Is Bajaj Finance's decline a sign of looming crisis in India's NBFC sector?
Agencies
(You can now subscribe to our
(You can now subscribe to our ETMarkets WhatsApp channel
Mumbai: A precipitate post-earnings decline in the stock of Bajaj Finance , India's biggest, pure-play non-bank lender by market value, has underscored rising stress in hitherto bankable sectors served by such companies, with analysts looking to the festive season for most borrowers to generate the necessary cash flows that would boost both NBFC asset quality and collection efficiencies."We are seeing pockets of stress emerging in sectors like micro finance, personal loans, cards and also micro-SME loans," said Anand Dama, head, BFSI Research at Emkay Global Financial Services "It is still not led by macro indicators. We expect this stress to continue in the second and third quarters at least, and hope that it does not deteriorate with the macro slowdown, which is difficult to predict as of now."While a marked improvement in banking system liquidity since last autumn has theoretically lowered the cost of NBFC financing and eased the pressure on the liabilities side of their balance sheets, the industry faces fresh challenges from the asset side now.A sizable section of microfinance loans has turned into non-performing assets-both at banks and NBFCs-and collection efficiencies have been under the lens due to the suspect repayment ability of a section of borrowers.The challenges are being felt even by top NBFCs, such as Bajaj Finance, which helped millions of Indians step on to the consumption ladder for the first time over the past decade. In the post-results analyst call last week, Bajaj Finance MD Rajeev Jain said that 13 of the 17 industries the company tracks in the MSME sector are showing signs of a slowdown, while three others are showing signs of contraction."So, it's virtually a perfect storm in a way. (Our) MSME portfolio is (about) ₹50,000 crore, which is entirely unsecured. In that, principally, (loans to) doctors is ₹15,000 crore. Even there, we are seeing pressure. So this segment did not trouble us even in Covid actually. This segment is also suddenly troubled. We ran that for 15 years. It has always been 99% current kind of portfolio," Jain said.The Bajaj Finance stock has fallen more than 8% in a week, with about 6% coming on the day after the earnings on Friday.Jain added that within MSMEs, the problem is with the business loans, and Bajaj Finance is "going hammer and tongs" to ensure that loan repayments are at pre-Covid levels for MSME as well non-MSME loans. Even for L&T Finance, another large NBFC, asset quality deteriorated with gross stage 3 loans due past 90 days at 3.31% in June 2025 from 3.14% a year ago. As a result, impairment costs increased 39% year on year to ₹542 crore from ₹390 crore a year earlier.CEO Sudipta Roy described it as a challenging quarter.But analysts caution that the troubles in the MSME sector are limited to unsecured loans."If you see bank loans to the sector which are largely secured, they are performing well. So it is not a sector phenomenon right now.These are companies with ₹10 crore to ₹15 crore turnover and business cycles go up and down. The festive season is crucial. If consumption recovers then we could see stress abate or things will become worse," said Bunty Chawla, analyst at IDBI Capital. Analysts said the second half of the fiscal remains crucial as macroeconomic conditions are heavily dependent on a good monsoon and festive spending to improve both demand for loans as well as asset quality.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Hans India
6 minutes ago
- Hans India
Officials told to expedite land acquisition
Eluru: District collector K Vetriselvi has directed the officials to expedite land acquisition for Polavaram Project Relief & Rehabilitation and national highways. She reviewed with the officials through video conference on Polavaram R&R, MSME, National Highways land acquisition, 4G mobile tower permissions, and other issues from the Collectorate here on Tuesday. Speaking on the occasion, she said that as part of the R&R package for the displaced people who were given lands for the construction of the Polavaram project, 5,000 acres of land is required in Eluru district for land acquisition, R&R colonies, construction and other works, and 800 acres have already been identified in Buttaigudem and Jilugumilli mandals. She said that a review of land acquisition for the remaining 4,200 acres has been conducted mandal-wise and another 600 acres have been identified. She ordered that the land acquisition work be completed by August 15. She instructed the officials to hold village meetings in the respective villages after identifying the land for land acquisition. After identifying the lands, it was suggested that the RDO and other officials should discuss with the respective farmers and hold village meetings in their presence. All steps should be taken to pay compensation to the farmers for the lands as per the government regulations. The acquisition of land for national highways should be expedited and lands should be allotted for construction works. She said that the 4G mobile towers of Airtel, Jio, and BSNL should be located away from the populated areas and without causing any inconvenience to the surrounding people, and that permissions should be granted for the arrangement of towers after double-checking them at the field level. District joint collector P Dhatri Reddy, Alluri Seetharama Raju ITDA PO Apoorva Bharath, Bachu Smaran Raj, MV Ramana, M Achyuta Ambarish, Special Collector Y Sarala Vandanam participated from their office chambers. District Revenue Officer V Visveswara Rao, concerned officials, and officials of respective mandals participated through video conference from the District Collectorate video conference hall.
