Bajaj Finance Ltd.
Enhanced Interactive Outlook | As of 1QFY26
Rating
Neutral
Current Price (CMP)
₹959
Price Target (PT)
₹1,000
1QFY26 Performance Snapshot
The latest quarterly results show stable core performance with strong AUM growth, though headwinds in specific sectors like MSME and increased credit costs are notable challenges.
22%
YoY PAT Growth
25%
YoY AUM Growth
-10bp
QoQ NIM Contraction
1.95%
FY26E Credit Cost
Key Management Commentary
Management highlighted significant stress in the MSME portfolio since Feb’25, with 13 of 17 tracked industries showing slowdowns. This is attributed to broader economic deceleration. Consequently, MSME loan growth is expected to be flat or decline in FY26. Vulnerabilities were also noted in Karnataka (11% of balance sheet), leading to a 35-40% cutback in disbursements in the state.
Credit costs are guided at 1.85-1.95% for FY26, with elevated costs seen in 2W/3W and MSME businesses. Management believes credit costs have peaked and will improve in the second half of the year. The company is taking corrective measures to limit exposure to borrowers with multiple active loans to manage consumer leverage concerns.
The Cost of Funds (CoF) declined ~20bp QoQ in 1QFY26 and is expected to fall another 15-20bp. This moderation could support a slight positive bias to margins, with management guiding for a potential 10bp NIM expansion. The company will rely more on NCDs, ECBs, and Bank Borrowings to optimize funding costs.
Interactive Financial & Customer Trends
Explore the detailed data behind the company’s performance. Switch between tabs to see trends in financial metrics, asset portfolio mix, and customer acquisition.
Assets Under Management (AUM) show continued strong YoY growth, though the pace is expected to moderate slightly. Headwinds in MSME and Auto Finance are key factors to watch.
The AUM portfolio is diversified, with Consumer Finance (B2C) and Mortgages forming the largest components. The Auto Finance book is declining, reflecting a strategic shift.
New customer acquisition remains robust, though YoY growth has moderated. The company continues to effectively leverage its existing customer base for booking new loans.
Profit After Tax (PAT) maintains a healthy growth trajectory, supported by NII growth and operational efficiencies, with a projected CAGR of ~25% over FY25-FY27.
A minor seasonal deterioration in asset quality was observed in 1QFY26. Gross Non-Performing Assets (GNPA) are expected to rise modestly but remain manageable.
Return ratios remain strong, with RoA and RoE expected to be ~4.1% and ~21% respectively in FY27, reflecting efficient profit generation despite headwinds.
Interactive Peer Comparison (FY27E)
See how Bajaj Finance stacks up against a key competitor on critical valuation and performance metrics. Select a metric below to update the chart.
Valuation & Outlook
BAF reported a healthy performance driven by strong AUM growth. While credit costs have risen due to stress in MSME and Auto loans, overall asset quality saw only marginal deterioration. The stock trades at 4.4x FY27E P/BV. Despite a healthy projected PAT CAGR of ~25% and strong return ratios, the report sees limited upside catalysts due to rich valuations and a lack of near-term re-rating triggers. Therefore, a **Neutral** rating is reiterated with a price target of **INR 1,000**.