The December 2025 quarter showcased Bajaj Housing Finance's operational resilience with interest income reaching ₹2,877.69 crores, up 5.19% sequentially and 18.17% year-on-year. This consistent growth trajectory reflects the company's expanding loan book and market penetration in India's housing finance sector. However, the market's muted response to these results underscores deeper valuation concerns, with the stock trading at a premium 31.63 times trailing twelve-month earnings compared to the sector average of approximately 13 times.
| Quarter | Interest Income (₹ Cr) | QoQ Change | Net Profit (₹ Cr) | QoQ Change | PAT Margin |
|---|---|---|---|---|---|
| Dec'25 | 2,877.69 | +5.19% | 664.89 | +3.41% | 23.10% |
| Sep'25 | 2,735.61 | +4.94% | 642.96 | +10.23% | 23.50% |
| Jun'25 | 2,606.86 | +4.33% | 583.30 | -0.58% | 22.38% |
| Mar'25 | 2,498.67 | +2.61% | 586.68 | +7.05% | 23.48% |
| Dec'24 | 2,435.16 | +1.56% | 548.02 | +0.44% | 22.50% |
| Sep'24 | 2,397.65 | +9.15% | 545.60 | +13.05% | 22.76% |
| Jun'24 | 2,196.69 | — | 482.61 | — | 21.97% |
Financial Performance: Steady Growth Amidst Margin Compression
Bajaj Housing Finance's Q3 FY26 results demonstrate the company's ability to maintain growth momentum despite challenging market conditions. Interest income of ₹2,877.69 crores represents the seventh consecutive quarter of sequential growth, with the company posting an impressive 18.17% year-on-year expansion. This robust top-line performance has been driven by aggressive loan book expansion and increasing market share in the competitive housing finance landscape.
However, profitability metrics reveal a more nuanced picture. The operating profit margin (excluding other income) contracted marginally to 91.15% from 91.47% in the previous quarter, whilst the PAT margin declined 40 basis points sequentially to 23.10%. This compression reflects rising interest costs, with interest expenses climbing to ₹1,733.51 crores in Q3 FY26, up 4.56% quarter-on-quarter. The company's operating profit to interest coverage ratio improved to 1.51 times, the highest in recent quarters, indicating enhanced operational efficiency despite margin pressures.
On an annual basis, FY25 witnessed stellar growth with net sales surging 25.70% to ₹9,575 crores and profit after tax climbing 24.91% to ₹2,162 crores. The company maintained a healthy PAT margin of 22.60% for the full year, demonstrating operational consistency. Employee costs rose to ₹483 crores in FY25, reflecting strategic investments in talent acquisition to support business expansion.
The ROE Conundrum: Capital Efficiency Lags Peers
A critical concern for Bajaj Housing Finance remains its below-par return on equity, which stands at 11.15% as of the latest quarter, with a five-year average of 10.49%. This metric is particularly troubling for a financial services company, as ROE directly reflects how efficiently the firm generates returns on shareholder capital. Higher ROE indicates superior capital efficiency and profitability, and Bajaj Housing's performance in this area lags significantly behind several peers in the housing finance sector.
The company's balance sheet reveals a highly leveraged structure with current liabilities ballooning to ₹82,981.69 crores in FY25, up from ₹69,682.53 crores in the previous year. This aggressive growth in liabilities, whilst supporting loan book expansion, has resulted in an average net debt to equity ratio of 4.44 times—amongst the highest in the peer group. Shareholder funds stood at ₹19,946.80 crores as of March 2025, reflecting strong equity base growth following the company's successful initial public offering.
Capital Efficiency Challenge
With ROE at 11.15%, Bajaj Housing Finance trails peers like Aptus Value Housing (16.20%), Can Fin Homes (17.03%), and Aadhar Housing Finance (14.33%). This weaker capital efficiency raises questions about the sustainability of the company's premium valuation, particularly when combined with aggressive leverage ratios. Investors should monitor whether management initiatives to improve asset yields and operational efficiency can drive ROE expansion in coming quarters.