Economic Times
36 minutes ago
- Economic Times
India braces for pain as Trump gives 24-hour warning on tariffs
Synopsis Trump tariffs on India: India is grappling with the potential economic repercussions of US President Trump's tariff threats, triggered by India's trade practices and Russian oil purchases. The government is exploring measures to support exporters and considering easing dairy market access for the US to appease Trump. ET Online India is racing to contain the economic fallout from President Donald Trump's threatened tariffs, which has left officials in New Delhi feeling shocked, jilted and unsure of how to harsh language — calling India's economy 'dead,' its tariff barriers 'obnoxious' and its people indifferent to the plight of Ukrainians — has been akin to a verbal slap in the face, according to an official in New Delhi, who asked not to be identified as the discussions are private. Officials have no template to deal with these kinds of public assaults, the person said, adding that the latest turn of events has put a strain on India's relationship with the said Tuesday he'll increase the 25% tariff on Indian exports to the US 'substantially over the next 24 hours,' citing the Asian nation's high barriers to trade and its purchases of Russian oil. India was 'fueling the war machine, and if they're going to do that, I'm not going to be happy,' Trump told CNBC. Also Read: Trump escalates threat level, says more tariff in 24 hours India's government is now bracing for higher tariffs and seeking to limit the possible economic damage. Prime Minister Narendra Modi has been urging Indians to buy more local goods to offset any slump in global demand. The Ministry of Commerce and Industry is discussing ways to help exporters who would be hardest hit, such as in the gems and jewelry and textile sectors. And officials say they will continue to seek back-channel talks to help ease the tensions. India has been a target of Trump for weeks now because of its economic ties with Russia. The US president has given Vladimir Putin until Aug. 8 to reach a truce with Ukraine, and wants to ramp up the pressure by targeting energy purchases from countries like India and China that are helping to keep Russia's economy afloat. Modi's government is so far holding its ground, saying it's being unreasonably targeted by the US for its ties to Russia — its biggest supplier of oil and military equipment. Officials have signaled they won't instruct refiners to halt Russian crude purchases. For months, Indian trade officials had been negotiating with the Trump administration on a deal that both sides said was close to being finalized, with a tariff rate possibly below 20%. The US president's tone appeared to change last month, when he threatened India with higher duties alongside others in the BRICS bloc of nations for what he said was the group's anti-US stance. He then followed up several days later with warnings about financial penalties on countries like India for buying oil from Russia. India has been buying Russian crude at a rate of about 1.7 million barrels a day so far this year, all of it from seaborne imports, while China has purchased an average of about 2 million barrels, comprising both seaborne imports as well as oil transported via an inland pipeline. Also Read: On Russian oil, India and China speak the same language to Trump To offset the tariff hikes, officials in New Delhi are now considering expediting an export promotion plan, first outlined in the February budget, which set aside 22.5 billion rupees ($256 million) to support exporters. The budgeted amount may be increased to help businesses offset potential losses resulting from greater competition with regional rivals, who have secured lower tariff rates of around 15%-20%, a person familiar with the matter said. The discussions are still ongoing and the government hasn't made any decision on what kind of support it will provide, the person Ministry of Commerce and Industry and Ministry of Finance didn't immediately respond to emails seeking further information. Also Read: India plans Rs 20,000-crore Export Promotion Mission to offset US tariff impact New Delhi is also weighing easing some dairy market access rules for the US in order to placate Trump, officials familiar with the matter said. The government is discussing whether it can allow limited imports of some dairy products, such as cheese not made in India and condensed milk with clear labeling of the animal feed used in manufacturing, they said. India maintains tariffs of as high as 60% on dairy products to protect its local industry and enforces strict rules to ensure imported dairy goods aren't from cattle fed with animal-based