Bajaj Finance: Strong Q1 Performance But Rising Credit Stress Triggers Market Sell‑off

Bajaj Finance

delivered solid Q1 FY26 numbers—yet investor confidence took a hit due to increasing credit risks and cautious management commentary. Key Highlights Net Interest Income rose 22% YoY to ₹10,227 cr, in line with expectations PAT grew ~22% YoY to ₹4,133–4,765 cr (standalone vs consolidated) AUM surged ~25% YoY to ₹4.41 lakh crore, powered by strong loan demand across segments and customer additions Record 13.5 million loans booked and 4.7 million new customers, bringing base to ~106 million What Rattled the Street Credit provisions jumped ~26% YoY to ₹2,120 cr, as gross NPA rose to ~1.03% from 0.86%, and net NPA to ~0.50% from 0.38% Management flagged early signs of stress in MSME and 2/3-wheeler portfolios, which make up ~15.5% of AUM. 2W disbursals dropped 53%, 3W by 57% YoY MSME-linked industries (12 out of 17 sectors monitored) are showing cooling demand—likely tied to broader GDP slowdown Credit cost annualised stands at ~2.0–2.02% of average assets External Watch & Technicals Several brokerages including JPMorgan, UBS, Macquarie, Bernstein and Jefferies issued cautious notes or downgrades, citing elevated credit costs and slowing growth in key segments Bajaj Finance was the top Nifty loser, down ~5–6% on July 25, dragging broader markets lower Still, Key Strengths Remain Long-term fundamentals intact: strong AUM and PAT growth, rising customer base, robust capital adequacy (~21% CRAR), and healthy ROE (~19%) Management reaffirmed AUM guidance at 23–24% and PAT growth outlook around 23–24% for FY26 Diversification across gold, car, consumer, and MSME loans may cushion segmental risks