How Bike Bazaar Ran Into A Credit Crisis

Pune-based two-wheeler finance startup Bike Bazaar has stopped lending, halting all new disbursements beginning December 2025 owed to a sharp deterioration for its loan book. Credit ratings agency ICRA downgraded Bike Bazaar to BBB status earlier this month, marking it as a high risk borrower.

The reason: More than a third of its portfolio is now either not paying or has already been sold off as distressed debt. As per an ICRA report, the startup is in talks with a “strategic investor” to revive its business, but given the current market, a revival seems a long way away. 

Notably, the deterioration has also begun spilling over into the securitisation process where Bike Bazaar-originated loans are pooled together and traded to other investors as an asset. 

Inc42 has reached out multiple times to Bike Bazaar cofounder and joint managing director Karunakaran Vadakkepat to get a better understanding of the situation and the company’s strategy to eliminate these risks. The story will be updated based on the company’s responses, but thus far, Bike Bazaar has not responded to our questions. 

Bike Bazaar’s Credit Hole

On June 25, 2026, Moody’s affiliated ICRA downgraded multiple pass-through certificate (PTC) issuances across five securitisation trusts with underlying loan pools originating through Bike Bazaar. The rating agency cited the weakening performance of the underlying loan pools and the deteriorating financial position of Bike Bazaar, which services these loans. 

ICRA also said borrowers have fallen behind on repayments, with monthly collection efficiency declining across the loan pools. The share of loans with even one missing payment climbed to between 6% and 17% in FY26. 

In two of the securitisation pools, 1.8% and 2.4% of loans have remained unpaid for more than 90 days, indicating a rise in bad loans.

Amid this, Bike Bazaar has already begun unwinding its corporate structure. As per RoC filings from February 2026, shareholders passed a special resolution to approve the transfer of up to 100% of its equity stake in subsidiary Bluebird Auto Trade Pvt Ltd to existing shareholders.

Notably, Bluebird was the marketplace arm of Bike Bazaar, from which it used to sell new and pre-owned two wheelers. 

Further, Bike Bazaar’s gross stressed assets, a combination of non-performing loans and security receipts held against loans already sold to asset reconstruction companies, climbed from 8% of the portfolio in March 2024 to 38.1% by March 2026, as per provisional data shared by ICRA.

The Downfall Of Bike Bazaar 

This was not supposed to happen.

Founded in 2017 by Srinivas Kantheti and V Karunakaran, both veterans of Bajaj Auto Finance with deep experience in two-wheeler lending, the startup had the right pedigree of leadership to succeed in this competitive space. 

Rather than applying for a fresh NBFC licence, the duo acquired Vardnarayan Savings and Investment Co Pvt Ltd, a small finance company in Nanded, Maharashtra, with a loan book of just ₹35 Lakh at the time.

From that base, the startup built aggressively. Assets under management grew at a CAGR of 30% over the three years from FY22 to FY25.

By February 2023, the company had closed a $30 Mn Series D round backed by DEG — a German development finance institution — alongside Women’s World Banking Asset Management, Elevar Equity, and Faering Capital.

All in all, it raised a cumulative funding of $63.7 Mn from more than 20 investors. By the end of FY24, Bike Bazaar had disbursed ₹1,185 Cr in loans for the year, growing 42%, with 1.74 Lakh customers on its books.

The startup’s thesis was that India has hundreds of millions of people who need two-wheelers to earn a living. Banks mostly don’t lend to them. An NBFC with the right underwriting and collections muscle, focused on Tier-II and Tier-III markets, had a large runway.

At its peak, it was operating over 1,000 touchpoints across 140 cities, with a stated focus on rural expansion and electric mobility.

However, what it also had was a concentrated book in two states. As of June 2025, Uttar Pradesh and Bihar together accounted for 52% of the AUM.

“These are large markets, but also ones with higher credit risk, less formal income documentation, and harder collections environments,” says a banking official.

When borrower stress hits, driven by macroeconomic pressure on lower-income households, it hit the book hard and in the same place at the same time.

The company tried to manage the problem by selling bad loans. It offloaded ₹179 Cr in stressed assets, which was about 11% of AUM, to an asset reconstruction company during FY25.

That sale temporarily improved the reported delinquency numbers. But the underlying credit quality hadn’t improved, and fresh delinquencies kept coming.

The 30+ days past due figure was running at 19.8% of AUM as of March 2026, compared to 5.2% a year earlier.

Notably, a larger capital buffer would have given the startup more room to absorb credit losses without breaching lender covenants, however, it couldn’t raise funds.

In August 2025, as delinquencies were accelerating, the company’s Chief Compliance Officer resigned. A replacement was appointed only on 25 November 2025, leaving the CCO role vacant for three months at precisely the moment the company needed its compliance infrastructure most.

Breach Of Multiple Covenants

The weakening performance is visible even in loans that Bike Bazaar had already bundled and sold to investors through securitisation. 

According to ICRA, borrowers in these loan pools are repaying less consistently than before, with cumulative collection efficiency ranging between 91.5% and 97.8%. At the same time, loans that have either turned into losses or remained unpaid for more than 30 days account for up to 10.5% of the original loan pool in some transactions, highlighting the worsening quality of the company’s loan book. 

The startup also swung from a net profit of ₹3 Cr in FY25 to a net loss of ₹45 Cr in FY26. Its loan book shrank 40% from ₹1,455 Cr to ₹839 crore in a single year.

The decline was not limited to Bike Bazaar’s own loan book. The total value of loans managed by the startup fell from ₹1,834 Cr in FY25 to ₹1,237 Cr in FY26 as lending slowed. At the same time, the share of loans that had turned into bad loans surged to 14.5%, up from just 1.7% a year earlier, reflecting a sharp deterioration in the quality of its portfolio.

Notably, the deterioration has also eaten into the company’s net worth. Net stressed assets now stand at roughly 87% of net worth, up from 56% a year earlier.

Per ICRA, the company has also breached financial, operating, and rating-linked covenants with its lenders, has sought waivers, and had not received them as of the date of the ICRA rating report published on 16 June 2026.

At the time of reporting, the company’s free cash on hand was around ₹44 Cr, against debt repayment obligations of ₹100 Cr over the next three months and ₹222 Cr over six months.

In what appears to be a last-ditch attempt to plug the liquidity gap, the company allotted 100 Secured Redeemable Non-Convertible Debentures on March 31, 2026, raising ₹10 Cr via private placement to an Alternative Investment Fund. 

The board passed the resolution by circulation, with no dissenting votes. Even after the raise, total debentures on the balance sheet stood at ₹77.57 Cr, a relatively thin buffer against the debt wall ahead.

Whether Bike Bazaar survives now hinges almost entirely on fresh capital.

Edited by Nikhil Subramaniam

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