Bajaj Finance Gets A 'Hold' Rating From Nirmal Bang After Its Q2 Results, Here's Why

Nirmal Bang Report

Bajaj Finance Ltd.'s Q2 FY25 net interest income was largely in line with our expectations, deviation from pre-provision operating profit/PAT versus estimates stood at -4%/-5%.

AUM grew 29% YoY to Rs 3,739 billion; we expect a growth of 28% in FY25E as the company pivots towards secured lending. Expect net interest margin to be stable in H2 as the cost of borrowing has peaked out.

Higher loan loss provisions in the quarter were a dampener; FY25 credit cost guidance has been revised upwards.

We trim our FY25E/FY26E PAT estimates factoring in higher credit costs. Roll forward to Sep-26E adjusted book value with a cut in multiple to 3.4 times (versus four times earlier), resulting in a target price of Rs 7,200. 

Bajaj Finance has seen a large shift in business mix, growth outlook and profitability metrics, hence our valuation is at a significant discount to the five-year average price/adjusted book value of ~six times. Maintain Hold.

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