Bajaj Finance, India’s largest retail non-banking finance company, has reported a steady April-June quarter with a 22% increase in consolidated profit after tax to ₹4,765 crore and a 22% increase in consolidated net interest income to ₹10,227 crore. However, the company has flagged “unexpected” stress in its unsecured micro, small, and medium enterprises (MSME) loan portfolio, which has led to a rise in loan loss and provisions.
The company’s vice chairman and managing director, Rajeev Jain, stated that over-leverage of customers across product segments remains a pain point, and the company is taking several actions to reduce the contribution of customers with multiple loans. The company has pruned most riskier segments, except MSME, which is a “work in progress”.
Loan loss and provisions for the company rose 26% year-on-year to ₹2,120 crore, largely led by a rise in early-stage delinquencies in the two and three-wheeler loan portfolio and the business and professional loans segment. The company expects both these segments to grow slower for the remainder of FY26.
Jain said that the company will wait another quarter before providing guidance on credit growth for FY26, and while growth in assets under management (AUM) could be around 15%, incremental disbursements will be flat to lower for the rest of the year. The company has begun offering loan restructuring options to assist MSME customers facing short-term cash flow issues, and has made stage-3-level provisions against this restructuring.
The company’s overall stage-2 and stage-3 assets, loans that have been due for over 60 days and 90 days, respectively, were at ₹878 crore for the June quarter, with stage-2 assets increasing by ₹324 crore primarily on account of MSME customers. Jain said that these are largely good borrowers who are facing short-term cash flow issues, and the company is prioritizing bringing back the bounce, three-, six-, and 12-month month-on-book (MoB) levels to those seen in the pre-Covid period, regardless of “what that means for growth”.
The company has also seen a rise in restructuring, with loans worth ₹219 crore that were categorized as ‘standard’ being restructured to allow borrowers more time to repay the loans. This is much higher than the typical restructuring rate of ₹40-50 crore per quarter. Jain said that the company is tracking 17 MSME industries, of which 13 are showing a slowdown and three are showing de-growth or contraction, and that the credit supply has got choked, leading to a “perfect storm” in the MSME sector.