Whalesbook
Profit Surge, But Provisions Rise
Bajaj Housing Finance reported a 14.1% year-on-year increase in net profit for the fourth quarter of fiscal year 2026, reaching ₹669 crore. This growth was supported by a 15% rise in net interest income, which climbed to ₹945 crore compared to ₹823 crore in the same period last fiscal. The company also maintained strong asset quality, with its gross non-performing assets (NPA) ratio dipping slightly to 0.27% from 0.29% a year prior, while the net NPA ratio held steady at 0.11%.
However, a closer look shows loan loss provisions more than doubled to ₹55 crore in the March 2026 quarter, up from ₹26 crore in the prior year's quarter. This jump in provisions, even with falling NPAs, could mean management is preparing for future credit risks or adopting a tougher risk assessment approach.
For the full fiscal year 2025, net profit rose 20% to ₹3,320 crore, with net interest income growing 25% to ₹3,752 crore.
High Valuation, Weak Stock Performance
The company's financial performance stands in contrast to its market valuation and stock performance. Bajaj Housing Finance has a market capitalization of about ₹74,482 crore and a trailing twelve-month (TTM) price-to-earnings (P/E) ratio around 30.1. This valuation seems high compared to its peers in the housing finance sector.
For instance, LIC Housing Finance trades at a TTM P/E of roughly 5.4, and Indiabulls Housing Finance's P/E is around 7.0. Even HDFC Bank, a much larger company, has a P/E of approximately 16.0.
This high valuation multiple has not led to strong shareholder returns. Over the past year, Bajaj Housing Finance's stock has dropped significantly, by up to 32.43% in some reports. Year-to-date, the stock has also seen substantial negative returns. This poor stock performance sharply contrasts with the profit growth, showing investor caution.
New management appointments, effective April 1, 2026, and the upcoming expiry of a significant shareholder lock-in period on April 12, 2026, could also be affecting investor sentiment. The expiry might release a large number of shares into the market.
NBFC Sector Challenges and Analyst Views
The broader non-banking financial company (NBFC) sector is expected to grow, but it faces challenges. Analysts predict NBFC lending will grow 15-17% in fiscal year 2026, faster than bank credit, with retail loans driving this growth. However, NBFC net profits are expected to moderate in FY2026 due to higher credit costs.
Analyst views on Bajaj Housing Finance are mixed. Some reports suggest potential upside with average price targets between ₹100-₹112, indicating modest gains. However, the general rating is 'Neutral', with a mix of buy, sell, and hold recommendations.
This split in analyst views reflects uncertainty about the company's future growth and how well it manages risks.
Key Risks and Concerns
The rise in loan loss provisions needs careful review as it could signal future loan quality problems, even though current NPA figures are low.
The company was also fined ₹5 lakh by the Reserve Bank of India in February 2024 for making a significant management change without prior approval, indicating a past compliance issue.
Recent changes in senior management, including a new Chief Risk Officer, introduce a transition period that could impact strategy and risk oversight.
Also, the upcoming expiry of a large share lock-in period could push the stock price down as more shares become available.
Competitively, its much higher P/E ratio than peers suggests it's priced too high for its recent stock performance or sector challenges. Unlike LIC Housing Finance with its P/E of 5.4, Bajaj Housing Finance's P/E of 30.1 appears less attractive in a market increasingly focused on risk-adjusted returns.
Looking Ahead
Analysts have set average 12-month price targets for Bajaj Housing Finance between ₹93.36 and ₹112.50, suggesting potential upside from current stock prices.
Its strong capital adequacy ratio of 22.46% offers a good safety net against unexpected issues.
However, continued success will depend on its ability to manage rising provisions, navigate competition, and deliver steady operational performance within the dynamic NBFC sector.