Bajaj Finance reported strong earnings growth in the second quarter of FY27, with a decent rise in profitability and improvement in credit quality.
The non-banking financial company's consolidated net profit in Q2FY27 rose 29% to Rs 6,367 crore from Rs 4,948 crore in the year-ago period, led by lower credit cost and strong growth in net interest income and assets under management (AUM).
The company's net interest income (NII) increased 24% to Rs 13,335 crore from Rs 10,785 crore, year-on-year (YoY). Net total income grew 23% YoY to Rs 15,974 crore. However, net interest margin (NIM) fell 9 bps sequentially.
Assets under management during the September quarter grew 26% YoY to Rs 5.85 lakh crore. Its AUM saw in increase of Rs 37,680 crore during the quarter.
New loans booked rose 11% YoY to 13.45 million in the quarter, and its customer franchise grew 16% YoY to 128.85 million as of September 30, adding 4.42 million customers during the quarter.
Bajaj Finance's management raised FY27 AUM growth guidance to 26-27% while retaining its medium-term 23-25% corridor, with improved operational efficiency partly cushioning incremental margin pressure from higher rates.
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Bajaj Finance Q2 results largely met the Street estimates, with most brokerages maintaining their bullish view on the stock.
Should you buy, sell or hold Bajaj Finance shares after Q2 results?
Bajaj Finance delivered a strong quarter, supported by healthy growth, positive demand commentary and prudent risk management, 360 ONE Capital said.
The brokerage firm has revised AUM growth estimates upwards while lowering its fee income estimates, resulting in earnings estimates cut of 2% and 1% for FY27 and FY28, respectively. It has factored in capital infusion and warrant conversion over FY27-28, resulting in a higher book value but lowered estimated RoE of 20% versus 22% earlier. Accordingly, it has reduced target multiple to 4.2x FY28E P/BV from 4.4x earlier.
Following the recent correction in Bajaj Finance shares and the resulting improvement in risk-reward, 360 ONE Capital upgraded its rating on the stock to ‘Buy' from ‘Hold', while keeping the target price unchanged at Rs 1,150.
According to Nuvama Institutional Equities, the planned Rs 175 billion fundraise should support long-term growth for Bajaj Finance. It believes accelerating growth and contained credit costs shall help the company sustain healthy RoA, RoAUM and RoE of 4.1%, 4.3–4.5% and 21–22% over FY27–29E.
“We believe Bajaj Finance's diversified portfolio and proactive risk management position it well to sustain healthy growth and manage asset quality despite emerging macroeconomic headwinds while,” Nuvama said.
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It retained its ‘Buy' rating on Bajaj Finance shares with a target price of Rs 1,175, valuing the stock at 4.1 times its estimated September 2028 adjusted book value (ABV) and 21 times its estimated earnings per share (EPS), compared with 3.4 times ABV and 17 times EPS at the current market price.
Avinash Singh, Deputy Head of Research at Emkay Global Financial Services noted that Bajaj Finance's proposed Rs 175 billion capital raise, comprising Rs 117 billion QIP and Rs 58 billion preferential warrants to Bajaj Finserv, is primarily growth-led and aimed at strengthening balance-sheet resilience.
Factoring in the Q2 performance and capital raise, Emkay Global adjusts its estimates, resulting in ROE compressing by ~100-150 bps over FY27-29E.
It maintained a ‘Reduce' call on Bajaj Finance share, with September 2027 target price of Rs 1,050 apiece.
Meanwhile, regulatory proposals around insurance commissions and flexi/revolving loans remain key monitorables. Bajaj Finance is evaluating mitigation strategies and expects only a small portion of AUM and marginal profitability impact.
Bajaj Finance share price has declined 10% in three months and has gained over 5% in six months. The stock has dropped 11% in one year.
On Monday, Bajaj Finance share price ended 2.54% lower at Rs 957.00 apiece on the BSE.
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