It’s the classic David versus Goliath situation in the NBFC segment – on the right side of the financial ring is Shriram Finance, which is in the media limelight after securing Rs 39,618 crore or $4.4 billion from Japan-based MUFG Bank in a preferential issue to acquire a 20% stake in the company. On the other side is the Pune-based Bajaj Finance , which is the largest NBFC in the country, in terms of number of customers served, loans disbursed and market capitalisation.

Investors on Dalal Street appear bullish on both the NBFC stocks — Bajaj Finance in early Tuesday trade was down nearly 0.5% to Rs 992, and hovering not too far from its 52-week high of Rs 1,102.5 that was reached on 23 October, 2025. It has a market capitalisation of Rs 6.16 lakh crore.

Meanwhile, Shriram Finance gained 1.6% to Rs 970.9 in early Tuesday trade, and not too far from its 52-week high of Rs 983.4 that was reached on 24 December, 2025. It has a market capitalisation of Rs 1.84 lakh crore.

However, the valuations of the two NBFCs differ widely — Shriram Finance trades at a price to (consolidated) book value of nearly 3 times, according to Screener.in, while Bajaj Finance trades at nearly 6 times.

Also, Bajaj Finance trades at a consolidated P/E of nearly 34 times, according to Screener.in, while Shriram Finance trades at a P/E of 20.8 times.

Let’s dig in to see the differences in growth of the two leading NBFCs.   

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Bajaj Finance’s consolidated loans were Rs 4.62  lakh crore at the end of September 2025 quarter, a growth of 24% on a y-o-y basis, and it benefited from strong demand for gold loans, commercial lending and loans against securities.

Its consolidated results include Bajaj Housing Finance and Bajaj Financial Securities. 

Meanwhile, Shriram Finance’s assets under management (AUM) grew 15.7% y-o-y to Rs 2.8 lakh crore in the September 2025 quarter, according to its investor presentation. The company’s loan portfolio is spread across commercial vehicles, passenger vehicles, construction and farm equipment, MSME, and gold loans, amongst others. 

Bajaj Finance has not stated its net interest margin (NIM) for Q2FY26. Having said that its consolidated net interest income (NII) grew 22% y-o-y to Rs 10,785 crore in the September 2025 quarter. 

For this key operational parameter, Shriram Finance’s net interest margin (NIM) was 8.19% in Q2FY26 vis-a-vis 8.74% a year earlier. And Shriram Finance’s core net interest income grew nearly 10.3 % y-o-y to Rs 6,027 crore in Q2FY26.

Coming to asset quality…

Bajaj Finance’s asset quality was broadly stable and superior to its rival — its net NPA (stage 3 asset, net) ratio was 0.6% at the end of September 30, 2025 vis-a-vis 0.46% a year earlier. For Shriram Finance, its net stage 3 was 2.49% in the September 2025 quarter vis-a-vis 2.64% a year earlier.

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Meanwhile, strong loan growth helped Bajaj Finance’s consolidated net profit grow 23.3% y-o-y to Rs 4,947.8 crore in the September 2025 quarter. For Shriram Finance, it faced higher operational costs, like other expenses, and its consolidated net profit grew just 11.5 % y-o-y to Rs 2,314.2 crore in Q2FY26.

Based on this, it’s clear that Bajaj Finance is leaps ahead of Shriram Finance.

The longer-term verdict: Bajaj Finance all the way?

Is the situation any different over a longer term?

Let’s see how these two leaders perform over a longer time frame.

Bajaj Finance’s consolidated loans were Rs 4.16 lakh crore at end of FY25 vis-a-vis Rs 2.47 lakh crore at end of FY23, a compounded growth of nearly 29.8%. Over this time period, the company had strong growth in gold loans, SME loans and urban B2C loans during this period.

