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Bajaj Finserv Reports Mixed FY26 Results
Bajaj Finserv's fiscal year 2026 results showed a split performance. Its core lending business expanded significantly, while its general insurance unit faced difficulties. This difference, particularly the weaker results from Bajaj General Insurance, could temper investor enthusiasm even with the parent company's overall revenue and profit growth. Motilal Oswal's decision to keep a 'Neutral' rating, despite raising earnings estimates, highlights the need for investor caution.
Lending Grows Strongly While Insurance Falters
Bajaj Finserv announced a record consolidated revenue of INR1.5 trillion for FY26, up 13% year-over-year. Profit after tax (PAT) rose 10% to INR98 billion. The fourth quarter of FY26 also showed growth, with revenue up 6% to INR385.1 billion and PAT up 13% to INR25.4 billion. However, these figures were boosted by investment gains and Bajaj Finance's strong performance.
In contrast, Bajaj General Insurance (BGen) saw flat Gross Written Premium (GWP) at INR43.2 billion for Q4 FY26, missing forecasts by 9%. Full-year BGen GWP grew 8% to INR233.3 billion, but Q4 PAT increased only 2% to INR3.7 billion, falling significantly short of analyst targets by 26%. Full-year BGen PAT grew 6% to INR19.5 billion. This insurance underperformance, partly due to pricing pressures in motor and crop insurance and a deliberate reduction in these areas, overshadowed the strong growth in the company's lending business. Bajaj Finance, for example, increased its Assets Under Management (AUM) by 22% to INR5.09 lakh crore by the end of Q4 FY26.
Premium Valuation Faces Insurance Headwinds
Despite these differing business performances, Bajaj Finserv's consolidated results contributed to a market value of about INR2.8 trillion. Its price-to-earnings (P/E) ratio is around 28.67x, which is higher than the average P/E of 21.20x for the broader holding company sector. This higher valuation suggests the market expects strong future growth, especially from its wide range of financial services. However, the weaker results from its insurance units, a significant part of its operations, raise questions about whether this valuation can be maintained.
Looking at competitors, HDFC Life Insurance trades at a P/E of about 66.2x and SBI Life Insurance at roughly 73.7x, both well above the Asian insurance average of 11.8x. ICICI Lombard General Insurance trades at a P/E of about 31.69x, also above its industry average. These differing peer valuations show varied market views within India's financial sector and suggest Bajaj Finserv's P/E is more reflective of its status as a diversified financial conglomerate rather than solely being driven by insurance multiples.
Full Insurance Ownership Brings New Risks
Bajaj Finserv recently acquired the remaining stake from Allianz SE, now fully owning its insurance subsidiaries. This move puts Bajaj Finserv directly responsible for managing the insurance segment's challenges. BGen's flat GWP growth and missed profit targets in Q4 FY26 are concerning, especially since the general insurance industry is expected to grow at a compound annual rate of 10% between 2026 and 2030. BGen's decision to reduce its exposure to motor and crop insurance, while intended to boost profits, points to pricing pressures and intense competition in these areas. New industry regulations and a greater focus on consumer protection could also continue to affect profits and how results are reported.
While Bajaj Finance performs well, its ongoing growth might not fully compensate for the insurance units' struggles if they don't improve. Management noted that consolidated profits were affected by temporary investment losses (MTM) in insurance, suggesting operational issues beyond just market swings. The timing of government health claims payments also impacted BGen's profitability, revealing operational complexities that could continue.
Analysts Maintain Neutral Stance Amid Challenges
Motilal Oswal has revised its earnings per share (EPS) estimates, increasing them by 1% for FY27 and 5% for FY28. Despite these updates, the brokerage firm kept its 'Neutral' rating and a price target of INR2,000. This suggests the firm believes current stock valuations are appropriate given the mixed results. The INR2,000 price target is based on a valuation of Bajaj Finserv's different business units separately. The company's future performance will depend on its ability to use its full ownership of its insurance companies to achieve profitable growth, which will require overcoming ongoing pricing pressures and operational difficulties in the general insurance market.