Bajaj Finance’s one-year returns of 49% outclass not just the benchmarks Nifty (7%) and the BSE Sensex (6%), they are also significantly higher from 14% returns by the Nifty Financial Services index in the same period.
The culprit
Bajaj Finance’s gross NPA and net NPA as of September 30, 2025 increased to 1.24% and 0.60% respectively compared to 1.06% and 0.46% as of September 30, 2024.
India’s largest NBFC by way of market capitalisation, Bajaj Finance has been witnessing stress in its loan book, with the SME and captive 2/3 wheeler business running the book down. Taking corrective measures, it has cut 25% of its unsecured MSME volumes in the SME business and expects growth to settle at 10-12% in FY26.
This will likely slower company’s growth trajectory over the next two quarters. The management has guided for the worst to be behind by Q4FY26/Q1FY27 and after this the company could look to recalibrate growth in the segment.For the company, new loans booked during H1FY26 grew by 24% to 25.66 million from 20.66 million in H1FY25. Its Assets under management (AUM) swelled by 24% to Rs 4,62 lakh crore as of September 30, 2025 from Rs 3.74 lakh crore as of September 30, 2024.In a Q2 review note, brokerage Axis Securities said that the drag is in line with the company’s principle of pulling back growth as the priority now is the asset quality. “… driven by slower growth guidance in the mortgage business (Bajaj Housing Finance) and the SME segment (collectively contributing 42% of the portfolio), the management has cut its growth guidance to 22-23% for FY26,” Axis said.
The company has guided for FY26 credit costs at the upper end of the 1.85-1.95% band.
In accounting parlance, credit cost refers to the total cost a lender incurs because of credit risks and it includes provisions for NPAs, write-offs and restructured and stressed accounts.
Motilal Oswal Financial Services (MOFSL) has projected Bajaj Finance’s credit costs to remain in the range of 1.95%–1.8% for FY26 and FY27. Maintaining a ‘Neutral’ stance on the stock, the brokerage has set a target price of Rs 1,160. Describing the company’s Q2 earnings as a mixed bag, MOFSL highlighted that rich valuations and the absence of near-term re-rating triggers could limit upside potential.
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New growth engines
Axis notes newer segments like gold, new car financing, LAP (loan against property), and tractor loans to partially offset the impact of slowdown from these 2 segments. “We expect BAF’s growth momentum to revert to its normalised growth rate of 24-25% CAGR over the medium term as the SME book resumes its growth trajectory,” the brokerage said, as it retained a ‘Buy’ view on the stock for a price target of Rs 1,200, hiked from a previous target of Rs 1,160.
Tech view
Decoding the charts, Anuj Gupta, Director at Ya Wealth Global Research said that Bajaj finance is hovering in a red zone, trading at a 5-week low. It is forming lower top & lower bottom formation, suggesting weakness, he said.
Placing a strong support at Rs 990 levels and resistance at Rs 1,030 levels, Gupta said that a decisive closing above Rs 1,030 could lead the rally towards next resistance level of Rs 1,080 to Rs 1,100 levels and if the stock trades below the resistance, a ‘sell on rise’ strategy could trigger.
(Disclaimer: The recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times.)