For Shriram Finance, its loan book was Rs 2.63 lakh crore at the end of FY25 vis-a-vis Rs 1.85 lakh crore at the end of FY23, a compounded growth of 19.2%. This was thanks to improved demand for financing for new and old vehicles.

Meanwhile, Bajaj Finance’s net interest income was Rs 36,393 crore during FY25 vis-a-vis Rs 22,990 crore during FY23, a compounded growth of nearly 25.8%, and superior growth vis-à-vis its rival.  

For Shriram Finance, its NIM was 8.55% during FY25 vis-a-vis 8.4 % during FY23. Its core net interest income was Rs 21,853 crore during FY25 vis-a-vis Rs 16,275 crore during FY23, a compounded growth of nearly 15.9%.

Once again, over this longer tenure, Bajaj Finance has done better than its rival with regard to asset quality. 

Bajaj Finance’s net NPA (stage 3 asset, net) ratio was 0.44% at the end of FY25 vis-a-vis 0.34% at the end of FY23.  For Shriram Finance, its net stage 3 was 2.64% during FY25 vis-a-vis 3.2% at the end of FY23.

On one metric, however, Shriram Finance beats Bajaj Finance. And that’s Net Profit growth over this time period.

For Bajaj Finance, its consolidated net profit of Rs 16,779.5 crore during FY25 vis-a-vis Rs 11,507.7 crore during FY23, a compounded growth of nearly 20.8%. 

For Shriram Finance, its consolidated net profit of Rs 9,435 crore during FY25 vis-a-vis Rs 6,012 crore during FY23, a compounded growth of nearly 25.3%. 

The efficiency test: ROE & valuations

On the all-important metric of Return on Equity (ROE), Bajaj Finance again has the upper hand.

Bajaj Finance has a consolidated return on equity of 19.2% during the current financial year, according to Screener.in, while for Shriram Finance it is 15.6%.

2026 Outlook: The MUFG catalyst

The RBI has taken several steps to lower the cost of lending in the broader banking system, and boost lending in the current peak lending season. Of equal importance will be for NBFCs like Shriram Finance and Bajaj Finance, and other leading banks’ ability to manage the pressure on NIM – the central bank has once again cut repo rates in early December 2025. 

Investors will be closely watching NBFCs and other leading banks to grow their loans books as well as manage various other parameters.

Now, let’s come specifically to how the situation could change for Shriram Finance in comparison to Bajaj Finance.

Bajaj Finance has stronger growth operational metrics vis-a-vis its rival, Shriram Finance. However, with the Japanese MUFG Bank expected to play an active role in the strategy of Shriram Finance, going forward, investors will be closely monitoring the acceleration in growth trajectory of this NBFC.

It’s important to note that the nearly 40,000 crore of new capital will be infused by MUFG (subject to regulatory approval). This will give Shriram Finance the funding to speed up growth. In fact, the company has already guided that growth rates should improve over the next few years.

In addition, given the fact that MUFG is a strong partner, the company expects cost of borrowing to reduce.

In fact one credit rating agency, CARE, has already upgraded Shriram Finance to AAA basis it’s financial performance.

The improvement in rating, fresh capital, along with the benefit of RBI’s pro-liquidity stance, should ultimately help Shriram Finance’s NIMs to improve 100 bps (1%) over the next couple of years. This is going to positively impact the company’s profitability significantly in the years to come.

Finally, there’s the valuation bit.

Shriram Finance is trading at valuations much lower than that of Bajaj Finance.

Historical numbers suggest that the valuation differential was perhaps justified. However, with the MUFG capital and know-how to give Shriram Finance a boost, perhaps a case could be made that this valuation gap may not remain as wide for long.

While, no one can say for sure what would happen in future, investors could put Shriram Finance on their watch list of stocks for 2026.

Disclaimer:

Note: We have relied on data from www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.

The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.

Amriteshwar Mathur is a financial journalist with over 20 years of experience.

Disclosure: The writer and his family do not hold the stocks discussed in this article. 

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