Bajaj Finance, Nifty's 2025 topper, faces Rs 38,000 crore reality check. What should investors do?
Bajaj Finance
came to a brutal end on Friday as the year's top-performing
Nifty stock
crashed over 6%, wiping out Rs 38,000 crore in market value after brokerages sounded alarm bells over rising
credit costs
and growth concerns despite a seemingly robust Q1 performance.
The NBFC giant, which had delivered a stellar 32% year-to-date return to claim the crown as 2025's best Nifty performer, tumbled below the psychological Rs 900 mark to hit lows of Rs 897.65 on the BSE as investors grappled with a harsh reality check on
asset quality
deterioration.
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The selloff erupted despite Bajaj Finance posting a strong 22% year-on-year growth in standalone profit after tax at Rs 4,133 crore during Q1FY26, supported by robust 24% YoY AUM growth and an impressive customer addition of 4.7 million new customers with 13.5 million new loans booked.
But beneath the headline numbers lurked troubling signs that sent shockwaves through the investment community.
Credit Cost Reality Bites
The most damaging revelation was credit costs surging to 2.02% during Q1FY26, significantly above the company's guided range of 1.85-1.95%, largely driven by stress in the MSME portfolio and two and three-wheeler segments.
UBS delivered the harshest verdict, slashing its rating to 'Sell' with a target price of Rs 750. "MSME segment (12% of book) seeing increased stress," UBS noted, highlighting the vulnerability in a key growth driver.
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Bajaj Finance Q1 Results: PAT grows 22% YoY to Rs 4,765 crore, NII jumps 22%
Bernstein was equally pessimistic, maintaining its underperform rating with a Rs 640 target price, citing "still elevated credit costs (202 bps vs guidance of 185-195 bps)" that resulted in a return on assets of 4.5%, right in the middle of the company's recently reduced target RoA range of 4.3-4.7%.
JPMorgan delivered perhaps the most stinging assessment, downgrading the stock to Neutral from Overweight with a Rs 970 target price. While acknowledging Bajaj Finance "remains best quality NBFC with rare combination of high growth & quality," JPM warned that "a pick-up in mortgage attrition, weakness in MSME AQ & continued weakness in 2/3W loan quality suggest possibility of negative revisions" to estimates.
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Bajaj Finance shares slide 6% after Q1 show fails to cheer D-Street
Succession Uncertainty Adds to Woes
Adding to investor anxiety, UBS highlighted that the "successor to Rajeev Jain will be announced only closer to the end of his tenure, clearing any near-term uncertainty." Jefferies provided some clarity, noting that "Rajeev will submit a report on succession to the board in 6 months, but plan to keep it internal till later."
Macquarie, maintaining its underperform rating with an ₹800 target price, delivered a scathing assessment: "Shares not factoring decline in growth guidance, higher credit costs." The brokerage noted that "stress in the SME segment results in high credit costs" and highlighted that the stock trades at a premium 4.4x FY27E P/B multiple.
Prabhudas Lilladher maintained its cautious stance with a Hold rating and ₹900 target price, warning that "valuation continues to be rich (trading at 1-year forward of P/ABV of 4.6x)." The brokerage expects "a moderation in FY26, factoring a healthy trend in early-stage delinquencies."
The NBFC's management has, however, maintained its medium-term growth guidance, while indicating a slowdown in the MSME and auto segments (winding down the captive book, which is seeing elevated stress).
The company maintained its full-year credit cost guidance and expects lower credit costs in H2FY26, with management expressing confidence about seeing "a further ~5-10bps expansion on account of a rate cut by end-FY26."
Some Brokerages Hold Faith
Not all analysts turned bearish. Jefferies maintained its Buy rating, rolling forward its price target to ₹1,100 from ₹1,044. "We trim earnings estimates for FY26-28 by 1-2% to factor lower AUM growth and higher credit costs. Still, we see a healthy growth of 23% in AUMs over FY25-28, earnings CAGR of 23% and ROE of 20%," Jefferies noted.
Emkay Global
also maintained its Add rating with a revised target price of ₹1,000, up from ₹925 earlier, "implying FY27E standalone P/B of 5x."
JM Financial
kept its Buy rating with a ₹1,000 target price, though acknowledged that "near-term concerns around growth/asset quality and rich valuations might limit upside."
The dramatic reversal in Bajaj Finance's fortunes presents investors with a classic dilemma: is this a temporary setback in a growth story or the beginning of a more serious deterioration?
The bulls point to the company's track record of "sector-leading growth/RoE on cross-cycle basis" and management's confidence in containing credit costs within the guided range. The company's plan to add 14-16 million new customers in FY26 suggests growth momentum remains intact.
However, the bears highlight mounting stress in key segments like MSME and two/three-wheelers, credit costs running above guidance, and rich valuations that leave little room for disappointment.
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