After a sharp run in several NBFC stocks, Jefferies believes the next leg of returns is unlikely to come from a broad valuation rerating. Instead, the brokerage is betting on earnings growth, estimate upgrades and improving asset quality to drive performance over the next 6-12 months.
Bajaj Finance and Aditya Birla Capital are Jefferies’ top picks in the consumer finance space, while Cholamandalam Investment and Finance remains another key preference. The brokerage also sees opportunities across housing finance and other NBFCs, with Aavas Financiers and Can Fin Homes standing out for their higher target-price upside among the stocks highlighted.
“Further rerating may be modest, but earnings growth and upgrades should drive stock performance over the next 6-12 months,” Jefferies said in its Consumer Finance report dated August 25, 2026.
Jefferies expects 23-28% EPS CAGR for Bajaj Finance, Aditya Birla Capital and Cholamandalam Investment & Finance Company over FY26-28, while Shriram Finance is expected to deliver 18% EPS CAGR over the same period.
Here are the key stock calls from the Jefferies report.
Jefferies on Aavas Financiers: ‘Buy’
Jefferies has maintained a ‘Buy’ rating on Aavas Financiers with a target price of Rs 1,800, compared with the Rs 1,333 reference price used in its valuation table, implying potential upside of about 35%.
The brokerage expects affordable housing finance companies to benefit from an improvement in loan growth, which should support earnings growth. Aavas is expected to deliver 17% EPS CAGR over FY26-FY28, according to Jefferies’ estimates.
“AHFCs should see loan growth improvement drive earnings growth,” Jefferies said.
Jefferies on Can Fin Homes: ‘Buy’
Jefferies has given Can Fin Homes a ‘Buy’ rating and set a target price of Rs 1,075, against the Rs 810 reference price in its valuation table, indicating upside of around 33%.
Can Fin Homes is among the housing finance companies that could benefit from improving loan growth, although Jefferies expects prime housing finance companies more broadly to face pressure on spreads until lending rates begin to rise. The brokerage estimates Can Fin Homes’ EPS CAGR at 9% over FY26-28.
Jefferies on Cholamandalam Investment and Finance: ‘Buy’
Jefferies has a ‘Buy’ rating on Cholamandalam Investment and Finance with a target price of Rs 2,100, versus the Rs 1,847 reference price in its valuation table, implying upside of about 14%.
Cholamandalam is one of Jefferies’ preferred names in the sector. The brokerage expects broad-based segment momentum and potentially lower credit costs to support 28% EPS CAGR and 20% core return on equity over FY26-28.
“CIFC should gain from broad-based segment momentum and lower credit costs supporting 28% EPS CAGR, 20% ROE over FY26-28e,” Jefferies said.
Jefferies on Poonawalla Fincorp: ‘Buy’
Jefferies has maintained a ‘Buy’ rating on Poonawalla Fincorp Ltd. with a target price of Rs 560, compared with the Rs 476 reference price used in the report, implying upside of around 18%.
Poonawalla is expected to post the strongest earnings growth among the companies in Jefferies’ comparison set, with the brokerage estimating 92% EPS CAGR over FY26-28. The report also shows that Poonawalla has seen more than 20% accretion in FY1 book value per share, supported by a capital raise.
Jefferies on Shriram Finance: ‘Buy’
Jefferies has a ‘Buy’ rating on Shriram Finance Ltd. and a target price of Rs 1,210, compared with the Rs 1,119 reference price in its valuation table, implying upside of about 8%.
The brokerage expects Shriram Finance’s spreads to surprise positively. However, it said the key trigger for the stock will be greater visibility on achieving the company’s 18% growth target for FY27. Jefferies itself estimates FY27 growth at 17%.
“At SHFL, spreads should surprise positively, but visibility on achieving 18% growth target for FY27 stays the key trigger,” Jefferies said.
Bajaj Finance and Aditya Birla Capital remain Jefferies’ top picks
While Aavas Financiers and Can Fin Homes offer higher target-price upside based on Jefferies’ valuation table, the brokerage’s strongest preference remains Bajaj Finance and Aditya Birla Capital.
Jefferies said both companies offer healthy growth, have lower exposure to rural risks and could also benefit if credit costs surprise positively. The brokerage expects earnings growth rather than a major expansion in valuation multiples to drive returns across the sector.
“Top picks: BAF and ABCAP offer healthy growth, lower exposure to rural risks and can surprise positively on credit costs,” Jefferies said.
The brokerage expects Bajaj Finance, Aditya Birla Capital and Cholamandalam Investment to deliver EPS CAGR of 23-28% over FY26-28.
What is driving Jefferies’ NBFC view?
Jefferies’ broader argument is that the sector’s fundamentals have improved even though valuations have not expanded in tandem. Many large NBFCs are trading below their price-to-book multiples at the start of the year despite strong earnings and better asset-quality trends, according to the brokerage.
Better-quality loan vintages originated over the past two years, particularly in unsecured lending where stress had emerged earlier, are helping contain credit costs and could create room for positive earnings revisions. Jefferies also expects seasonal tailwinds for growth and asset quality in the second half, although it flagged a tougher base.
“Better-quality vintages originated in the past two years esp in unsecured… are helping contain credit costs, creating scope for positive earnings revisions,” Jefferies said.
The report also found that much of the year-to-date performance in major NBFC stocks has been driven by growth in book value and earnings estimates rather than valuation expansion.
“Stock prices at major NBFCs like SHFL, BAF, Chola was mostly driven by higher BVPS even as multiples compressed for most,” Jefferies said.
Jefferies’ key ‘Buy’ calls at a glance
| Stock | Jefferies rating | Target price | Key takeaway |
| Aavas Financiers | ‘Buy’ | Rs 1,800 | Loan growth improvement could support earnings |
| Can Fin Homes | ‘Buy’ | Rs 1,075 | Higher target-price upside; housing finance growth recovery |
| Poonawalla Fincorp | ‘Buy’ | Rs 560 | Strongest EPS growth estimate in Jefferies’ comparison set |
| Cholamandalam Investment | ‘Buy’ | Rs 2,100 | Broad-based momentum and scope for lower credit costs |
| Shriram Finance | ‘Buy’ | Rs 1,210 | Spreads could surprise positively; growth visibility remains key |
| Bajaj Finance | ‘Buy’ | Top pick | Healthy growth, lower rural exposure and scope for credit-cost upside |
| Aditya Birla Capital | ‘Buy’ | Top pick | Healthy growth, lower rural exposure and potential positive credit-cost surprise |
The report also carries ‘Buy’ ratings on AU Small Finance Bank, Aptus Value Housing Finance, HDB Financial Services, Home First Finance and Manappuram Finance, alongside the names highlighted above.
Conclusion
The easy valuation rerating may be limited, but improving asset quality, contained credit costs, stronger loan growth and earnings upgrades could still support the next phase of NBFC stock performance. Bajaj Finance and Aditya Birla Capital remain its top choices.
Disclaimer
This article is for informational and educational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any securities. The ratings, target prices, estimates and views mentioned in this article are based on Jefferies’ research report dated August 25, 2026, and reflect the brokerage’s opinions and assumptions at the time of publication.
Stock market investments are subject to market risks, and target prices or projected returns are not guaranteed. Investors should conduct their own research, consider their financial objectives and risk tolerance, and consult a qualified financial adviser before making any investment decisions. Financial Express does not endorse or guarantee the performance of any stock or investment mentioned in this article.