The quarter's performance underscores Bajaj Finance's ability to maintain healthy growth across its lending portfolio whilst preserving profitability. Net sales surged 21.27% year-on-year to ₹19,523.88 crores, driven by robust disbursement activity and a diversified product mix. The company's operating profit margin (excluding other income) stood at 70.28%, demonstrating resilient operational efficiency despite rising competitive pressures in the NBFC sector.
| Quarter | Revenue (₹ Cr) | QoQ Change | Net Profit (₹ Cr) | QoQ Change | PAT Margin |
|---|---|---|---|---|---|
| Jun'25 | 19,523.88 | +5.78% | 4,699.61 | +4.91% | 24.75% |
| Mar'25 | 18,456.85 | +2.34% | 4,479.57 | +5.49% | 25.05% |
| Dec'24 | 18,035.11 | +5.52% | 4,246.54 | +6.17% | 24.43% |
| Sep'24 | 17,091.22 | +6.16% | 3,999.73 | +2.24% | 23.98% |
| Jun'24 | 16,100.05 | +7.86% | 3,911.98 | +2.29% | 24.84% |
| Mar'24 | 14,926.21 | +5.38% | 3,824.53 | +5.10% | 26.12% |
| Dec'23 | 14,163.60 | — | 3,638.95 | — | 26.17% |
Financial Performance: Consistent Execution Drives Growth
Bajaj Finance's Q2 FY26 results reflect a well-executed strategy focused on portfolio diversification and margin management. On a quarter-on-quarter basis, net sales expanded by 5.78% from ₹18,456.85 crores in Q1 FY26 to ₹19,523.88 crores in Q2 FY26, whilst consolidated net profit grew by 4.91% to ₹4,699.61 crores. The year-on-year comparison reveals even stronger momentum, with revenue surging 21.27% and net profit climbing 20.13%, underscoring the company's ability to scale operations whilst maintaining profitability.
The company's profit before tax stood at ₹6,367.58 crores in Q2 FY26, up 13.31% quarter-on-quarter and 20.95% year-on-year. Interest expenses, a critical metric for NBFCs, rose to ₹6,917.68 crores, reflecting higher borrowing costs in line with the expanding loan book. However, the company's net interest margin remained healthy, supported by efficient liability management and a diversified funding mix. The PAT margin of 24.75% in Q2 FY26, though marginally lower than the 25.05% recorded in Q1 FY26, remains robust and indicative of strong pricing power.
Employee costs rose to ₹2,102.56 crores in Q2 FY26 from ₹1,943.19 crores in the previous quarter, reflecting investments in talent acquisition to support business expansion. The operating profit (PBDIT excluding other income) reached a record ₹13,532.15 crores, with the operating margin standing at 70.28%, the highest in recent quarters. This margin expansion signals operational excellence and the company's ability to leverage its scale advantages.
Capital Efficiency: Strong ROE Reflects Quality Execution
Bajaj Finance's return on equity (ROE) of 17.21% in Q2 FY26 stands as a testament to the company's efficient capital deployment and superior profitability. The five-year average ROE of 17.05% places Bajaj Finance amongst the best-in-class NBFCs, demonstrating consistent value creation for shareholders. Higher ROE indicates that the company generates substantial returns on the equity capital invested, a critical metric for evaluating financial performance in the lending sector.
The company's balance sheet reflects robust growth, with shareholder funds expanding to ₹96,692.87 crores as of March 2025, up from ₹76,695.35 crores in the previous year. Total investments stood at ₹34,440.84 crores, providing liquidity cushion and diversification benefits. Current assets reached ₹51,955.67 crores, ensuring adequate resources to meet operational requirements and growth objectives.
Capital Efficiency Highlight
ROE of 17.21% demonstrates Bajaj Finance's ability to generate superior returns on equity capital, reflecting efficient business operations and strong profitability. The company's five-year average ROE of 17.05% underscores sustained capital efficiency, positioning it amongst the sector's top performers.
However, the company's leverage metrics warrant attention. With an average net debt to equity ratio of 3.74, Bajaj Finance operates with significant leverage, typical for NBFCs but requiring careful monitoring in a rising interest rate environment. The company's ability to manage this leverage whilst maintaining healthy asset quality will be crucial for sustaining growth momentum.
