Bajaj Finance shares slide 7%: Is it a Buy or Sell now? 3 key challenges revealed

Bajaj Finance shares plummeted sharply on Tuesday, dropping more than 7% after investors reacted to the company’s slower growth guidance and continued stress in its MSME and captive two-wheeler businesses. 

The lender reported a consolidated profit after tax of Rs 4,950 crore for the September quarter, up 23% from a year earlier. Assets under management rose 24% year on year to Rs 4.62 lakh crore. While profit was in line with estimates, management’s softer tone on growth and asset quality triggered the sell-off.

Credit costs remained elevated at about 2% of AUM, and gross stage 3 assets rose to 1.24% from 1.03% in the previous quarter. The company trimmed its FY26 AUM growth forecast to 22–23%, compared with 24–25% earlier, and said net interest margins would likely stay flat for the rest of the year.

Motilal Oswal keeps Neutral rating, sees limited upside

Motilal Oswal Financial Services reiterated its Neutral stance with a target price of Rs 1,160, valuing the stock at 4.8 times September 2027 book value.

“Despite a healthy profit CAGR of 25% over FY25 – FY28 and strong RoA and RoE trends, valuations remain expensive. We do not see near-term triggers for re-rating,” the brokerage house added.

It expects a profit of Rs 20,300 crore in FY26 and Rs 25,700 crore in FY27, with margins holding around 9.7%. 

JM Financial cuts rating to Add, says MSME stress continues

JM Financial Institutional Securities downgraded Bajaj Finance to Add from Buy, even as it raised its target price to Rs 1,140 from Rs 1,060.

The brokerage said the quarter was steady on profit but weighed down by higher credit costs and pressure in MSME and captive auto financing. “Bajaj Finance’s Q2 was in line on earnings, but MSME stress continues to weigh on growth,” the firm said, adding that gross NPAs rose 21 basis points sequentially to 1.24%.

The report noted that unsecured MSME disbursals were cut by 25%, with MSME loan growth expected to moderate to about 10–12% in FY26. Credit costs are expected to stay near the top of the 1.85–1.95% range this year and improve only in FY27.

Gold loans remained the strongest segment, rising 85% year on year and 18% sequentially. The brokerage expects gold loans to reach Rs 1.6 lakh crore by FY26 and Rs 3.6 lakh crore by FY27.

JM Financial now estimates profit of Rs 2.07 lakh crore in FY26, rising to Rs 3.30 lakh crore by FY28, with return on equity improving from 19.6 to 22%. It warned, however, that the stock’s valuation remains demanding at nearly 4.7 times FY27 book value and 24 times earnings.

HDFC Securities stays positive, keeps Buy rating

HDFC Securities retained its Buy rating and lifted its target price slightly to Rs 1,105 from Rs 1,100, noting that strong operating efficiency continues to support Bajaj Finance despite near-term credit cost pressure.

The brokerage said AUM growth of 23.6% year on year, steady pre-provision profit growth of 21%, and an improvement in cost ratios show that the company’s efficiency gains remain intact.

“Bajaj Finance’s post-pandemic technology investments continue to drive productivity gains and these should sustain through FY26 to FY28,” the report said. Cost-to-income improved to 33% and operating cost to AUM fell to 3.8%.

HDFC Securities expects credit costs to start easing from FY27 once the company winds down its loss-making captive two and three wheeler financing business. It values the stock at 4.5 times September 2027 adjusted book value and 23 times earnings.

Growth moderation in MSME and housing offsets gains from gold and rural lending

Bajaj Finance’s AUM grew 24% year on year to Rs 4.62 lakh crore. The composition is shifting, with slower MSME and mortgage growth offset by gains in gold, rural and commercial lending.

Gold loans grew 85% from a year earlier and 18% quarter on quarter. The rural B2C segment rose 44% and commercial lending rose 27%. MSME loans, about 14% of total AUM, expanded modestly as the company tightened lending filters.

The company added 4.13 million customers during the quarter, taking the total franchise past 110 million. New loan bookings were up 26% to 12.2 million.

Asset quality pain remains limited but visible

Asset quality metrics deteriorated slightly, driven by MSME and captive portfolios. Gross stage 3 assets rose to 1.24% and net stage 3 to 0.61%.

JM Financial said around 18 basis points of the increase in bad loans came from MSME and captive auto segments, which together account for only 1.5% of AUM but contributed almost 9% of total loan losses.

Bajaj Finance’s management maintained its credit cost guidance for FY26 at 1.85 to 1.95% and expects meaningful improvement next year as the weaker portfolios shrink.

Push for AI

Bajaj Finance’s digital initiatives remain central to its efficiency story. JM Financial said 85% of customer service resolutions in the quarter were handled by AI bots and that Rs 19,900 crore of personal loans were disbursed through AI-assisted call centre agents.

The company expects its proprietary artificial intelligence platform, called FINAI, to show measurable productivity gains over the next 12 to 18 months.

The board has elevated Manish Jain, managing director of Bajaj Financial Securities, as deputy chief executive officer. He will now oversee loans against securities, commercial lending, and deposit businesses.