Bajaj Finance Shares Fall 6% on Credit Costs, Asset Quality concerns in Q1FY26 results

On Friday, Bajaj Finance shares fell 6.35 percent, touching a day’s low price of Rs 898 on NSE despite delivering a strong performance in Q1FY26, continuing its remarkable growth trajectory. The company reported a consolidated net profit of Rs 4,765 crore for Q1FY26, marking a 22 percent year-on-year (YoY) rise from Rs 3,912 crore in Q1FY25. This robust bottom-line growth was supported by operational performance. Net interest income (NII) surged 22 percent YoY to Rs 10,227 crore as compared to Rs 8,365 crore during the same period last year, reflecting healthy loan book expansion and continued strong interest margins. Total revenue from operations rose 21.3 percent  YoY to reach Rs 19,524 crore, underscoring the company’s ability to scale its business efficiently. The pre-provisioning operating profit (PPOP) increased 22 percent to Rs 8,487 crore, while the number of new loans booked in the quarter jumped 23 percent YoY to 13.49 million, up from 10.97 million a year ago. The customer base hit 106.51 million, a 21 percent rise over last year, and a net addition of 4.69 million new customers from the previous quarter.

A key milestone was the growth in assets under management (AUM), which soared 25 percent YoY to Rs 4,41,450 crore in Q1FY26 versus Rs 3,54,192 crore in the year-ago same quarter. Sequentially, AUM expanded by Rs 24,789 crore, indicating persistent business momentum. 

However, the quarter wasn't without challenges. Loan losses and provisions rose 26 percent to Rs 2,120 crore in Q1FY26, compared to Rs 1,685 crore in Q1FY25, reflecting elevated stress, especially in the two and three-wheeler loans and MSME segments. The gross NPA ratio increased to 1.03 percent from 0.86 percent a year ago, and net NPA reached 0.50 percent compared to 0.38 percent last year. Bajaj Finance stated that it has undertaken significant credit actions in affected business segments and expects AUM growth in both MSME and vehicle-financing businesses to moderate for the remainder of FY26. Asset quality pressure remains an area of concern, but the company’s capital adequacy ratio is healthy at 21.96 percent as of June 30, 2025.

Management remains optimistic about long-term prospects and continues to prioritise prudent underwriting and digital transformation initiatives. In its commentary for Q1FY26, Bajaj Finance reiterated its commitment to disbursing over 50 million new loans in the current financial year, compared to 43.42 million loans in FY25. Management acknowledged continued vigilance over customer leverage and stated that several actions were taken across all products to limit the proliferation of customers with multiple loans, aiming for controlled and profitable growth. The increase in gold loans by 82 percent and the rise in urban and rural B2C loans further highlight the company’s diversified growth engine.

Brokerage perspectives after Q1FY26 results remain mixed. Bernstein maintained an ‘Underperform’ view on the stock with a price target of Rs 640, citing higher credit costs and return on assets within revised guidance. Macquarie maintained an ‘Underperform’ rating to Rs 800, highlighting stress in the SME segment. JP Morgan downgraded the stock to ‘Neutral’ from ‘Overweight’ with concerns on mortgages, three-wheelers, and MSME asset quality, with the target price lowered to Rs 969 from Rs 977. Meanwhile, Jefferies maintained a ‘Buy’ rating of Rs 1,100, citing healthy growth despite MSME segment pressures.

Operationally, Bajaj Finance reiterated its focus on digital lending, tech-led initiatives, and expanding its customer franchise across urban and rural markets. The board remains committed to driving growth while balancing risk, especially in volatile lending segments. Going forward, the company’s succession plans from Rajeev Jain remain a major development to laying down the company’s roadmap.