Business

IIE DIGITAL DESK : Shares of Bajaj Finance Ltd tumbled nearly eight per cent after the company reported strong quarter-on-quarter numbers but tempered its future growth outlook, raising concerns about rising credit costs and stress in select loan segments. 

For the quarter ended September 2025 (Q2 FY26), Bajaj Finance posted a profit after tax of around ₹4,875 crore, which represents a year-on-year growth of about 22 per cent. Net interest income (NII) rose by 22 per cent to about ₹10,785 crore, net total income increased 20 per cent to ₹13,170 crore, and pre-provision operating profit (PPOP) came in at ₹8,874 crore, up 21 per cent.

Despite these healthy headline numbers, the management’s forward guidance disappointed the market. The company revised its assets under management (AUM) growth forecast for FY26 downward to 22–23 per cent from the earlier 24–25 per cent. The weaker guidance reflects the emergence of stress in certain segments such as MSME loans and the two- and three-wheeler portfolios.

Credit-quality concerns are also beginning to surface. Gross non-performing assets (NPAs) rose to 1.24 per cent from 1.06 per cent a year ago, while net NPAs climbed to 0.60 per cent from 0.46 per cent. Loan-loss provisions increased by 19 per cent to around ₹2,269 crore, and annualised credit costs stood at approximately 2.05 per cent of average assets. 

Analysts and market participants say the sharp fall in the stock is largely a result of valuation pressure combined with the changed sentiment around one of India’s most efficient and profitable non-banking financial companies (NBFCs). The stock had been trading at lofty multiples — nearly five times the FY27 estimated book value and around 26 times the estimated FY27 earnings — which means any hint of a slowdown or rising risk tends to trigger sharp reactions.

Brokerage views are divided. Some, like Morgan Stanley and Jefferies, continue to see the current weakness as a long-term buying opportunity given the strong franchise and structural growth prospects. Others, such as Motilal Oswal and JM Financial, have adopted a more cautious stance, citing the risk of near-term sluggishness in key lending segments. 

While Bajaj Finance delivered quarterly performance in line with expectations, the market’s reaction underscores how much the valuation premium is reliant on confidence in unabated growth and stable asset quality. With the AUM growth forecast scaled back and signs of asset stress emerging, the stock has faced a sharp correction, reflecting a shift from unchecked optimism to watchful caution. The company’s next few quarters will likely be closely scrutinised as investors assess whether this is a temporary pause or the start of a slower phase in the growth trajectory.