Shares of Bajaj Finance experienced a sharp decline of nearly 7% at the start of trading on Tuesday following the release of the company’s financial results for the September quarter (Q2FY26). Despite reporting solid growth, the market reacted negatively to the company’s reduced AUM growth forecast and indications of increasing asset stress. The stock dropped by 6.97% to Rs 1,009.75 around 9:39 am as investors assessed the mixed outlook.
Bajaj Finance disclosed a profit after tax (PAT) of Rs 4,875 crore, marking a 22% year-on-year increase, slightly below the market’s expectations of Rs 4,969 crore. Net interest income (NII) climbed by 22% to Rs 10,785 crore, while total net income rose by 20% to Rs 13,170 crore. Pre-provision operating profit (PPOP) surged by 21% to Rs 8,874 crore, demonstrating robust operational efficiency.
However, the management revised down its AUM growth guidance for FY26 to 22–23%, down from the previous 24–25%, attributing it to challenges in the MSME and two- and three-wheeler segments. Consequently, the company adopted a more cautious approach towards disbursals in these areas.
Operationally, Bajaj Finance originated 1.22 crore new loans during the quarter, a notable 26% increase from the 97 lakh loans in Q2FY25. The customer base expanded to 11.06 crore, reflecting a 20% year-on-year growth, with an addition of 41.3 lakh customers in the July–September period.
The asset quality exhibited a slight deterioration in Q2, with the gross NPA ratio climbing from 1.06% to 1.24% year-on-year, and the net NPA increasing from 0.46% to 0.60%. Loan losses and provisions rose by 19% compared to the previous year, amounting to Rs 2,269 crore, leading to an annualized credit cost of 2.05% of average assets. The provision coverage ratio for Stage 3 assets stood at 52%, indicating a prudent provisioning strategy amid emerging stress areas.
Various brokerages characterized the quarter as stable but not exceptional, emphasizing Bajaj Finance’s operational resilience while highlighting concerns about valuation. Motilal Oswal Financial Services described it as a “mixed quarter with in-line earnings” and maintained a Neutral rating with a target price of Rs 1,160, citing limited upside due to high valuations. JM Financial downgraded the stock to ADD from Buy, setting a target of Rs 1,140 after revising down its FY26–27 EPS estimates following slower AUM growth.
Morgan Stanley retained its Overweight rating with a target of Rs 1,195, recommending investors to consider adding positions, anticipating lower credit costs and enhanced cost efficiencies to bolster margins. HSBC raised its target price to Rs 1,200 with a Buy rating, projecting a 28% EPS CAGR over FY26–28. Jefferies maintained a Buy recommendation with a target of Rs 1,270, foreseeing achievable profit growth of 23% over FY25–28.
CLSA upheld an Outperform rating with a target of Rs 1,200, highlighting stable NIMs, improved fee income, and controlled credit costs. Conversely, Bernstein remained cautious, reiterating an Underperform call with a target of Rs 640, citing concerns about higher NPAs and scaling pressures affecting returns.
With Bajaj Finance currently trading at approximately 5x FY27 estimated book value and 26x FY27 earnings, it stands as one of India’s most premium-valued financial stocks. Analysts acknowledged the company’s strong fundamentals, including an estimated PAT CAGR of around 25% and expected RoA/RoE of 4.2% and 22% respectively by FY28, which partly justifies its premium valuation. However, with revised growth guidance, stable NIMs, and emerging pressure on asset quality, the stock might lack immediate triggers for re-rating.
Long-term investors might view the current correction as an opportunity to buy on dips due to Bajaj Finance’s consistent performance, expanding customer base, and robust profitability metrics. The upcoming festive season in the second half of FY26 could also provide a short-term boost to disbursements. In the short term, market volatility may persist as investors recalibrate expectations concerning slower loan growth and slightly higher credit costs, prompting traders to wait for further clarity on asset quality trends before considering new positions.
In summary, Bajaj Finance remains a long-term growth stock; however, its premium valuation leaves little room for disappointment.