Bajaj Finance: Can the consumer financing beat its own guidance?

Copyright © HT Digital Streams Limit all rights reserved. Manish Joshi 2 min Read 15 Sept 2025, 01:36 PM IST Bajaj Finance performed well in the June Quarter, with an independent consumer loan book rising from 26% year-on-year to £ 1.55 billion. (Beeld: Pixabay) Summary on track to lead, Bajaj Finance could see that consumer loans rise further as GST cut, falling interest rates and tax cuts converge. Shares of Bajaj Finance Ltd scored a record high of £ 1,025,70 on Monday, with a 14% profit since the announcement of changes to the tax on goods and services (GST) on September 3. In fact, the trading volumes rose to almost 3x the monthly average on the first day after the GST rate cut, which asked the stock exchanges to obtain elucidation from the company. If lower GST on durable consumers will indeed encourage expenses, Bajaj Finance is a beneficiary, as almost half of its independent lending book is consumer loans. Within it is almost 70% of the loan business-to-consumer (B2C). GST for air conditioners, televisions and dishwashers were cut to 18% of 28%, which could increase demand. Bajaj performed well in the June quarter (Q1FY26), with an independent consumer loan book rising to £ 1.55 billion on an annual basis. Here are consumer loans on four categories, ie urban B2C loans, urban sales financing, rural B2C loans and rural sales financing. The growth rate can accelerate as GST rate cut is the third trigger to increase the demand for durable consumers following the recent Interest rate cuts by the Reserve Bank of India (RBI) and income tax rate cuts announced in the Union budget for FY26. But can the demand for more durable loans for consumers increase Bajaj’s total independent loan growth rate? The answer depends on the company’s strategy for its two-wheeler, three-wheeler and MSME portfolios. Bajaj is eager to lower the growth rates in these two segments as it has seen credit costs – and debt and supply – increase relative to other segments. Two-wheelers/three-wheeler book dropped by 20% in Q1FY26 years, but is now less important as it is only 5% of the independent loan book. MSME -lending, which contributes 16% of the independent book, grew 29% in the first quarter of FY26. Management still led for a single-digit growth rate in FY26, which indicates a sharp slowdown in the rest of the year. MSME loans are unsecured and signs of tension emerge. Bajaj Finance follows 17 key industries within MSME, and the business is shrinking for almost 75% of it due to economic slowdown and poor credit growth. Thus, although the outlook on consumer loan growth has improved, the total FY26 loan book growth can still be at Q1FY26 levels with MSME Book’s growth in growth. The other implication of the MSME loan book stress is the increase in the total credit costs. It was a factor why Bajaj reported credit costs at 2.02% in Q1FY26, above its full annual guidance of 1.85-1.95%. Management hopes that a better H2FY26 can help give the full year guidance. On the brighter side, there can be an upside surprise in terms of higher improvement than the estimated net interest margin (NIM). Management has led to ten basis points on a year-on-year NIM growth for FY26, but growth can be higher than RBI more repo rate cuts. Lower interest rates benefit NBFCs such as Bajaj Finance, as the cost of loans drops, which increases profitability. Separately, lower interest rates also increase the demand for loans, as customers are attracted by lower interest rates. Investors should still take the difficult call or the rich valuation of the share further leaves room for major returns in the near term. Bajaj Finance probably has an excellent yield on average assets (ROAA) of 4.2% for FY27 according to Bloomberg Consensus estimate – one of the highest in NBFCs with a large balance sheet size. But the stock also trades at a price-to-book value multiple of 4.6x for FY27, which may already consider in the strong ROAA. Catch all the business news, market news, news reports and latest news updates on Live Mint. Download the Mint News app to get daily market updates. More Topics #Bajaj Finance #nbfcs #Mark To Read Maket Read the following story