Shares of Bajaj Finance are under pressure from a flurry of cautious to negative commentaries by leading global brokerages following its Q1FY26 results. While the company reported a profit beat and stable credit cost guidance, concerns around MSME stress, loan spread compression, and valuation have triggered multiple downgrades or conservative stances.
UBS has issued a Sell rating with a target price of ₹750, citing increasing stress in the MSME segment. It acknowledged that Q1 PAT came ahead of estimates but attributed the beat largely to higher other income. UBS noted that credit cost guidance of 1.85–1.95% was retained and said leadership stability remains with no near-term uncertainty; the successor is likely to be named closer to 2028.
Macquarie has also maintained an Underperform call with a target of ₹800, stating that while Q1 PAT was in line, lower provisioning was offset by weaker other income. The brokerage flagged rising SME segment stress and believes the stock has not yet priced in potential growth guidance cuts or higher credit costs. It called out the high valuation at 4.4x FY27E Price/Book which already implies 24–25% AUM growth.
Bernstein is bearish too, maintaining an Underperform call with a sharply lower target of ₹640. It noted that Q1 EPS grew 20% on the back of 25% AUM growth, but flagged credit costs remaining elevated at 202 bps vs guidance of 185–195 bps. RoA stood at 4.5%, in the middle of a recently revised lower range. Bernstein warned of profitability pressures due to declining loan spreads.
JPMorgan downgraded the stock to Neutral from Overweight, placing a target price of ₹970. The brokerage believes the company remains a top-quality NBFC, but added that rising mortgage attrition, unexpected MSME stress, and weak performance in 2/3-wheeler loans could lead to earnings downgrades. It expects the stock’s re-rating to pause for the next 1–2 quarters.
Goldman Sachs has a Neutral rating with a target of ₹969, highlighting that core PPoP grew 20% YoY but was offset by lower NII due to NIM pressure. Asset quality remains mixed with deterioration seen in MSME and car loan segments. Goldman said 4% of the MSME book is already restructured, and PCR fell 160 bps QoQ despite continued stress.
Citi is also Neutral, setting its target price at ₹983. The brokerage noted that core credit cost held steady at 2.02% despite visible stress in the MSME and two/three-wheeler loan segments. It said Bajaj Finance restructured ₹220 crore in MSME loans in Q1 and expects another ₹150 crore in Q2. However, Citi did see some positives in cost of funds, which improved by 20 bps QoQ to 7.79%.
CLSA remains positive, reiterating an Outperform call with a target of ₹1,150. The firm said NII and PPoP were in line, and the 3% PAT beat was led by lower credit costs. CLSA appreciated the 25% AUM growth amid a retail lending slowdown and expects a 25% PAT CAGR over the next two years.
Motilal Oswal has maintained a Buy rating, seeing up to 20% upside from current levels. The brokerage noted that the stress in the MSME book is being closely monitored and believes the steady guidance on credit costs and return ratios supports a positive outlook in the medium term. However, it too acknowledged that elevated valuations leave little room for disappointment.
Headline options:
-
Bajaj Finance share: UBS, Macquarie, Bernstein turn bearish; CLSA, Motilal Oswal see up to 20% upside
-
Buy or sell? Bajaj Finance faces mixed views as MSME stress, high valuations worry brokerages
-
Bajaj Finance: Brokerages split as CLSA, Motilal remain bullish but UBS, Macquarie flag credit cost risks
Disclaimer: The views and recommendations expressed in this article are those of the respective brokerages. They do not represent the views of this publication. Investors are advised to consult their financial advisor before making any investment decisions.