Asset Quality and Growth Balance: Navigating the Expansion Phase
Bajaj Housing Finance's aggressive growth strategy is evident in its cash flow dynamics. The company reported negative operating cash flow of ₹17,074 crores in FY25, driven by a massive ₹19,436 crores increase in working capital deployment—primarily reflecting loan book expansion. This was funded through robust cash flow from financing activities totalling ₹17,870 crores, indicating strong access to capital markets and lender confidence.
The company's asset base has expanded dramatically, with fixed assets reaching ₹140.57 crores and current assets standing at ₹2,980.44 crores as of March 2025. This infrastructure build-out supports the company's ambitions to scale operations and capture market share in India's underpenetrated housing finance market. However, the sustainability of this growth trajectory depends critically on maintaining asset quality and managing funding costs effectively.
Five-Year Growth Trajectory
Bajaj Housing Finance has delivered exceptional long-term growth with sales expanding at a 30.00% compound annual growth rate over five years and EBIT growing at 27.65% annually. This consistent performance underscores the company's market positioning and execution capabilities, though investors must weigh this against current valuation premiums and profitability challenges.
Peer Comparison: Premium Valuation Without Commensurate Returns
A comparative analysis with housing finance peers reveals Bajaj Housing Finance's valuation disconnect. The company trades at 31.63 times trailing earnings and 3.53 times book value—multiples that dwarf industry averages and most direct competitors. This premium appears unjustified when juxtaposed against its 10.49% average ROE, which ranks amongst the lowest in the peer group.
| Company | P/E (TTM) | P/BV | ROE (%) | Debt to Equity | Div Yield (%) |
|---|---|---|---|---|---|
| Bajaj Housing | 31.63 | 3.53 | 10.49 | 4.44 | — |
| LIC Housing Finance | 4.98 | 0.71 | 12.36 | 7.08 | 2.01 |
| PNB Housing | 9.60 | 1.17 | 9.73 | 3.63 | 0.62 |
| Aadhar Housing Finance | 19.91 | 3.01 | 14.33 | 2.55 | — |
| Aptus Value Housing | 15.85 | 2.87 | 16.20 | 1.57 | 1.68 |
| Can Fin Homes | 12.56 | 2.24 | 17.03 | 6.61 | 1.41 |
LIC Housing Finance, despite carrying higher leverage (7.08x debt-to-equity), trades at just 4.98 times earnings whilst delivering superior ROE of 12.36%. Similarly, Aptus Value Housing and Can Fin Homes command P/E multiples of 15.85x and 12.56x respectively, whilst generating significantly higher returns on equity exceeding 16%. Bajaj Housing's valuation premium appears predicated on its Bajaj brand parentage and growth potential rather than current financial performance metrics.
Valuation Analysis: Expensive Territory Despite Recent Correction
At the current price of ₹89.63, Bajaj Housing Finance has corrected 34.58% from its 52-week high of ₹137.00, yet valuation metrics remain stretched. The stock's P/E ratio of 32 times significantly exceeds the industry average of 22 times, whilst its EV/EBITDA multiple of 17.95 times reflects market expectations of sustained high growth. The price-to-book ratio of 3.53 times is particularly concerning given the company's modest ROE, as this implies investors are paying a substantial premium for each rupee of book value despite below-average returns.
The company's valuation grade has oscillated between "Expensive" and "Very Expensive" over recent months, currently settling at "Expensive" as of the latest assessment. This classification reflects the disconnect between current multiples and fundamental performance. With institutional holdings at a mere 2.33%, the stock lacks strong institutional support, which may contribute to elevated volatility and limited buying interest at current levels.
Shareholding Dynamics: Promoter Stake Dilution Continues
The shareholding pattern reveals notable shifts in ownership structure. Promoter holding declined to 86.70% in December 2025 from 88.70% in the previous quarter, marking a 200 basis point reduction. This dilution follows the company's listing trajectory and represents strategic stake monetisation by parent Bajaj Finance Limited. Since March 2025, promoter holdings have decreased from 88.75% to current levels, reflecting the ongoing process of broad-basing the shareholder base.
