Bajaj Finance Stock Plummets 8% Despite Strong AUM Growth! What's Behind The Investor Jitters?

Bajaj Finance Limited's financial results for the September quarter of FY26 revealed strong operational performance, with total AUM growing 24% year-on-year to ₹4.62 trillion and consolidated profit rising 23% to ₹4,948 crore. The company also acquired 4.13 million new customers and booked 12 million loans.

However, investor sentiment was dampened by credit costs exceeding guidance. The credit cost stood at 2.05% for Q2FY26, higher than the guided range of 1.85-1.95%, largely due to issues in the micro, small, and medium enterprises (MSME) portfolio and captive two- and three-wheeler loans. Factors contributing to this include borrower overleveraging, slow business recovery in some areas, and intense competition from fintechs.

To manage asset quality, Bajaj Finance has lowered its FY26 AUM growth guidance to 22-23% from 24-25% and significantly cut unsecured MSME volumes by 25%, expecting MSME AUM growth at 10-12% in FY26. Management anticipates credit costs will return within guidance for FY26 due to improving asset quality trends for loans disbursed after February 2025, with a significant decline expected in FY27.

The company is aggressively expanding its gold loan business, which saw AUM surge 85% year-on-year. With 1,272 branches now offering gold loans, the book is projected to reach ₹16,000 crore by FY26 end and ₹35,000-37,000 crore by FY27, driven by walk-in customers and rural market penetration.

Other segments like loan against securities (LAS) and commercial lending also showed strong growth. Despite improved cost efficiency and stable net interest margin (NIM) at 9.5%, asset quality saw a slight weakening with gross NPA rising to 1.24% and net NPA to 0.60%.

Impact: This news has a direct impact on the Indian stock market, particularly the financial services sector, influencing investor sentiment towards NBFCs and consumer lending. The company's strategic shift towards risk management and the performance of its gold loan portfolio will be closely watched. Rating: 7/10.

Explained Terms: AUM (Assets Under Management): The total market value of investments that a financial firm manages on behalf of its clients. It represents the size of the firm's investment portfolio. Credit Cost: The amount of money a lender expects to lose from loans that borrowers are unlikely to repay. It's a key indicator of loan portfolio health. MSME (Micro, Small and Medium Enterprises): A classification for businesses based on their size and revenue, crucial sectors for economic growth. Overleveraging: Taking on excessive debt relative to one's ability to manage and repay it, increasing financial risk. Fintechs: Companies that use technology to offer innovative and often more accessible financial services. Guidance: A company's projection or forecast of its future financial performance, used by investors to assess expectations. bps (basis points): A unit of measure equal to one-hundredth of a percent (0.01%). Used for small changes in interest rates or financial metrics. Loan Against Securities (LAS): A type of loan where investors pledge their shares, mutual funds, or other securities as collateral. B2C (Business-to-Consumer): Refers to businesses that sell products or services directly to individual consumers. NIM (Net Interest Margin): A profitability metric for financial institutions, showing the difference between interest earned on assets and interest paid on liabilities, as a percentage of assets. Opex-to-net income: A ratio measuring operating expenses relative to net income, indicating cost efficiency. Gross NPA (Gross Non-Performing Asset): The total value of loans where the borrower has failed to make interest or principal payments for a specified period (usually 90 days). Net NPA (Net Non-Performing Asset): Gross NPAs minus the provisions made by the bank or financial institution for potential losses from these bad loans.