Bajaj Finance, which had dazzled investors with a 32% year-to-date return, saw its winning streak end abruptly on Friday as the stock plunged over 6%, closing below the critical ₹900 mark. The sharp selloff wiped out around ₹38,000 crore in market capitalisation, even as the company posted strong Q1FY26 earnings.
The fall came as multiple brokerages raised red flags over rising credit costs and asset quality issues, particularly in the MSME and two-wheeler loan portfolios — dampening investor enthusiasm despite robust headline numbers.
Q1 Performance: Growth at the Top, Trouble Beneath
The non-banking financial giant reported a 22% year-on-year rise in standalone net profit to ₹4,133 crore for the June quarter. Assets under management (AUM) grew by 24% YoY, while the company added 4.7 million new customers and booked 13.5 million new loans.
However, investors were rattled by the spike in credit costs, which rose to 2.02% — breaching the company’s guided range of 1.85–1.95%. The increase was largely attributed to stress in the MSME and two- and three-wheeler loan segments.
Brokerages Turn Bearish
UBS issued a ‘Sell’ call with a sharply reduced target price of ₹750. “MSME segment (12% of book) seeing increased stress,” the brokerage warned.
Bernstein maintained its underperform rating with a target of ₹640, stating, “Credit costs are still elevated (202 bps vs guidance of 185–195 bps), resulting in RoA of 4.5%, which sits mid-range of the recently reduced target RoA band (4.3–4.7%).”
JPMorgan downgraded the stock to ‘Neutral’ from ‘Overweight’, with a revised target of ₹970. It praised the company’s overall quality but flagged concerns: “A pick-up in mortgage attrition, weakness in MSME asset quality, and continued softness in 2/3W loan quality suggest possibility of negative revisions.”
Macquarie retained its ‘Underperform’ rating and ₹800 target, arguing that “shares are not factoring in the decline in growth guidance and higher credit costs.” It noted that the stock is trading at a premium valuation of 4.4x FY27E price-to-book.
Prabhudas Lilladher also stayed cautious, holding its ₹900 target and observing that “valuation continues to be rich,” with FY26 likely to see “moderation” based on early-stage delinquencies.
Management Commentary & Succession Uncertainty
While the company maintained its full-year credit cost guidance and expects a moderation in H2FY26, it acknowledged challenges in the MSME and auto segments. Management also expects some tailwinds from potential rate cuts by end-FY26.
Adding to uncertainty, UBS pointed to a lack of clarity around succession planning as Rajeev Jain’s tenure nears its end. Jefferies clarified that Jain will submit a succession report to the board within six months, but the plan will be kept under wraps for now.
Not All Are Bearish
Some brokerages remain optimistic. Jefferies retained its ‘Buy’ rating with a raised target of ₹1,100, despite trimming FY26–28 earnings estimates by 1–2%. It sees 23% AUM growth and a consistent RoE of 20%.
Emkay Global also retained an ‘Add’ rating and revised its target to ₹1,000 from ₹925, while JM Financial stuck with its ‘Buy’ call and ₹1,000 target, although it cautioned that rich valuations and asset quality concerns may cap near-term upside.
Bulls vs Bears: A Divided Street
The stock’s sharp reversal has reignited debate among investors. Optimists cite Bajaj Finance’s proven track record of delivering strong growth and RoE across cycles, along with plans to add 14–16 million customers in FY26. They believe the current weakness is cyclical and manageable.
On the other hand, skeptics point to rising delinquencies in key segments, a breach in credit cost guidance, and steep valuations that offer little buffer for future earnings downgrades.
As the market digests these mixed signals, the next few quarters will be critical in determining whether Bajaj Finance can weather the storm — or if this marks the start of a longer correction in India’s most celebrated NBFC stock.
