Bajaj Finance down 2% on higher provisions; brokerages optimistic on growth

Nomura said Bajaj Finance (BAF) has voluntarily revised loss-given-default (LGD) floors across products, resulting in accelerated provisions of ₹1,400 crore in Q3FY26.

Brokerages were divided on Bajaj Finance after its 2025–26 (FY26) third-quarter (October–December/Q3) results, with a few raising targets on valuation comfort while others flagged concerns over the credit cost trajectory.

 

In Q3, Bajaj Finance reported a 6 per cent year-on-year (Y-o-Y) decline in consolidated net profit to ₹3,977.85 crore, compared with ₹4,246.54 crore in Q3 of 2024-25. Revenue from operations stood at ₹21,213.89 crore, versus ₹18,035.13 crore a year ago.

 

Bajaj Finance shares slipped 2 per cent during the session, hitting an intraday low of ₹943.45 per share on the BSE. The stock later recovered to settle marginally lower at ₹964. In comparison, the BSE Sensex ended slightly higher at 83,817.69.

 

 

Nomura Research said Bajaj Finance voluntarily revised loss-given-default (LGD) floors across products, leading to accelerated provisions of ₹1,400 crore in Q3. Excluding this, credit cost stood at 192 basis points (bps), lower than 205 bps in the previous quarter.

 

Management chose to permanently strengthen LGD assumptions rather than rely on temporary overlays, reflecting a conservative balance sheet approach. Nomura now expects credit cost of 197 bps in the fourth quarter (January–March/Q4) of FY26, with management hopeful of achieving 165–175 bps from 2026–27 (FY27) onwards. Guidance on this is expected in the next results call.

 

The brokerage said that micro, small and medium enterprise (MSME) stress has inched up, with Stage 2+3 assets rising 23 bps quarter-on-quarter and 100 bps Y-o-Y. This prompted management to slow MSME growth to 11 per cent Y-o-Y in Q3FY26. Growth in the segment, however, is expected to recover to the 20 per cent range over the next two to three quarters.

 

Nomura also highlighted intensifying competition, including increased participation by public-sector banks in segments such as personal loans, and elevated customer leverage, which has remained flat Y-o-Y but at high levels over recent years. Despite this, management sees room for market-share gains across most products.

 

Given higher credit cost assumptions, Nomura cut its FY26 net profit estimates by 3 per cent and raised long-term credit cost assumptions in its residual income model. It lowered its target price to ₹1,195, implying a December FY27 price-to-book (P/B) multiple of 4.7x and a one-year forward P/B of 4.5x. While incremental growth may come at varying credit costs, the brokerage remains optimistic about Bajaj Finance’s growth outlook.

 

Emkay Global Research said Bajaj Finance reported a softer-than-expected Q3, with weakness across growth, profitability and credit costs. While management remains confident of containing credit costs within the 1.65–1.75 per cent range, Emkay observed that changes to the expected credit loss (ECL) model will lead to an additional annual provisioning impact of ₹300–400 crore.

 

Factoring in the Q3 performance and management commentary, Emkay cut its FY26 earnings per share (EPS) estimates by 5 per cent and lowered its target price to ₹950, while keeping FY27 through 2027–28 (FY28) estimates broadly unchanged.

 

JM Financial Institutional Securities upgraded the stock to ‘buy’ from ‘add’ and raised its target price to ₹1,125. The brokerage said Bajaj Finance reported an in-line Q3. Elevated provisioning was driven by accelerated ECL charges following gains from a subsidiary stake sale, which pushed ECL/exposure at default to 2.04 per cent from 1.67 per cent in the second quarter (July–September/Q2).

 

JM Financial noted that the stock has corrected 12 per cent over the past four months and now trades at 3.7x FY28 book value per share, limiting downside given 22 per cent loan growth over FY26–28 and average return on asset (RoA) and return on equity (RoE) of 4.2 per cent and 21 per cent, respectively, in FY27–28. The brokerage maintained its FY27–28 EPS estimates.

 

Anand Rathi Research also has a ‘buy’ rating and raised its target price to ₹1,130. The brokerage said Bajaj Finance reported a healthy performance in Q3FY26. Adjusted for one-off or accelerated ECL provisioning, net profit would have been higher than estimates. Citing strong execution, a robust artificial intelligence platform, and the sharp correction in the stock price, Anand Rathi revised its target, valuing the stock at 4.5x FY28 consolidated book value, unchanged from its earlier multiple of September 2027 book value, for an expected RoA of 4 per cent and RoE of 20 per cent.