Growth Trajectory: Sustained Momentum Across Key Metrics
Bajaj Finance has delivered impressive long-term growth, with sales expanding at a compound annual growth rate (CAGR) of 21.85% over the past five years. Operating profit (EBIT) has grown even faster at 24.20% CAGR, reflecting improving operational leverage and margin expansion. The company's annual revenue surged to ₹69,683 crores in FY25 from ₹54,973 crores in FY24, representing a 26.80% year-on-year increase.
Profit after tax for FY25 stood at ₹16,761 crores, up 16.05% from ₹14,443 crores in FY24. The company's ability to maintain double-digit profit growth whilst scaling operations highlights the strength of its business model and execution capabilities. The PAT margin of 24.10% in FY25, though marginally lower than the 26.30% recorded in FY24, remains healthy and reflects the competitive dynamics in the lending sector.
Long-Term Growth Excellence
Bajaj Finance has achieved a remarkable 21.85% CAGR in sales and 24.20% CAGR in operating profit over the past five years, demonstrating sustained business momentum. The company's revenue has grown from ₹26,373 crores in FY20 to ₹69,683 crores in FY25, reflecting a near-trebling of the business scale. This consistent growth trajectory, coupled with improving profitability metrics, underscores the company's market leadership and competitive advantages.
Valuation Analysis: Premium Pricing Raises Concerns
Bajaj Finance trades at a price-to-earnings (P/E) ratio of 38.76 times trailing twelve-month earnings, significantly above the industry average of 24 times. This premium valuation reflects investor confidence in the company's growth prospects and quality of earnings. However, the current valuation grade of "Very Expensive" suggests limited margin of safety for new investors. The stock's price-to-book value (P/BV) ratio of 6.98 times further underscores the premium, compared to the peer group average of approximately 2.0 times.
The company's PEG ratio of 2.40 indicates that investors are paying a substantial premium relative to expected growth, raising questions about future return potential. Whilst Bajaj Finance's superior ROE and growth track record justify some premium, the current valuation leaves little room for disappointment. The enterprise value to EBITDA multiple of 20.44 times and EV to sales multiple of 13.99 times both point to stretched valuations.
The stock's 52-week range of ₹645.31 to ₹1,102.45 provides context for the current price of ₹1,007.30. Trading 8.63% below its 52-week high, the stock has delivered substantial returns over various timeframes, with a one-year return of 48.67% and a five-year return of 136.12%. However, the recent 7.13% single-day decline highlights investor nervousness about valuations.
Peer Comparison: Leadership Position With Premium Pricing
Bajaj Finance's positioning within the NBFC sector reveals both its competitive strengths and valuation challenges. The company's ROE of 17.05% compares favourably against peers such as Shriram Finance (14.21%) and Cholamandalam Investment and Finance (14.45%), though it trails Muthoot Finance (20.32%). This superior capital efficiency justifies some valuation premium, but the extent of the premium remains debatable.
| Company | P/E (TTM) | P/BV | ROE (%) | Debt/Equity | Div Yield (%) |
|---|---|---|---|---|---|
| Bajaj Finance | 38.76 | 6.98 | 17.05 | 3.74 | 0.52 |
| Jio Financial | 119.23 | 1.55 | 1.31 | 0.03 | 0.17 |
| Shriram Finance | 17.77 | 2.73 | 14.21 | 4.15 | 1.25 |
| Cholaman. Inv. & Fn | 31.76 | 0.57 | 14.45 | 0.72 | 0.11 |
| Tata Capital | 37.61 | 0.38 | 0.00 | 0.00 | — |
| Muthoot Finance | 21.72 | 4.55 | 20.32 | 3.38 | 0.78 |
Whilst Bajaj Finance's P/E of 38.76 times appears elevated, it remains below Jio Financial's 119.23 times, though significantly above Shriram Finance's 17.77 times and Muthoot Finance's 21.72 times. The company's P/BV of 6.98 times stands out as the highest in the peer group, reflecting investor willingness to pay a substantial premium for Bajaj Finance's franchise value and growth potential. However, this premium valuation demands flawless execution and sustained growth to justify the price.
