The sharp decline in the stock came as investor sentiment weakened amid rising concerns over increasing non-performing loans, higher credit costs, and sustained pressure on margins.
On the asset quality front, loan losses and provisions increased 19% to Rs 2,269 crore in Q2FY26 from Rs 1,909 crore in Q2FY25. The annualised loan losses and provisions to average assets under finance for the quarter stood at 2.05%. As of September 30, 2025, Bajaj Finance’s Gross Non-Performing Assets (GNPA) stood at 1.24%, while Net NPA came in at 0.60%, up from 1.06% and 0.46%, respectively, a year earlier. The provisioning coverage ratio on stage 3 assets stood at 52%.
Also Read: Bajaj Finance shares plunge 7% on rising NPA concerns. Should you buy the dip?
What are experts saying?
Bernstein
The brokerage reiterated an Underperform rating on Bajaj Finance with a target price of Rs 640, a downside potential of 41% from current market levels. While acknowledging strong headline performance — with AUM up 24% and PAT up 23% at a time when large banks are struggling to reach double-digit growth — it flagged increasing pressure from scale and sustained high growth expectations. Unlike most banks and NBFCs that reported improving asset quality in Q2, Bajaj Finance saw a notable deterioration, with higher gross and net NPAs across most segments despite ongoing loan growth, the international brokerage added.
CLSA
CLSA maintained an Outperform rating on Bajaj Finance with a target price of Rs 1,200, noting that Q2FY26 was a solid quarter across most parameters, with key financial metrics largely in line with estimates. Asset under management (AUM) grew 24% year-on-year, led by faster growth in secured loans compared to SME and two-wheeler segments.Net interest margin (NIM) remained stable, while fee and other income were slightly stronger than expected. Asset quality was mixed, as credit costs rose 3 basis points quarter-on-quarter to 2%, driven by higher net slippages, though net 30+ day past due (dpd) formation improved to its best level in several quarters. Management maintained its full-year credit cost guidance at 1.85–1.95% but trimmed its loan growth outlook by 200 basis points to 22–23%.
Morgan Stanley
The global brokerage firm reiterated its Overweight rating with a target price of Rs 1,195, acknowledging that the reduction in FY26 AUM growth guidance and stable NIM could weigh on investor sentiment. However, the brokerage highlighted positives such as the likely decline in credit costs going forward and continued cost efficiencies. Morgan Stanley trimmed its EPS estimates but views any near-term stock weakness as an opportunity to accumulate.
Jefferies
Jefferies also retained its Buy call with a higher target price of Rs 1,270. It said Q2FY26 consolidated profit of Rs 49 billion (pre-minority) rose 23% year-on-year, marginally above estimates, supported by a stronger topline. AUM grew 24% YoY, and the festive season performance was encouraging, although management cut its loan growth guidance by 100 basis points to 22–23% due to weaker trends in SME and housing segments. While credit costs were elevated this quarter, Jefferies expects them to moderate as trends improve and forecasts a 23% profit CAGR over FY25–28.
HSBC
HSBC maintained a Buy rating on Bajaj Finance and raised its target price to Rs 1,200. The brokerage said Q2FY26 EPS was in line with its estimates, with stable return ratios (RoA and RoE) as improved cost efficiency offset higher credit costs. HSBC expects growth in AUM, better operating leverage, and normalization in credit costs to drive a 28% EPS CAGR over FY26–28. It also raised FY26–28 EPS estimates and its target valuation multiple to 5.4x FY27E BVPS.
Emkay Global
Emkay Global downgraded Bajaj Finance to Reduce from Add and cut its target price by 7% to Rs 1,000 (from Rs 1,075), trimming FY26–28 EPS estimates by about 5–6%. The revision reflects Q2FY26 trends and the company’s moderated outlook, including the reduction in FY26 growth guidance to 22–23% (from 23–24% earlier) due to rising competition in the mortgage segment (32% of AUM) and tighter risk management in MSME loans (12% of AUM). The brokerage also noted that credit costs are likely to remain toward the higher end of the guided 1.85–1.95% range. Given gradual growth moderation and competitive pressures on yields, Emkay expects Bajaj Finance’s valuation premium over peers to narrow.
Motilal Oswal
The domestic brokerage firm maintained a Neutral rating on Bajaj Finance with a target price of Rs 1,160, citing limited upside potential given rich valuations. The stock currently trades at 5x FY27E price-to-book and around 26x FY27E price-to-earnings. Despite projecting a healthy PAT CAGR of around 25% over FY25–28 and strong return ratios (RoA/RoE of 4.2%/22% in FY28E), the brokerage believes near-term triggers for valuation re-rating are lacking.
Bajaj Finance shares have surged 45% since the beginning of 2025.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)