products in order to adhere to religious sensitivities. Any easing of restrictions in the dairy sector would represent a significant concession by India, which didn't grant the UK any similar market access in a recently concluded free trade estimate that a 25% tariff could cut India's gross domestic product growth by 0.3 percentage point. Pranjul Bhandari, chief India economist at HSBC Holdings Plc., said an additional penalty would curb growth further, resulting in lower capital inflows and investment. An internal assessment by the Ministry of Commerce and Industry shows that a 25% tariff would impact about 10% of India's exports in the July-to-September rivals have criticized his previously friendly relationship with Trump and called him out for his silence on the US leader's comments.'We are receiving threats — that there will be more than 25% tariffs and we are being told that we should not buy oil from Russia. This friendship has turned out to be expensive,' Jairam Ramesh, a senior leader in the main opposition Indian National Congress, told reporters Tuesday. Also Read: India considering new measures to boost domestic growth amid global trade challenges Trump's actions will push India to react, although it's unlikely to retaliate and will more likely seek further talks with the US, said Indrani Bagchi, chief executive officer at Ananta Centre, a Delhi-based research group.'My sense is the government will contain this and will not take this forward, will not escalate,' she said. India will want to continue the trade deal negotiations in spite of Trump's 'personal anger,' she said. The US president likely wants to have Modi call him and 'fold in the way that other countries have,' she said. 'That is not India's style.'
Economic Times
3 hours ago
- Economic Times
Fintech lender Zype raises Rs 90 crore in round led by Japanese VC fund Unleash Capital Partners
Mumbai-based digital lending startup Zype has raised Rs 90 crore in a fresh funding round led by Japanese venture capital firm Unleash Capital Partners. Existing investor Xponentia Capital also participated in the round. This round comes after the 2022-founded startup raised its first major institutional round of Rs 146 crore last year, thereby bringing the total equity raised to Rs 236 crore. Unitus Capital was the exclusive advisor for the transaction, the company said in a statement. Zype received a non-banking finance company (NBFC) licence in 2023 and, since then, has been disbursing loans from its books. Its current assets under management (AUM) stands at Rs 400 crore, and since its inception, it has disbursed Rs 1,300 crore. Competing with the likes of Fibe and Kreditbee, Zype extends unsecured personal loans but only caters to young salaried consumers. Its borrowers have typically used Zype for wedding expenses, home repair, and health emergencies in their families. 'We have grown this business in a measured and profitable manner. With the new raise, we are good to grow for the next 12-18 months without the need for a fresh equity round,' said Yogi Sadana, founder, Zype. Sadana was previously the chief executive officer of fintech lending startup, Cashe. He quit Cashe to start his own digital lending business in June the NBFC is not yet rated by credit rating agencies, Sadana said that with the new capital raise and some scale-up of business operations, he is looking to get ratings, which will help him source credit lines from more banks and the startup is at an annual recurring revenue run rate of Rs 150 crore and is growing profitably month-on-month (MoM). Sadana said that while the startup did not report net profit for FY25, given that it broke even only in the last quarter, from FY26 the company will report net profit at the end of the to data from business intelligence platform Tracxn, Zype closed FY24 with a net operating revenue of Rs 20.3 crore and a net loss of Rs 7.3 crore. This funding round comes at a time when consumer lending startups are trying to shake off the tough few months of November to February, when traditional lenders slowed down lending to fintech startups. With the interest rate cycle turning favourable and the festive season coming up, the sector is hopeful of good growth over the coming months. ET reported on August 5 that Fibe is looking to close a $35 million funding round from IFC. Sadana is also hopeful of good business over the festival season, when consumption trends pick up, and the holiday season, when people tend to spend more. 'We have a 250-member team already, with a special focus on technology and keeping collections in-house,' Sadana said. 'We have even built an AI lab internally to work on cutting-edge technologies,' he added.
