Bajaj Finance Q2: Profit Surge OR Valuation Trap? Analysts Warn Investors!

Bajaj Finance (BFL) announced a healthy Q2 FY26 performance, posting a Return on Assets (ROA) of 4.5 percent and a Return on Equity (ROE) of 19 percent. The company's Asset Under Management (AUM) surpassed ₹4,50,000 crore as of September 2025, reflecting a 24 percent year-on-year growth, fueled by diverse business verticals. Despite a strategic shift towards secured products like mortgages, which now constitute 31 percent of its AUM, intense competition in housing finance and cautiousness in MSME lending have led to revised, slower growth expectations for these segments. Consequently, Bajaj Finance has lowered its FY26 asset growth guidance to 22-23 percent.

Net Interest Margins (NIMs) remained stable in Q2 FY26, contrary to the industry trend of margin expansion in a falling rate environment. This stability is attributed to a diversification into lower-yielding secured loans, balancing reduced funding costs. Credit costs were noted at 2.05 percent, slightly above guidance, but management expects improvements in H2 FY26 and FY27.

**Impact**: Bajaj Finance's results and analyst ratings significantly influence the Non-Banking Financial Company (NBFC) sector and broader financial market sentiment in India. The 'Sell' recommendation, despite positive results, signals potential stock price stagnation due to high valuation concerns, impacting investor decisions and sector outlook. Rating: 8/10

**Key Terms:** * **ROA (Return on Assets)**: A financial ratio that measures a company's profitability relative to its total assets, indicating how efficiently it uses assets to generate earnings. * **ROE (Return on Equity)**: A profitability ratio that measures how much profit a company generates with the money shareholders have invested. * **AUM (Asset Under Management)**: The total market value of the investments that a financial institution manages on behalf of its clients. * **NIM (Net Interest Margin)**: A financial ratio that measures the difference between the interest income generated by a financial institution and the amount of interest it has paid out to its lenders, expressed as a percentage of interest-earning assets. * **Credit Costs**: The amount of money a lender anticipates losing due to borrowers defaulting on their loans or leases.