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Motilal Oswal Initiates Coverage with 'Neutral' Rating
Motilal Oswal has begun covering Bajaj Finserv with a 'Neutral' rating and a target price of ₹1,900. This suggests that the brokerage sees limited potential for the stock to climb higher. While the company's established financial operations are strong, Motilal Oswal's cautious view indicates that anticipated growth may already be reflected in Bajaj Finserv's current stock valuation.
Bajaj Finserv's Core Business Strength
The company's primary revenue sources are performing robustly. Bajaj Finance, a 51.3% owned subsidiary, is a key driver, contributing about 54% of total revenue. It manages ₹4.8 trillion in assets under management (AUM) and has grown its customer base to nearly 110 million, with AUM increasing at a 23% annual rate since FY20. In general insurance, Bajaj General Insurance holds a 7.1% market share as India's third-largest provider. The life insurance arm, Bajaj Allianz Life Insurance, is successfully focusing on profitable growth, seeing its value of new business (VNB) margins expand to 16.4%. These core segments are projected to significantly boost earnings, with expected compound annual growth rates (CAGRs) of 28% for Bajaj Finance's profit, 16% for Bajaj General's profit, and 19% for BLife's VNB through FY28.
Emerging Platforms and Current Valuation
Bajaj Finserv is also developing newer, asset-light businesses in areas like broking, asset management, and technology services to expand its ecosystem for the long term. These ventures currently account for just 1% of revenue but are expected to become profitable as they grow. Their limited current contribution means they offer future opportunities rather than immediate boosts to the stock's value. Bajaj Finserv's total market capitalization is around ₹2.73 trillion. Its trailing twelve-month (TTM) Price-to-Earnings (P/E) ratio fluctuates between approximately 28x and 34x. While this valuation is supported by the company's diversified operations, some analysts view it as a point of concern when compared to competitors.
Sector Challenges and Peer Benchmarking
The broader Indian financial services sector faces caution. The Economic Survey 2025-26 highlighted the importance of careful underwriting and resilience amidst global economic volatility and reliance on foreign capital. High stock valuations across the Indian market, combined with currency pressures, have led some analysts to express skepticism about Indian equities for 2026. Competitors such as New India Assurance trade at a lower P/E of 20.6x, while Mahindra and Mahindra Financial Services is considered potentially undervalued by some. Bajaj Finserv's stock has declined about 15% over the past year, suggesting that current market sentiment may already be factoring in some of these broader economic challenges.
Key Risks and Customer Concerns
Beyond valuation, several significant concerns temper Bajaj Finserv's outlook. Motilal Oswal's 'Neutral' stance specifically points out that "much of the growth [is] already priced in," suggesting limited upside without new catalysts or superior execution. Additionally, ethical considerations and customer treatment have drawn criticism. Past issues have included Bajaj Finance's aggressive telemarketing practices. More seriously, reports have detailed the intrusive installation of apps like "Bajaj Finserv Credit Suraksha" on devices purchased via EMI. Users have reportedly been unable to uninstall these apps or revoke permissions, raising serious privacy and data security concerns and giving the company extensive control over phone functions. This lack of transparency, potential for coercive practices, and historical customer complaints regarding service and staff professionalism could lead to reputational damage and regulatory scrutiny, potentially impacting long-term growth and shareholder value.
Divergent Analyst Outlooks
While Motilal Oswal's target price suggests modest near-term gains, other analysts hold a more optimistic view. The consensus 12-month target price from the broader analyst community is ₹2,226.69, implying a potential upside of over 30%. This difference in analyst expectations highlights varying perspectives on Bajaj Finserv's future performance, with some forecasting strong gains from its diverse operations, while others, like Motilal Oswal, adopt a more cautious approach due to current valuation levels and identified risks.