The dividend yield of 0.52% lags peers such as Shriram Finance (1.25%) and Muthoot Finance (0.78%), suggesting that investors are prioritising capital appreciation over income. With a market capitalisation of ₹6,27,226 crores, Bajaj Finance remains the largest player in the NBFC sector, commanding a leadership position that supports its premium valuation to some extent.
Stock Performance: Strong Long-Term Returns, Recent Volatility
Bajaj Finance has delivered exceptional returns to investors over the long term, with a ten-year return of 1,775.77%, far outpacing the Sensex's 221.39% gain over the same period. This translates to an alpha of 1,554.38 percentage points, highlighting the stock's wealth-creation potential. The five-year return of 136.12% also significantly exceeds the Sensex's 90.70% gain, demonstrating consistent outperformance.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Day | -7.13% | -0.48% | -6.65% |
| 1 Week | -4.63% | -0.39% | -4.24% |
| 1 Month | -1.53% | +0.77% | -2.30% |
| 3 Months | +14.79% | +3.14% | +11.65% |
| 6 Months | +16.66% | +4.63% | +12.03% |
| YTD | +47.58% | +6.39% | +41.19% |
| 1 Year | +48.67% | +4.58% | +44.09% |
| 3 Years | +42.96% | +34.53% | +8.43% |
| 5 Years | +136.12% | +90.70% | +45.42% |
| 10 Years | +1,775.77% | +221.39% | +1,554.38% |
However, recent performance reveals increased volatility. The stock has declined 7.13% in the past day and 4.63% over the past week, underperforming the Sensex significantly. The one-month return of -1.53% contrasts sharply with the Sensex's 0.77% gain, indicating near-term pressure. Nevertheless, the three-month and six-month returns of 14.79% and 16.66% respectively demonstrate resilience, with the stock outperforming the broader market by substantial margins.
The year-to-date return of 47.58% and one-year return of 48.67% highlight the stock's strong momentum through most of 2025. The stock has also outperformed its NBFC sector peers, delivering a one-year return of 48.67% compared to the sector's 18.66% return, an outperformance of 30.01 percentage points. This sector-leading performance reflects investor confidence in Bajaj Finance's business model and execution capabilities.
Technical Analysis: Bullish Trend Faces Near-Term Headwinds
From a technical perspective, Bajaj Finance remains in a bullish trend that began on September 4, 2025, at ₹934.85. The stock trades above its 50-day moving average of ₹1,009.54 and 100-day moving average of ₹959.98, indicating medium-term strength. However, the current price of ₹1,007.30 sits below the 5-day, 20-day, and 50-day moving averages, suggesting near-term weakness.
Technical indicators present a mixed picture. The MACD remains bullish on both weekly and monthly charts, whilst the RSI shows no clear signal. Bollinger Bands indicate a bullish stance, and the KST indicator confirms bullish momentum. However, the Dow Theory suggests a mildly bearish outlook, and the on-balance volume (OBV) shows no clear trend, reflecting uncertainty amongst market participants.
Technical Caution
Whilst the overall technical trend remains bullish, the stock's position below key short-term moving averages and the sharp 7.13% decline signal near-term consolidation or correction risk. Immediate support lies at the 52-week low of ₹645.31, whilst resistance is evident at the 20-day moving average of ₹1,061.54. Investors should monitor these levels closely for trend confirmation.
The stock's 52-week high of ₹1,102.45 represents a 9.44% upside from current levels, providing a near-term target for bulls. Conversely, the 52-week low of ₹645.31 sits 35.92% below the current price, offering a reference point for worst-case scenarios. The stock's beta of 1.00 indicates it generally moves in line with the broader market, classified as a medium-beta stock.
Investment Thesis: Quality Franchise, Valuation Hurdle
Bajaj Finance's investment case rests on several pillars: exceptional long-term growth trajectory, superior capital efficiency with an ROE of 17.21%, market leadership in the NBFC sector, and consistent financial performance. The company has demonstrated its ability to scale operations whilst maintaining profitability, with sales growing at 21.85% CAGR and operating profit expanding at 24.20% CAGR over the past five years. The quality grade of "Excellent" reflects the company's robust fundamentals and track record.
