’, indicating that the upgrade primarily reflects external factors, particularly the recent upgrade of India’s sovereign credit rating to BBB from BBB- on August 14, 2025. This sovereign rating uplift, driven by India’s strong economic growth and structural reforms, has had a ripple effect, boosting the ratings of several Indian financial institutions, including Bajaj Finance, State Bank of India, HDFC Bank, and Tata Capital, among others.
The upgrade signals S&P’s confidence in Bajaj Finance’s ability to maintain its financial strength in a supportive economic environment. However, the ratings remain capped by India’s sovereign rating due to the direct and indirect influence of the government on financial institutions operating in the country.
Why the Upgrade?
Several key factors contributed to S&P Global Ratings’ decision to upgrade Bajaj Finance’s issuer credit ratings:
Strong Market Position: Bajaj Finance is a market leader in financing consumer durables, two- and three-wheelers, and other retail lending segments. Its extensive pan-India franchise and large customer base, serving over 70 million clients, have solidified its dominance in the NBFC sector. The company’s diversified loan book, spanning personal loans, home loans, and auto financing, enhances its resilience against market volatility.
Stable Financial Performance: Bajaj Finance has consistently delivered above-average profitability, supported by stable earnings, strong asset quality, and access to low-cost funding. S&P projects the company’s credit costs to remain around 2% of average loans over the next 12–24 months, reflecting prudent risk management and a largely mass-affluent borrower base that mitigates risks in unsecured lending.
Structural Reforms in India: The upgrade aligns with India’s improving economic fundamentals, driven by reforms like the Insolvency and Bankruptcy Code (IBC) introduced in 2016. The IBC has strengthened creditor rights, improved payment discipline, and reduced credit risk in the financial system, creating a favorable environment for NBFCs like Bajaj Finance. S&P also noted India’s resilient growth trajectory and enhanced monetary policy credibility as key drivers.
Bajaj Group Affiliation: As part of the Bajaj Group, one of India’s most respected conglomerates, Bajaj Finance benefits from better access to funding at competitive rates compared to its peers. This affiliation enhances its liquidity and financial flexibility, further bolstering its creditworthiness.
Growth Potential: S&P anticipates Bajaj Finance will outpace industry growth, projecting a 25–27% expansion over the next two years. The company’s robust underwriting standards and diversified portfolio position it to capitalize on India’s economic growth, ensuring sustained profitability and capitalization.
Earlier Recognition in 2025
This is not the first positive rating update for Bajaj Finance in 2025. On March 17, S&P Global Ratings revised the company’s long-term rating outlook from ‘Stable’ to ‘Positive’ and upgraded its SACP from BBB- to BBB, citing a strengthening regulatory environment and Bajaj Finance’s strong market position. Additionally, on April 7, CARE Ratings reaffirmed Bajaj Finance’s strong track record, emphasizing its established franchise and robust portfolio growth. More recently, Moody’s assigned Bajaj Finance a first-time Baa3/P-3 long- and short-term issuer rating with a stable outlook on August 8, 2025, highlighting its diversified loan book and strong capitalization. These consistent affirmations across multiple agencies underscore Bajaj Finance’s financial stability and growth prospects.
Implications for Bajaj Finance and Investors
The S&P upgrade is a significant milestone for Bajaj Finance, reinforcing investor confidence and signaling strong growth prospects. The improved rating enhances the company’s ability to access global capital markets at competitive rates, supporting its ambitious expansion plans. For investors, the upgrade reflects Bajaj Finance’s resilience and market leadership, making it an attractive option in India’s rapidly growing financial sector. However, S&P’s report cautions that the company’s growth, while robust, may lead to a slight dip in its pre-diversification Risk-Adjusted Capital (RAC) ratio below 15% by fiscal 2026 due to its aggressive expansion.
The upgrade also highlights the broader positive outlook for India’s financial sector. Alongside Bajaj Finance, S&P upgraded seven banks (including SBI, ICICI Bank, and HDFC Bank) and two other NBFCs (Tata Capital and L&T Finance) on August 15, 2025, citing improved asset quality, profitability, and capitalization. These upgrades, following India’s sovereign rating uplift, reflect the sector’s ability to leverage the country’s economic momentum and systemic reforms.
Looking Ahead
The S&P Global Ratings upgrade positions Bajaj Finance as a standout performer in India’s NBFC landscape. With a projected growth rate of 25–27% over the next two years, supported by a strong regulatory environment and a diversified portfolio, the company is well-poised to maintain its leadership in retail financing. However, its ratings remain tied to India’s sovereign rating, meaning any future changes in the country’s credit profile could impact Bajaj Finance. For now, the company’s robust financials, strategic group affiliations, and market dominance make it a beacon of stability and growth in India’s financial sector.
As Bajaj Finance continues to expand its footprint, this upgrade serves as a testament to its operational excellence and a promising indicator for investors and stakeholders. The company’s shares, trading at ₹8,560.60 as of March 2025, remain a focal point for those eyeing opportunities in India’s dynamic financial market.
References:
- Business Standard. (2025, August 16). Bajaj Finance receives upgrade in Issuer credit ratings.
- Outlook Business. (2025, August 16). S&P Lifts Ratings of SBI, HDFC Bank, Bajaj Finance, Others.
- SensexNifty.com. (2025, March 18). Bajaj Finance Credit Rating Upgraded: S&P Revises Outlook to 'Positive'.
- CARE Ratings. (2025, April 7). Bajaj Finance Limited Rating Report.
- CNBC TV18. (2025, March 18). S&P Global Ratings revises Bajaj Finance’s long-term rating outlook to ‘positive’.
- Economic Times. (2025, August 15). S&P Global upgrades ratings of 10 Indian financial institutions.
- NDTV Profit. (2025, August 8). Bajaj Finance Debt Receives ‘First-Time Baa3’ Ratings With ‘Stable’ Outlook.
