Bajaj Finance Q4: Profit Climbs, But Analyst Views Diverge

Bajaj Finance reported strong fourth-quarter results, with a 22% rise in net profit and a 20% jump in net interest income. However, the market's reaction is split, as analysts weigh concerns over asset quality against the company's future growth forecasts.

Valuation Concerns Emerge

The company's profit after tax for the January-March quarter rose to Rs 5,464.57 crore, up from Rs 4,479.57 crore a year ago. Net interest income grew to Rs 11,781 crore from Rs 9,808 crore, showing steady lending. Assets under management expanded by 22% year-on-year, surpassing Rs 5 lakh crore. Despite these strong numbers, Bajaj Finance's stock closed just 1% higher at Rs 932.60 on April 29, 2026. This cautious reaction appears linked to a rise in gross non-performing loans to 1.01% from 0.96% last quarter, though net NPAs improved slightly to 0.41%. The stock's price-to-earnings ratio, around 31.5-33.0, is substantially higher than the NBFC industry average of about 21.48, indicating investors expect significant future growth.

Sector Context and Peer Comparison

Bajaj Finance operates in the non-banking financial company (NBFC) sector, which is projected to grow its assets under management (AUM) by 15-17% in FY26, faster than bank credit growth. Analysts foresee ongoing credit demand from MSMEs and retail customers, boosted by government policies. However, the sector faces challenges like higher borrowing costs, especially in unsecured loans. Among peers such as Shriram Finance, Muthoot Finance, and Tata Capital, Bajaj Finance holds the largest market capitalization at around ₹5.79 lakh crore. While its P/E ratio is above the industry average, it remains below its March 2021 peak. The company's stock has delivered over 1200% returns in the past decade, but recent three-month performance has turned negative, suggesting a change in momentum. For FY27, management forecasts steady net interest margins and fee income growth, with AUM expansion around 22%. Bajaj Finance is also increasing investment in AI to improve operations and customer interactions.

Risks and Bearish Forecasts

A closer look at Bajaj Finance's results reveals potential risks. The increase in gross non-performing loans to 1.01% from 0.96% needs attention, particularly given analyst worries about asset quality in segments like MSMEs. Macquarie and Bernstein, both holding 'Underperform' ratings, suggest that the FY27 growth and return targets might be too ambitious. With a P/E ratio above 30, the stock is priced significantly higher than competitors. This premium risks a price correction if growth slows or credit costs rise. The current P/E is about 47% above the NBFC industry average, posing a risk if growth expectations aren't met. Some analysts have questioned whether a 4.6% Return on Assets can be sustained at the company's scale. While credit costs have fallen year-on-year, showing improvement, this trend needs monitoring amid a potentially tighter credit market and increasing unsecured lending.

Analyst Ratings Diverge

Brokerage firms have differing views on Bajaj Finance. Citi and Morgan Stanley have upgraded the stock to 'Buy' and 'Overweight', setting target prices of Rs 1,120, expecting that major challenges have passed. Jefferies keeps a 'Buy' rating with a target of Rs 1,210, predicting consistent quarterly performance and strong growth. In contrast, Macquarie and Bernstein are cautious, maintaining 'Underperform' ratings with target prices of Rs 860 and Rs 840, citing valuation concerns and doubts about sustainability. JM Financial upgraded the stock to 'BUY' with a target of Rs 1,125, based on a valuation of 4.3x FY28 P/BV and an expected 22% loan CAGR from FY26-28. Management guidance anticipates 22-24% AUM growth and stable net interest margins for FY27, along with lower credit costs, which supports the more optimistic price targets.