However, the valuation challenge cannot be ignored. With a P/E of 38.76 times and a PEG ratio of 2.40, the stock trades at a significant premium to both its peers and historical averages. The "Very Expensive" valuation grade suggests limited margin of safety, making the stock vulnerable to any disappointment in earnings growth or deterioration in asset quality. The high leverage ratio of 3.74 times net debt to equity also warrants monitoring, particularly in a rising interest rate environment.
"Bajaj Finance exemplifies the classic dilemma: an excellent business trading at a price that leaves little room for error, demanding near-perfect execution to justify current valuations."
Key Strengths & Risk Factors
KEY STRENGTHS
- Market Leadership: Largest NBFC with ₹6.27 lakh crore market capitalisation and dominant sector position
- Superior ROE: Return on equity of 17.21% demonstrates efficient capital deployment and strong profitability
- Consistent Growth: Five-year sales CAGR of 21.85% and operating profit CAGR of 24.20% reflect sustained momentum
- Excellent Quality Grade: Long-term financial performance earns "Excellent" quality rating
- Strong Institutional Support: Institutional holdings of 36.44% indicate confidence from sophisticated investors
- Diversified Portfolio: Broad product mix across consumer durables, two-wheelers, SME lending, and digital finance
- Operational Efficiency: Operating margin of 70.28% demonstrates scale advantages and cost management
KEY CONCERNS
- Stretched Valuation: P/E of 38.76x and P/BV of 6.98x indicate "Very Expensive" pricing with limited margin of safety
- High PEG Ratio: PEG of 2.40 suggests premium pricing relative to growth prospects
- Elevated Leverage: Net debt to equity of 3.74 times requires careful monitoring in rising rate environment
- Margin Pressure: PAT margin declined from 26.12% in Mar'24 to 24.75% in Jun'25, indicating competitive pressures
- Low Dividend Yield: Yield of 0.52% offers limited income for investors seeking regular returns
- Execution Risk: Premium valuation demands flawless execution with little room for disappointment
- Recent Volatility: Sharp 7.13% single-day decline highlights sensitivity to valuation concerns
Outlook: What to Watch
POSITIVE CATALYSTS
- Sustained AUM growth above 20% annually
- Maintenance of ROE above 17% levels
- Further operating margin expansion
- Successful digital transformation initiatives
- Stable asset quality metrics
RED FLAGS TO MONITOR
- Deterioration in asset quality or rising NPAs
- Further margin compression below 24%
- Slower-than-expected loan book growth
- Rising funding costs impacting profitability
- Increased competitive intensity in key segments
The Verdict: Quality at a Price
Score: 78/100
For Fresh Investors: Consider accumulating on dips towards ₹950-₹975 levels. The current valuation of 38.76 times earnings offers limited margin of safety for immediate entry. Wait for better entry points or deploy capital in tranches to average costs.
For Existing Holders: Hold your positions with confidence. The company's excellent fundamentals, market leadership, and consistent execution justify continued ownership despite premium valuations. Consider booking partial profits above ₹1,100 to rebalance portfolio allocation.
Fair Value Estimate: ₹950-₹1,000 per share (current price at upper end of fair value range)
Rationale: Bajaj Finance exemplifies a high-quality business with superior fundamentals, consistent growth, and market leadership. The ROE of 17.21%, five-year sales CAGR of 21.85%, and "Excellent" quality grade underscore the company's competitive advantages. However, the "Very Expensive" valuation with a P/E of 38.76 times and PEG ratio of 2.40 limits immediate upside potential. The BUY rating reflects confidence in the long-term franchise value, but investors should be selective about entry points. The recent 7.13% decline may present better accumulation opportunities for patient investors willing to look beyond near-term volatility.
Note— ROCE = (EBIT - Other income) / (Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results. Investments in equity markets carry inherent risks, including the potential loss of principal. The views expressed herein are based on information available as of the publication date and are subject to change without notice.
