India's Bajaj Finance drops on asset quality woes, higher credit costs (updated)

Bajaj Finance

25/07/2025 05:38

Adds analyst comments in paragraphs 4-6, stock details in paragraphs 8-9; updates shares

July 25 (Reuters) - Shares of Bajaj Finance BJFN.NS were on track for their worst day in three months on Friday, as concerns over worsening asset quality and high credit costs overshadowed strong loan growth.

Bajaj Finance BJFN.NS fell as much as 6.4% in early trade and was last down about 5% at 916 as of 10:04 a.m. IST, making it the top loser on both the financials sub-index .NIFTYFIN and the benchmark Nifty 50 .NSEI, which were down 0.6% each.

The non-banking lender reported June-quarter profit ahead of estimates, but its gross non-performing asset ratio deteriorated to 1.03%, compared with 0.96% in the previous quarter and 0.86% a year ago.

Loan losses and provisions grew 26% on-year, with the lender saying credit costs remained elevated during the quarter.

Analysts at Goldman Sachs said they do not expect growth to pick up in the near term, citing ongoing stress in Bajaj Finance’s selected unsecured portfolios and limited room for net interest margin expansion.

UBS analysts also flagged concerns, noting the company’s outlook on near-term credit costs and assets under management for fiscal 2026 was "weaker than expected."

Bajaj Finace has been grappling with higher loan losses in the last few quarters, especially in the unsecured segment.

Average rating of 31 analysts on Bajaj Finance is at "buy," with a median price target of 975.50 rupees, as per data compiled by LSEG.

The stock has been the best year-to-date performer on 20-member financials index with its 34% climb, compared with the index's 14.4% gain.

Benchmark Nifty 50 has gained 5.5% so far in 2025.

 (Reporting by Kashish Tandon and Manvi Pant; Editing by Sumana Nandy and Nivedita Bhattacharjee)

 ((Manvi.Pant@thomsonreuters.com; +918447554364;))