It was the classic David versus Goliath battle in the NBFC segment in the December 2025 quarter – on one side of the ring is Shriram Finance and on the other side, is Pune-based Bajaj Finance, which is the largest NBFC in the country, in terms of number of customers served, loans disbursed and market capitalisation.
The MUFG catalyst: A game-changer for Shriram Finance
Investor interest in Shriram Finance has been very strong, with Shriram Finance in late December 2025, announcing its plan to raise Rs 39,617 crore from Japan-based MUFG Bank. As part of the deal, the global banking giant would take a 20% stake in the expanded capital of the NBFC.
The Shriram Finance stock was up 5% in early Tuesday trade to Rs 1,012, on a day when sentiment is very bullish with the new trade deal announcement with the US. The stock had hit a 52-week high of Rs 1,044 earlier in the trading day.
Bajaj Finance, too, gained 6.7% in mid-Tuesday trading to Rs 964.5, and the stock had hit a 52-week high of Rs 1,102.5 on 23 October, 2025.
Investors have been increasingly evaluating leading NBFC stocks on account of their ability to grow retail loans at a far quicker pace than leading private sector banks. Retail loans earn higher rates of interest vis-a-vis corporate loans and it helps NBFCs to deal with the reducing interest rate environment followed by RBI.
Q3FY26 report card – strong growth in retail lending
Operational performance in December 2025 quarter
| NIM (%) | Loan growth (%) | Net profit growth (%) # | NPA in % | |
| Shriram Finance (standalone) | 8.58% | 14.6% | 21.2% | 2.38% |
| Bajaj Finance | NA | 22% | 23% | 0.47%* |
*NPAs for the current financial year as on 31 December 2025
# Excluding one-time gains / losses
The two NBFCs reported solid growth in loans in the December 2025 quarter.
Shriram Finance’s strong focus on retail loans helped it to grow its NIM on a y-o-y basis in Q3FY26, at a time when RBI is making credit / loans cheaper several.
Bajaj Finance declared its results after the close of Tuesday trading, and its loan book grew a strong 22% to Rs 4.85 lakh crore in the December 2025 quarter. It has highlighted strong growth in CV and tractor finance along with car loans and commercial lending.
Earlier, Shriram Finance had highlighted its loan book grew by 14.6% y-o-y to Rs 2.91 lakh crore in the December 2025 quarter, and that was thanks to a 37.5% y-o-y surge in farm equipment loans coupled with a 21.8% jump in passenger vehicle loans.
To Shriram Finance’s credit, its net interest margin (NIM) was 8.58% in Q3FY26 vis-a-vis 8.48% a year earlier, and that is thanks to its strong focus on retail loans.
Retail loans have higher interest rates vis-a-vis loans to top corporates, and helped Shriram Finance to manage the pressure on NIMs, at a time when RBI is attempting to boost lending in the broader banking system via cheaper credit.
Bajaj Finance has not given its NIM – it has highlighted a 21% y-o-y growth in its net interest income to Rs 11,317 crore in Q3FY26.
Asset quality and profit growth in Q3FY26 – one-time effects impact net profit
Bajaj Finance has highlighted impairment on financial instruments of Rs 3,625.5 crore in the December 2025 quarter vis-à-vis Rs 2,043.3 crore a year earlier.
The company has highlighted that it took an additional provisioning of Rs 1,406 crore in Q3FY26 related to expected credit losses. This provision relates to future / anticipated NPAs and making provisions for loans / advances, irrespective of whether the loan has turned into a NPA or not.
The Bajaj Finance management has been very prudent with regard to its NPA provisioning and investors will appreciate it, despite the one-time hit to net profits in Q3FY26. It also sends a signal to investors on the strong quality of the loan book of Bajaj Finance.
Bajaj Finance has highlighted net NPA at 0.47% at the end of 31 December, 2025 vis-à-vis 0.48% a year earlier.
Bajaj Finance had a one-time gain of Rs 1,416.4 crore related to sale of shares in its subsidiary, Bajaj Housing Finance.It has used these proceeds to make additional provisions in the quarter under review.
In addition, Bajaj Finance took a one-time charge of Rs 265 crore related to the new labour laws.
Higher provisioning and the provisioning for new labour regulations resulted in its consolidated net profit falling 5.5% y-o-y to Rs 4,066 crore in the quarter under review.
However, excluding one-time items, Bajaj Finance has highlighted a 23% y-o-y growth in profit after tax to Rs 5,317 crore in Q3FY26.
In the case of Shriram Finance, its asset quality showed improvement.
Its net NPA ratio was 2.38% in the December 2025 quarter vis-a-vis 2.68% a year earlier.
The NBFC had a one-time burden of Rs 131.7 crore related to the new labour laws in Q3FY26.
Coming to net profits, in the December 2024 quarter, Shriram Finance had an exceptional gain of Rs 1,656.77 crore related to the divestment of its entire stake in Shriram Housing Finance Limited, now renamed as Truhome Finance Limited. This resulted in Shriram Finance’s standalone net profit declining nearly 29.4% y-o-y to Rs 2,521.7 crore in the December 2025 quarter.
The NBFC has highlighted its net profit grew 21.2% y-o-y in Q3FY26 on excluding all exceptional items.
Efficiency kings – Return on Equity (RoE)
Shriram Finance has a standalone ROE of 16.4% according to Screener.in. Bajaj Finance in its results presentation has highlighted a consolidated annualised ROE of 19.6% in Q3FY26.
Growth outlook
The growth in loans for both the NBFCs is expected to strengthen over the next few quarters with the RBI taking several steps to boost lending in the economy and also lower the interest rates for loans / credit.
The trade deal with the USA is also expected to give a much-awaited boost to the local economy, and create lending opportunities for NBFCs and the broader banking system.
As part of its growth strategy, Bajaj Finance had recently raised Rs 5,120 crore via secured redeemable non-convertible debentures. Shriram Finance is also looking to raise funds by way of issue of redeemable non-convertible debt securities including bonds in onshore/offshore market on private placement basis, and further details are awaited.
Investors will also be closely monitoring the role of Japan-based MUFG in the growth strategy of Shriram Finance over the next few quarters.
Valuations and outlook
Valuation Matrix: Shriram Finance vs. Bajaj Finance
| Price to (standalone) book value (x) | Standalone P/E | |
| Shriram Finance | 3.1 | 20.8 |
| Bajaj Finance (consolidated) | 5.8 | 32.8 |
Shriram Finance trades on the preferred valuation metric – price to (standalone) book value of nearly 3.1 times.
Bajaj Finance trades at 5.8 times its consolidated book value.
Shriram Finance has seen its valuation increase in recent months, given its recent fund-raising plans from Japan-based MUFG Bank.
Investors could put Shriram Finance on their watch list for 2026, given an expected aggressive growth plan with its Japanese partner. Investors will be closely monitoring the growth in the retail loans of Shriram Finance over the next few quarters.
For Shriram Finance to be the new king of NBFCs it will need to deliver fast growth, and a relatively clean book for a long time to come. Till then, Bajaj Finance probably retains its prime position.
Amriteshwar Mathur is a financial journalist with over 20 years of experience.
The writer and his family have no shareholding in any of the stocks mentioned in the article.
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