Bajaj Finance Drops 6.15% Despite Strong Q1 Profit — What’s Going On?
On July 25, 2025, shares of Bajaj Finance Ltd. plunged 6.15%, marking their sharpest single-day fall in over two years, despite posting a 22% year-on-year rise in Q1 FY26 net profit to ₹4,765 crore and a beat on net interest income (NII) at ₹10,227 crore.
The market reaction may seem confusing on the surface, especially for retail investors, but institutional players are reading between the lines — and what they’re seeing isn’t just the headline growth.
Bajaj Finance Q1 FY26 Highlights: Key Metrics You Need to Know
| Metric | Q1 FY26 | YoY Growth |
|---|---|---|
| Net Profit | ₹4,765 crore | +22% |
| Net Interest Income (NII) | ₹10,227 crore | +26% |
| Gross NPA (GNPA) | 1.03% | ↑ from 0.87% |
| Net NPA | 0.50% | ↑ from 0.31% |
| Provisions | ₹2,120 crore | ↑ sharply |
| AUM Growth Guidance | 23–25% (unchanged) | – |
What’s Behind the Stress?
Despite strong profit numbers, the street is focusing on asset quality deterioration and early signs of NBFC stress in 2025:
- Gross NPA rose to 1.03%, up from 0.87% sequentially.
- Net NPA increased to 0.50%, pointing to weakening asset recovery.
- A spike in loan loss provisions to ₹2,120 crore — primarily driven by MSME and two-wheeler segments.
- Dip in provision coverage ratio, leading to concern over the adequacy of future buffers.
“The MSME book is showing signs of strain, and rising delinquencies in small-ticket loans are putting pressure on provisioning,” said a Mumbai-based fund manager.
What Are Brokers Saying?
Several top brokerages downgraded Bajaj Finance, citing risk to valuation multiples, slower asset growth, and elevated credit costs:
| Brokerage | Rating | Target (₹) | Commentary |
|---|---|---|---|
| JPMorgan | Underweight | 925 | Valuation stretched; credit cost risk rising |
| UBS | Neutral | 980 | Asset quality pressure not fully priced in |
| Macquarie | Underperform | 950 | AUM growth could taper; MSME loans under pressure |
| Bernstein | Market-Perform | 940 | Caution on NPA trajectory and cycle resilience |
| CLSA | Buy | 1,150 | Long-term story intact; sees 25% PAT CAGR over FY25–28 |
📌 Analyst Consensus:
- ✅ 20 Buy
- ➖ 14 Hold
- ❌ 5 Sell
What Smart Investors Are Watching
Even amid short-term pain, savvy investors are closely tracking several strategic indicators:
- Succession Clarity: With CEO Rajeev Jain expected to lay out a formal succession plan, leadership transition could be key to market confidence.
- AUM Guidance: Management has maintained a 23–25% AUM growth outlook, reinforcing belief in demand-side strength.
- Credit Cycle Sensitivity: Investors are revisiting the resilience of Bajaj Finance in a rising credit cost environment.
- Valuation Multiples: The stock trades at 4.4x FY27 P/B, leaving less room for error if profitability comes under pressure.
“What matters now is not the past quarter, but how effectively Bajaj Finance navigates this shift in the credit cycle,” notes Pranav Shah, a financial analyst at a domestic brokerage.
Is This a Buying Opportunity or a Warning Sign?
Bear Case:
- Asset quality under stress, especially in unsecured and MSME segments.
- Provisions are rising, impacting margin leverage.
- Valuation still rich vs. peers, even after the correction.
Bull Case:
- Long-term growth engine remains strong; PAT CAGR projected at 25% by CLSA.
- Brand strength and digital reach offer insulation.
- Succession clarity, if executed well, could re-rate sentiment.
Smart Investor Strategy: What You Can Do Now
- Avoid panic selling if you’re already holding — monitor NPA trends next quarter.
- Wait for technical stabilization or signs of support before bottom-fishing.
- Focus on Q2 guidance and any updates on provisioning policy or loan restructuring.
Quick FAQ
Why did Bajaj Finance shares fall?
Because of rising NPAs and higher provisions, despite strong profit growth. Markets are pricing in future credit risk, not just current numbers.
Is it still a good investment?
If you’re a long-term investor with appetite for short-term volatility, Bajaj Finance remains a strong structural play — but monitor asset quality closely.
What’s the forecast for FY26–27?
Analysts like CLSA project 25% PAT CAGR, but much depends on MSME loan performance, CEO succession, and credit cost management.
Final Take
The 6.15% drop in Bajaj Finance’s stock price isn’t just a knee-jerk reaction — it reflects deepening market concerns over the company’s asset quality and ability to maintain high growth without taking on excess risk.
That said, Bajaj Finance remains one of India’s best-managed NBFCs, and for long-term investors, this may be a healthy reset rather than a red flag.
Watch the data. Follow the guidance. Invest with clarity.
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