NBFC Delivers Strong Profit, Loan Book and Asset Quality Growth, While Brokerages Remain Divided Over Valuation and Future Upside

Shares of Bajaj Finance Ltd. surged to a fresh 52-week high on Friday after the country's largest retail-focused non-banking financial company (NBFC) reported an impressive set of first-quarter earnings for FY27. Strong growth across key financial parameters—including profit, loan disbursements, assets under management (AUM), and asset quality—strengthened investor confidence, pushing the stock more than 6% higher during intraday trade.

The stock touched an intraday high of ₹1,122 on the National Stock Exchange (NSE), extending its strong rally in 2026. Investors responded positively to the company's consistent execution, healthy credit demand, and improving operational efficiency, even as analysts remained divided over whether the current valuation leaves room for further upside.

Strong Rally Continues

Bajaj Finance has remained one of the best-performing financial stocks despite broader market weakness.

The stock has gained:

• Around 15% in calendar year 2026

• Approximately 27% over the last 12 months

In comparison, the benchmark Nifty 50 has declined around 7% this year and remains marginally lower over the past year.

The consistent outperformance reflects investors' confidence in Bajaj Finance's diversified lending franchise, strong execution capabilities and resilient earnings growth.

Robust Earnings Drive Investor Optimism

The company's financial performance for the quarter ended June 30, 2026, exceeded market expectations across most operational metrics.

Q1 FY27 Financial Performance

The strong growth was supported by healthy retail lending demand, rising customer acquisition, improved cross-selling opportunities and sustained momentum across multiple lending categories.

Loan Book Crosses a Major Milestone

One of the key highlights of the quarter was the continued expansion of Bajaj Finance's loan portfolio.

The company's Assets Under Management (AUM) crossed the ₹4 trillion mark for the first time, growing 23% year-on-year.

The milestone underscores the company's ability to consistently scale its lending business while maintaining disciplined underwriting standards.

Growth remained broad-based across consumer finance, personal loans, SME lending, commercial lending and secured credit products.

Record Loan Bookings Reflect Healthy Demand

Customer demand remained robust during the quarter.

Bajaj Finance booked nearly 16 million new loans, representing a 19% increase compared to the same period last year.

The strong loan growth highlights continued demand from retail consumers despite evolving macroeconomic conditions.

Management indicated that credit demand remains healthy across urban and semi-urban markets, supported by improving consumer confidence and rising digital adoption.

Asset Quality Continues to Improve

Alongside strong growth, Bajaj Finance continued strengthening its asset quality.

As of June 30, 2026:

• Gross Non-Performing Assets (GNPA) improved to 1.20%, compared with 1.28% a year earlier.

• Net Non-Performing Assets (NNPA) declined to 0.49%, down from 0.63%.

The improvement reflects disciplined credit underwriting, effective collection mechanisms and a stable repayment environment.

Lower delinquencies also helped reduce provisioning requirements, supporting overall profitability.

Margin Strength Supports Earnings Growth

Apart from strong loan growth, Bajaj Finance continued to benefit from healthy net interest margins and improving operating leverage.

Net Interest Income (NII) increased 24% year-on-year to ₹11,495 crore, driven by expansion in the loan book and stable lending yields.

Non-interest income also grew 18%, reflecting higher fee income and stronger customer engagement across the company's expanding financial services ecosystem.

Together, these factors contributed to another quarter of robust earnings growth.

Brokerages Raise Earnings Estimates

The impressive quarterly performance prompted several brokerage firms to revise their earnings forecasts upward.

Most analysts acknowledged that Bajaj Finance continues to outperform expectations across nearly every operating metric.

However, opinions remain divided regarding the stock's valuation following its sharp rally.

360 ONE Capital Maintains 'Hold'

360 ONE Capital described the quarter as exceptionally strong but maintained its 'Hold' recommendation.

According to the brokerage:

• Demand remains healthy.

• Asset quality continues improving.

• Operating efficiency remains strong.

• Credit costs are moderating.

The brokerage raised its FY27 and FY28 earnings estimates after increasing AUM growth assumptions and lowering credit cost expectations.

It also increased its target price to ₹1,150 from ₹1,035.

However, it believes much of the positive outlook has already been priced into the stock.

Motilal Oswal Sees Structural Growth Opportunity

Motilal Oswal Financial Services (MOFSL) adopted a significantly more bullish view.

The brokerage believes Bajaj Finance has entered a phase of structurally higher earnings growth driven by multiple long-term growth engines.

According to MOFSL, the company's future growth will be supported by:

• Continued retail credit expansion.

• Improving operating margins.

• Lower credit costs.

• Digital lending platforms.

• Rapid growth in gold loans.

• New financial products.

The brokerage projects:

• PAT CAGR of around 30% between FY26 and FY28

• Return on Assets (RoA) of 4.2%

• Return on Equity (RoE) of 21.4% by FY28

It has retained its positive stance while raising the target price to ₹1,300, indicating approximately 23% upside from previous levels.

Emkay Global Remains Conservative

While recognising Bajaj Finance's strong operational performance, Emkay Global Financial Services continues to maintain a cautious stance.

The brokerage marginally increased its earnings estimates following the June-quarter results but reiterated its 'Reduce' recommendation.

Its revised target price stands at ₹1,050, reflecting concerns that the stock's premium valuation may limit future returns despite healthy business fundamentals.

Valuation Debate Takes Centre Stage

The latest results have shifted the discussion away from business performance towards valuation.

Most analysts agree that Bajaj Finance remains one of India's highest-quality financial companies.

The key difference lies in whether investors should continue paying a premium multiple for its consistent execution and long-term growth prospects.

Bullish analysts believe the company deserves premium valuations due to its superior profitability and scalable business model.

More cautious analysts argue that the stock's recent rally has already captured much of its future earnings potential.

Key Growth Drivers Going Forward

Investors will closely monitor several factors over the coming quarters:

• Growth in retail lending.

• Expansion in AUM.

• Asset quality trends.

• Credit cost trajectory.

• Digital platform growth.

• Gold loan business expansion.

• Interest rate environment.

• Regulatory developments affecting NBFCs.

Execution across these areas will largely determine whether Bajaj Finance can sustain its premium valuation.

Market Outlook

Bajaj Finance continues to reinforce its position as one of India's strongest financial institutions, delivering consistent growth across earnings, lending and asset quality despite an evolving macroeconomic environment. The June-quarter results demonstrate that the company remains well positioned to benefit from rising retail credit demand, digital financial services and expanding customer relationships.

While concerns over valuation have prompted mixed brokerage opinions, the company's operational performance continues to justify investor confidence. Going forward, sustained loan growth, stable margins, disciplined risk management and continued improvement in profitability will remain the key factors determining whether Bajaj Finance can extend its record-breaking rally and maintain its leadership within India's fast-growing NBFC sector.