Lower growth guidance, MSME loan stress weigh on Bajaj Finance

Bajaj Finance reported a robust Q2FY26 earnings, but it is facing stress in consumer loans and micro, small and medium enterprises (MSME), and credit costs are elevated. Rising consumption demand and falling funding costs are positive factors. Valuations are on the high side and high leverage may become a concern.

- DEVANGSHU DATTA

MSME loans are at 12 per cent of assets under management (AUM) and 42 per cent of loan book is exposed to consumption (including both B2B and B2C) loans across both rural and urban geographies. Another 31 per cents in mortgages.

Stress in consumer loans may be reducing as collections are improving in the rural B2C segment. The company has tightened up sanctions and is cautiously optimistic as it rides the demand arising from the GST cuts. Bajaj indicated it has faced stress in unsecured MSME loans since Q1FY26 itself and until restructuring takes hold, MSME loan growth will be slow.