Whalesbook
Bajaj Finance is navigating a complex period. While its total Assets under Management (AUM) grew strongly, the company faces pressure on its funding sources and a slowing growth path. New loans booked increased by 20.5% year-on-year and the customer base expanded, but the contraction in its deposit book presents a significant operational challenge.
Milestone AUM Growth and Deposit Decline
Bajaj Finance Ltd. (BAJFINANCE) announced its Q4 FY26 business update. The company's AUM crossed ₹5 lakh crore, reaching ₹5.10 lakh crore by March 31, 2026, a 22% rise from the previous year, meeting management expectations. However, this growth was overshadowed by a 4% year-on-year drop in its deposit book, which fell to ₹68,550 crore. This marked a 3.5% decline from the previous quarter, highlighting ongoing difficulties in attracting deposits. The deposit book now makes up about 16% of total borrowings, down from a peak of 20-22%, raising questions about the stability and cost of its funding. In early April 2026, Bajaj Finance's market capitalization was around ₹2.42 trillion, with a P/E ratio near 32.0x, and its stock traded near ₹7,100.
Analyst Concerns and Competitive Landscape
Macquarie analysts reaffirmed their 'Underperform' rating and ₹860 price target. They noted that fiscal year 2026 saw Bajaj Finance's slowest growth in 15 years, excluding the FY21 period. This slowdown challenges the company's usual growth trajectory. Macquarie's research suggests that as Bajaj Finance expands, maintaining growth and a return on assets (ROA) above 4.0% will be harder, especially with moderating deposit growth. Competitors like HDFC Ltd. and ICICI Bank often have more stable retail deposit bases, offering a stronger funding advantage. The wider non-banking financial company (NBFC) sector is also facing tighter liquidity, making it harder for all players to gather deposits. While Bajaj Finance has shown resilience, past funding pressures have caused stock volatility. Analyst views differ; Jefferies, for example, maintains a 'Buy' rating with a ₹9,600 price target.
Funding Structure and Profitability Risks
Key concerns for Bajaj Finance's future profitability and growth stem from its funding structure. Macquarie's primary worry is the challenge of maintaining high growth and return metrics as the company grows. The reduction in deposits—now 16% of funding versus a peak of 20-22%—is a significant vulnerability. Unlike banks with stable current and savings account (CASA) balances, Bajaj Finance relies more on market-sensitive funding. This makes it vulnerable to interest rate swings and liquidity shortages. Macquarie warns that continued deposit pressure could push the company towards more expensive wholesale funding. This would likely shrink net interest margins (NIMs) and hurt overall profitability. Any misstep in managing its asset-liability balance could be costly.
Outlook and Investor Confidence
Looking forward, Bajaj Finance must show a clear plan to boost deposit growth and manage funding costs. Its success in overcoming these dual challenges of growth and funding will be crucial for investor confidence. Analyst sentiment may change depending on future updates on its deposit book and the stability of its asset quality and profit margins.