Bajaj Finserv: Motilal Oswal Starts Coverage with Neutral Rating, ₹1900 Target

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AuthorRiya Kapoor|Published at:
Bajaj Finserv: Motilal Oswal Starts Coverage with Neutral Rating, ₹1900 Target
Overview

Motilal Oswal has started coverage on Bajaj Finserv with a 'Neutral' rating and a ₹1,900 target price. The brokerage sees strong growth from subsidiaries Bajaj Finance and Bajaj General Insurance in assets and premiums. While expected revenue and profit growth are solid, the target price suggests the valuation balances future potential with current market standards.

Motilal Oswal Initiates Bajaj Finserv Coverage

Motilal Oswal has launched coverage on Bajaj Finserv, assigning it a "Neutral" rating and setting a price target of ₹1,900. The research firm views Bajaj Finserv as a parent company to significant financial entities, including India's largest non-banking financial company (NBFC), Bajaj Finance, and key general and life insurance operations. The core of the firm's valuation hinges on Bajaj Finance's substantial assets under management (AUM) and its consistent expansion.

Subsidiary Performance and Outlook

Bajaj Finance, a key subsidiary, has shown impressive growth, with its assets under management (AUM) expanding at a compound annual rate of about 23% from FY20 to FY25, reaching ₹4.8 trillion by Q3 FY26. Its reliable earnings, strong return on equity (ROE), and consistent compounding power make it a primary value driver. Meanwhile, general insurer Bajaj General Insurance (BGen) holds a 7.1% market share year-to-date for FY26. It demonstrates solid profitability with a combined ratio (CoR) of 100.8% in the first nine months of FY26 and is a significant force in motor, health, and fire insurance.

Growth Projections

Looking ahead, Motilal Oswal forecasts profit after tax (PAT) growth for Bajaj Finance and Bajaj General Insurance at 28% and 16% compound annual growth rates (CAGRs) respectively, between FY26 and FY28. For Bajaj Life Insurance, the value of new business (VNB) is projected to grow at a 19% CAGR. Across Bajaj Finserv's operations, revenue and PAT are expected to achieve 15% and 17% CAGRs, respectively, during this period, with an anticipated ROE of 13-14%.

Valuation and Target Price

The ₹1,900 target price is based on a Sum of the Parts (SoTP) valuation method. This approach suggests a forward Price-to-Earnings (P/E) multiple of 22 times on FY28 earnings estimates. This valuation acknowledges Bajaj Finserv's diverse business streams and its potential for expansion in both lending and insurance. Investors will closely monitor the company's progress in developing its technology-driven financial services ecosystem.

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