Why did Bajaj Finserv's stock plunge despite an increase in Q2 profit?

Synopsis

Bajaj Finserv reported a 8% rise in Q2 net profit to ₹2,244 crore, but its lending arm, Bajaj Finance, saw its stock slump over 6%. This decline was triggered by a cautious outlook for future expansion and increased credit costs. Bajaj Finance also moderated its FY26 growth forecast. Meanwhile, Bajaj Allianz General Insurance posted a 5% profit increase.

MUMBAI: Bajaj Finserv Tuesday reported a consolidated net profit of ₹2,244.10 crore for the second quarter, up 8%, although the growth commentary from its lending business caused a major erosion in market value of the stock. Bajaj Finance, the group's lending arm that published earnings late Monday, caused Bajaj Finserv to slump more than 6% on a rather circumspect outlook for future business expansion and its elevated credit costs.

Bajaj Finance moderated its growth forecast for FY26 by about 2 percentage points from its earlier projections of 24-25%.

Earnings at Bajaj Finserv, which also houses the group’s insurance businesses, were at Rs 2,087 crore in the same period last year.

Bajaj Finance, the group’s lending arm, posted a 22% year-on year increase in consolidated net profit to Rs 4,876 crore. Bajaj Finance and Bajaj Finserv were the two biggest NSE losers — in excess of 6% each — on a day the broader gauge climbed 0.5%.

The Bajaj Finserv stock slumped 6% to Rs 1,992.9 on NSE, while Bajaj Finance, the country’s biggest consumer credit company by market capitalisation, lost 7% to Rs 1009.1 each.

At Bajaj Allianz General Insurance, net profit climbed 5% YoY to Rs 517 crore. Gross written premium rose 9% to Rs 6,413 crore. The company’s combined ratio stood at 102.3%. Solvency ratio remained strong at 339%. Underwriting loss widened to Rs 92 crore from Rs 48 crore, attributed to higher acquisition costs on preferred business lines.

On maintaining a sub-100 combined ratio, the management said that Bajaj has been beating the industry combined ratio by a full 15 percentage points. “Even now, when you see the delta in combined ratio, 1/n accounting also pushes it up by at least a percent point,” said Tapan Singhel, MD and CEO of the general insurance arm.

...moreless

...moreless