Bajaj Finances 23-wheeler MSM Ebusinessestogrowslowin F Y 26 MD Rajeev Jain

Published in Business and Finance on Tuesday, August 5th 2025 at 1:50 GMT by moneycontrol.com
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Two & Three-Wheeler Finance AUM declined by 20 percent on-year to Rs 15,703 crore in April-June quarter, from Rs 19,689 crore in a year ago period.

Bajaj Finance Cautions on Slowing Growth for Two & Three-Wheeler MSME Businesses in FY26

Bajaj Finance, a leading non-banking financial company (NBFC), has signaled a potential slowdown in growth within the two and three-wheeler Micro, Small, and Medium Enterprises (MSME) segment during the fiscal year 2025-26. This assessment, articulated by Managing Director Rajeev Jain, stems from a confluence of factors including persistent inflationary pressures, fluctuating commodity prices, evolving regulatory landscapes, and a general cautiousness among business owners regarding future investments. While acknowledging the resilience demonstrated by this sector in recent years, Bajaj Finance’s perspective highlights a shift towards more measured expansion rather than the rapid growth witnessed previously.

The core of Jain's observation revolves around the inherent sensitivity of these businesses – primarily those involved in transportation and logistics – to macroeconomic conditions. The two and three-wheeler segment is a vital artery for countless MSMEs, facilitating everything from last-mile delivery services to transporting goods across regions. Their performance directly reflects the overall health of the economy and consumer spending habits. The recent period has been characterized by volatility; while initial post-pandemic recovery showed robust growth, subsequent challenges have tempered expectations.

One significant contributor to this anticipated slowdown is persistent inflation. While headline inflation rates may fluctuate, underlying inflationary pressures remain embedded within various cost components for these businesses. Fuel prices, a critical operational expense for two and three-wheeler operators, continue to be volatile, influenced by global geopolitical events and crude oil price dynamics. Beyond fuel, the costs of spare parts, maintenance, and even raw materials used in vehicle repairs have seen upward trends, squeezing profit margins for MSMEs already operating on thin capital bases. This constant pressure forces businesses to either absorb these costs (reducing profitability) or pass them onto consumers (potentially impacting demand).

Furthermore, the fluctuating nature of commodity prices adds another layer of uncertainty. The price volatility isn't limited to fuel; metals and other materials used in vehicle manufacturing and maintenance are subject to global market swings. This unpredictability makes it difficult for MSMEs to accurately forecast expenses and plan investments, leading them to adopt a more conservative approach. The lack of predictability discourages expansion plans and can lead to delayed purchases or upgrades of vehicles.

Beyond purely economic factors, evolving regulatory landscapes also play a crucial role in shaping the future trajectory of these businesses. Government policies related to vehicle emissions standards, safety regulations, and taxation directly impact operational costs and investment decisions. While initiatives aimed at promoting electric mobility are laudable, the transition presents significant challenges for MSMEs, particularly those with limited financial resources. The cost of adopting electric vehicles is currently a barrier for many, requiring substantial upfront investments that can strain already tight budgets. The uncertainty surrounding government subsidies and incentives further complicates these investment decisions.

Jain’s assessment isn't solely based on negative indicators; he also acknowledges the inherent resilience and adaptability demonstrated by MSMEs in the two and three-wheeler segment. These businesses have historically proven their ability to weather economic storms, often innovating and finding creative solutions to overcome challenges. However, the current environment presents a unique set of complexities that require a more nuanced approach.

The cautious outlook from Bajaj Finance also reflects a broader trend observed within the NBFC sector. Lenders are increasingly scrutinizing loan applications from MSMEs, particularly those in sectors perceived as high-risk or vulnerable to economic fluctuations. This heightened risk aversion is driven by concerns about asset quality and the potential for increased non-performing assets (NPAs). While Bajaj Finance has consistently maintained a strong track record of prudent lending practices, it’s operating within an environment where overall caution prevails.

The company's perspective suggests that while the two and three-wheeler MSME segment will continue to be a significant contributor to India’s economic growth, the pace of expansion is likely to moderate in FY26. This doesn't necessarily indicate a contraction; rather, it points towards a period of consolidation and strategic adjustments as businesses navigate the evolving landscape. The focus will shift from aggressive expansion to optimizing existing operations, improving efficiency, and managing costs effectively.

Bajaj Finance’s insights also highlight the importance of government support for these vital MSMEs. Targeted interventions aimed at mitigating inflationary pressures, providing access to affordable financing, and facilitating the transition towards cleaner technologies could play a crucial role in sustaining growth and ensuring the long-term viability of this sector. Furthermore, fostering a stable and predictable regulatory environment is essential for encouraging investment and promoting innovation.

The company’s assessment isn't an isolated prediction; it aligns with broader economic forecasts that anticipate a period of slower but more sustainable growth across various sectors in India. The global economic outlook remains uncertain, with geopolitical tensions and trade disputes continuing to pose risks. These external factors can significantly impact the Indian economy and, consequently, the performance of MSMEs.

Ultimately, Bajaj Finance’s cautionary note serves as a valuable reminder that even resilient sectors are not immune to macroeconomic headwinds. It underscores the need for businesses to adopt a proactive approach, carefully managing risk and adapting to changing circumstances. The coming fiscal year will likely be characterized by a more measured pace of growth, requiring MSMEs in the two and three-wheeler segment to demonstrate agility, resilience, and a commitment to sustainable practices. The ability to navigate these challenges effectively will determine their long-term success and contribution to India’s economic prosperity.

The company's experience lends significant weight to this assessment; Bajaj Finance has deep penetration within the MSME lending space and possesses granular insights into the operational realities faced by these businesses. Their perspective isn't based on abstract macroeconomic models but rather on direct interactions with borrowers and a comprehensive understanding of their challenges and opportunities.

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Bajaj Finances 23-wheeler MSM Ebusinessestogrowslowin F Y 26 MD Rajeev Jain

Bajaj Finance Cautions on Slowing Growth for Two & Three-Wheeler MSME Businesses in FY26