Bajaj Finance Maintains Neutral Rating, Target Price at Rs 1000: Motilal Oswal

Bajaj Finance Reports Strong 4QFY26 Results, Guides for 22-24% AUM Growth in FY27

Bajaj Finance, a leading non-banking financial company in India, has reported its 4QFY26 results, which show a strong growth in key financial metrics. The company's profit after tax (PAT) grew by 22% year-over-year (YoY) to approximately INR55.5 billion, which is in line with market expectations. For the full fiscal year 2026, Bajaj Finance's PAT grew by 17% YoY to approximately INR193 billion.

The company's non-interest income stood at approximately INR24.3 billion, up 15% YoY, while its operating expenses (opex) grew by 22% YoY to approximately INR48 billion, which is also in line with market expectations. The provision for probable losses (PPoP) stood at INR94 billion, up 18% YoY, and for the full fiscal year 2026, PPoP grew by 18% YoY to approximately INR355 billion.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

In terms of credit costs, Bajaj Finance reported a decline in annualized credit costs in 4Q to approximately 1.6%, which is lower than the previous quarter (PQ) of 1.9% excluding accelerated ECL provisions and the previous year (PY) of 2.3%.

Looking ahead, Bajaj Finance has guided for 22-24% asset under management (AUM) growth in FY27, driven by a steadily expanding customer base of approximately 15-17 million additions, along with continued investments in strengthening distribution and deepening penetration. The company expects growth to be driven by emerging segments, including gold loans, where rapid branch expansion is likely to support scale-up. Further momentum is expected from tractor and CV financing, while low market share across key portfolio segments will provide significant headroom for further growth.

Valuation and Outlook

The stock trades at 4.2x FY27E price-to-book value (P/BV) and approximately 23x price-to-earnings (P/E). Despite a strong PAT compound annual growth rate (CAGR) of approximately 27% over FY26-FY28E and return on assets (RoA) and return on equity (RoE) of 4.1% and 21% in FY28E, respectively, we see limited near-term upside catalysts in the absence of immediate triggers for a meaningful re-rating. Therefore, we maintain our Neutral rating on the stock with a target price of INR1,000, premised on 3.8x FY28E book value per share (BVPS).

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline