Bajaj Finance's Q2 Shock: Strong Results, But Why the SELL Rating? Investors Must See This!

Bajaj Finance Limited (BFL) reported a robust 23% year-on-year net profit increase for Q2 FY26, with ROA at 4.5% and ROE at 19%. The company provided upbeat guidance, expecting lower credit costs and improved operating efficiency in H2 FY26 and FY27. Loan growth is guided at 22-23% for FY26.

However, analysts are cautious about sustaining asset growth on its large base (over ₹4.5 lakh crore AUM) and long-term profitability. This concern stems from BFL's shift towards lower-yielding, secured loans (3% of AUM), which may impact profitability. Credit costs remained elevated at 2.05% (vs. guided 1.75-1.85% for FY26), expected at the higher end. Net Interest Margins (NIMs) stayed stable due to the asset mix shift.

The stock has rallied ~60% YTD and trades at a premium valuation of 5x FY27 estimated book value. Given the risk-reward, analysts issued a 'Sell' rating, anticipating the stock may remain rangebound.

Impact: This news, especially the 'Sell' rating and valuation concerns, could pressure Bajaj Finance's stock. Investors may reassess positions despite strong quarterly numbers, potentially leading to consolidation or correction. Impact Rating: 7/10

Difficult Terms: ROA (Return on Assets): Efficiency metric for asset utilization. ROE (Return on Equity): Profitability relative to shareholder equity. AUM (Assets Under Management): Total market value of investments managed. NIM (Net Interest Margin): Profitability from lending operations. NBFCs (Non-Banking Financial Companies): Financial firms without a banking license. YTD (Year-to-Date): From start of current year to now. MSME: Micro, Small, and Medium Enterprises. CV (Commercial Vehicles): Business-use vehicles.