Brokerage firm Prabhudas Lilladher has maintained a 'Buy' rating on Bajaj Finance, setting a target price of Rs 1,150. The firm cites strong loan growth of 26.5% as a key driver, even as rising funding costs put pressure on profit margins. Investors are closely watching a planned Rs 175 billion capital raise and evolving regulatory standards.
Prabhudas Lilladher has reaffirmed its positive stance on Bajaj Finance, setting a price target of Rs 1,150 per share. The report emphasizes the company's steady growth, noting that its total assets under management—which represents the total value of all loans provided—reached Rs 5,846.2 billion. This reflects a significant 26.5% year-on-year expansion.
The company’s loan book has been supported by consistent performance across several key areas, including mortgage lending, urban consumer finance, and rural credit. Looking ahead, analysts expect a recovery in lending to small and medium enterprises (MSME) by the second half of the 2027 fiscal year.
However, the company is navigating a phase of tighter profit margins. The net interest margin, which is the difference between interest earned on loans and interest paid to depositors or lenders, has moderated to 9.5%. This is largely because the cost of borrowing money is rising faster than the company had initially estimated. While this margin pressure is a concern, the brokerage maintains its growth projections of 26% for fiscal 2027 and 25% for fiscal 2028, which align with the company's internal expectations.
A significant development that investors are tracking is the company’s proposal to raise Rs 175 billion in fresh capital. This move is designed to create a larger financial buffer to support future operations and manage potential market volatility. While this capital strength is positive for long-term stability, investors often monitor how such fundraising might affect earnings per share through equity dilution.
Asset quality also remains a core focus. The company has seen some movement in bad loans, partly due to temporary trends in short-term gold loan products. Management has indicated that credit costs are expected to stay stable at around 1.6% for fiscal 2027. Despite this, the non-banking finance sector faces an evolving regulatory environment. The final rules regarding insurance commissions and the structure of revolving loan products remain key areas to watch. Shareholders should continue to monitor the progress of the capital raise, the stabilization of profit margins, and any further regulatory announcements from the central bank, as these factors will influence the company's performance in the coming quarters.