Bajaj Finance Q4: brokerages see up to 30% upside

Stock reaction after results

Bajaj Finance shares gained as investors responded to the company’s March-quarter (Q4) update and a broadly supportive set of brokerage notes. The stock rose as much as 4.2% after the results, and another market update also described an intraday move of about 5% during early trading. The moves stood out against a generally weak broader market in one of the reports.

The immediate drivers highlighted by analysts were improving asset quality, a better credit cost trajectory, and continued momentum in assets under management (AUM). While some brokerages noted a marginal miss on select earnings metrics, the overall narrative remained that Bajaj Finance’s growth engine is intact.

Key Q4 numbers investors tracked

The company reported a year-on-year increase in Q4 net profit, although different reports cited different standalone profit numbers for the quarter. One update said net profit rose 22% YoY to Rs 5,553 crore, while another said standalone net profit rose 23% YoY to Rs 4,839.5 crore. Alongside profits, business volumes remained a core focus for market participants.

AUM crossed Rs 5 lakh crore (Rs 500,000 crore), rising 22% YoY, with quarterly AUM addition of Rs 25,498 crore. Loan growth remained strong, with 12.89 million loans booked in the quarter and the customer franchise expanding 17% to 119.33 million.

Credit costs improve, supporting the earnings outlook

A major support for the post-results tone was the improvement in credit costs. The annualised credit cost improved to 1.65% in the March quarter from 2.17% a year earlier, signalling better collections and portfolio performance. Reuters also noted that credit costs are expected to improve further to 1.45%-1.60% in the current fiscal year.

Brokerages linked the easing provisions to improving asset quality and lower bad-loan formation. JPMorgan, in one of the notes cited, pointed to healthy asset quality and benign early delinquency trends despite external disruptions.

Management guidance: growth and credit cost bands

Management commentary and guidance featured prominently in broker reactions. Guidance cited in the notes included AUM growth of 22%-24% for FY27 and a net credit cost outlook of 145-160 basis points. Another brokerage note highlighted management guidance of a 15-30 basis points decline in credit costs in FY27.

A separate update also said the company revised its AUM growth expectation to 22%-23% from an earlier 24%-25%, citing an increase in non-performing loans linked to small and medium enterprise lending and a weaker outlook for the housing finance division. These points were presented as part of the firm’s risk management actions in MSME lending.

Brokerages: most stay constructive, targets remain elevated

Several global and domestic brokerages maintained buy or equivalent ratings after the Q4 results. HSBC, Nomura and Jefferies maintained ‘buy’ calls with target prices of Rs 1,100, Rs 1,140 and Rs 1,210 per share, respectively. JPMorgan also stayed positive in one note with an ‘overweight’ rating and a target price of Rs 1,080.

Jefferies said lower credit costs and better fee income supported earnings, while AUM growth remained strong at 22%. Morgan Stanley maintained its overweight rating and raised its target price to Rs 1,120 from Rs 1,090, pointing to a sharp improvement in credit costs.

Where the Street is more cautious

Not all brokerages were fully aligned on near-term upside. Macquarie retained an underperform rating with a target price of Rs 860, citing concerns around valuations and the sustainability of elevated return ratios. Another set of notes also flagged stress pockets in MSME and two-wheeler and three-wheeler loan segments.

Separately, another brokerage roundup mentioned that JPMorgan downgraded the stock to ‘Neutral’ from ‘Overweight’ with a price target of Rs 970, even while calling Bajaj Finance a “best quality NBFC” and pointing to emerging risks.

What analysts are saying about growth visibility

Despite the mixed views, the dominant theme across positive notes was visibility on compounding. One brokerage expects a robust earnings growth trajectory and projected a 26.5% EPS CAGR over FY26-28. JM Financial reiterated its Buy rating (one note cited a target of Rs 1,080, while another cited a revised target of Rs 1,060, and a later note mentioned Rs 1,000), emphasising franchise scale, sustained AUM growth of over 20%, and sector-leading return ratios.

JM Financial also pointed to structurally lower credit cost guidance and a rising share of secured lending as supportive for medium-term stability. It added that AI-led operating efficiencies and provisioning buffers could improve resilience, based on the brokerage’s assessment.

Capital position and balance sheet comfort

The company’s capital position was another comfort point mentioned in the reports. Bajaj Finance reported a capital adequacy ratio of 21.55%, including Tier-I capital at 20.67%. Brokerages read this as sufficient headroom to fund growth while navigating asset quality cycles.

Reuters also noted tighter underwriting and strengthening asset quality trends over the last two to three quarters, as cited by CLSA. It added that the reaffirmation of the long-term profit forecast of 23%-24% suggested growth was not expected to decline.

Key data snapshot

Brokerage targets and ratings mentioned

Market impact and what to watch next

For investors, the immediate market impact has been a tug-of-war between improved credit costs and questions around valuation and stress in select portfolios such as MSME and legacy two-wheeler and three-wheeler exposures. The Q4 data points on AUM growth, customer additions and the step-down in credit costs helped the stock outperform on the day.

The next set of signposts will be whether the guided AUM growth band and credit cost trajectory are delivered, and how quickly stress pockets normalise. Brokerages are also tracking underwriting tightness, early delinquency trends, and the mix shift towards secured lending that could influence yields and return ratios.