Bajaj Finance Stock Sees HOLD Rating & Price Target Boost! What's Driving the Change?

ICICI Securities has reiterated a 'HOLD' recommendation for Bajaj Finance shares, simultaneously increasing the target price to INR 1,050 from INR 910. The brokerage firm highlighted that Bajaj Finance's financial results for the second quarter of fiscal year 2026 (Q2FY26) were impacted by a rise in credit costs, particularly within the Micro, Small, and Medium Enterprises (MSME) sector and captive loan segments for two- and three-wheeler vehicles. This stress led to a 25% reduction in unsecured MSME loan volumes.

While credit costs remained elevated at over 2% in the first half of FY26 (H1FY26) due to Q1 seasonality and Q2 stress, Bajaj Finance noted positive trends. Asset quality (AQ) for portfolio disbursed post-February 2025 shows encouraging performance across 3-month and 6-month on-book periods. Based on these trends, Bajaj Finance anticipates its full-year FY26 credit cost guidance of 185-195 basis points (bps) will be met.

**Impact**: This analysis suggests that while short-term operational challenges are present, Bajaj Finance's strategic adjustments and improved asset quality in newer loans provide confidence. The upward revision in target price by ICICI Securities indicates potential for stock appreciation, although the 'HOLD' rating implies limited immediate upside. The NBFC sector could see scrutiny on asset quality management. Rating: 7/10

**Difficult Terms Explained**: * **MSME**: Micro, Small, and Medium Enterprises – businesses with limited capital and workforce. * **Captive loan**: A loan provided by a financial arm associated with a product manufacturer or seller. * **2W/3W**: Two-wheeler and three-wheeler vehicles. * **AUM**: Assets Under Management – total value of assets managed by a financial institution. * **Credit cost**: The financial impact of loan defaults or anticipated losses on loans. * **Unsecured volumes**: Loans issued without requiring collateral from the borrower. * **Asset Quality (AQ)**: A measure of the riskiness of a company's loan portfolio; higher AQ means lower risk of default. * **FY26**: Fiscal Year 2026 (April 2025 - March 2026). * **Guidance range**: A company's projected range for future financial performance indicators. * **185-195 bps**: Basis points, where 100 bps equals 1%. This means 1.85% to 1.95%. * **BVPS**: Book Value Per Share – the per-share value of a company's net assets. * **Standalone business**: The operations and valuation of a company separate from its subsidiaries. * **Housing subs**: Refers to the company's subsidiary focused on housing finance.