| Category | Dec'25 | Sep'25 | Jun'25 | Mar'25 | QoQ Change |
|---|---|---|---|---|---|
| Promoter | 86.70% | 88.70% | 88.70% | 88.75% | -2.00% |
| FII | 0.94% | 0.86% | 0.93% | 1.01% | +0.08% |
| Mutual Funds | 0.63% | 0.33% | 0.32% | 0.45% | +0.30% |
| Insurance | 0.43% | 0.19% | 0.25% | 0.25% | +0.24% |
| Other DII | 0.33% | 0.07% | 0.14% | 0.14% | +0.26% |
| Non-Institutional | 10.97% | 9.86% | 9.66% | 9.41% | +1.11% |
Institutional participation remains anaemic, with mutual funds holding just 0.63%, FIIs at 0.94%, and insurance companies at 0.43%. However, the December quarter witnessed encouraging trends with mutual fund holdings nearly doubling from 0.33% to 0.63%, and insurance holdings jumping from 0.19% to 0.43%. These increases suggest growing institutional interest, albeit from extremely low bases. The non-institutional category expanded to 10.97%, indicating retail investor accumulation during the price correction.
Stock Performance: Severe Underperformance Across Timeframes
Bajaj Housing Finance's stock performance has been deeply disappointing for investors across virtually all timeframes. The shares have declined 22.53% over the past year, dramatically underperforming the Sensex's 5.37% gain and generating negative alpha of 27.90 percentage points. This underperformance becomes even more pronounced when compared to the housing finance sector's robust 17.13% return over the same period, resulting in a staggering 39.66 percentage point lag versus sector peers.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | +1.43% | +0.16% | +1.27% |
| 1 Month | -7.22% | -4.78% | -2.44% |
| 3 Months | -18.70% | -2.71% | -15.99% |
| 6 Months | -20.61% | +1.32% | -21.93% |
| YTD | -5.00% | -4.17% | -0.83% |
| 1 Year | -22.53% | +5.37% | -27.90% |
The technical picture remains decidedly bearish, with the stock trading below all major moving averages—5-day (₹89.32), 20-day (₹92.25), 50-day (₹95.74), 100-day (₹103.13), and 200-day (₹111.62). The overall technical trend shifted to "Bearish" on November 18, 2025, at ₹106.60, and has remained under pressure since. Multiple technical indicators including MACD, moving averages, KST, and On-Balance Volume all flash bearish signals, suggesting limited near-term upside potential.
Investment Thesis: Quality Growth at Unjustified Premium
Bajaj Housing Finance presents a paradox for investors—solid operational fundamentals undermined by excessive valuation. The company's quality assessment stands at "Average," reflecting decent long-term growth (30.00% sales CAGR, 27.65% EBIT CAGR) but hampered by weak ROE and high leverage. The financial trend remains "Positive" based on Q3 FY26's record performance across multiple metrics including highest-ever quarterly net sales, operating profit, and PAT.
However, this positive operational momentum clashes with bearish technical trends and stretched valuation multiples. The company's proprietary Mojo Score stands at 40 out of 100, firmly in "SELL" territory, reflecting concerns over expensive valuation despite average quality metrics. The score breakdown reveals mixed signals—positive quarterly financial trends offset by bearish technicals and fair but not compelling valuation.
Key Strengths & Risk Factors
✅ KEY STRENGTHS
- Consistent Growth: Seven consecutive quarters of sequential interest income growth with 18.17% YoY expansion in Q3 FY26
- Strong Parentage: Backing of Bajaj Finance provides brand credibility, distribution network, and funding access
- Healthy Margins: PAT margin of 23.10% demonstrates pricing power and operational efficiency
- Improving Coverage: Operating profit to interest coverage at record 1.51 times indicates strengthening debt servicing ability
- Market Leadership: Largest market capitalisation (₹73,999 crores) in housing finance peer group
- Long-term Track Record: Five-year sales CAGR of 30.00% and EBIT CAGR of 27.65% demonstrate execution capabilities
- Growing Institutional Interest: Mutual fund and insurance holdings nearly doubled in Q3, signalling improving sentiment
⚠️ KEY CONCERNS
- Weak ROE: 11.15% return on equity significantly trails peers like Can Fin Homes (17.03%) and Aptus (16.20%)
- Expensive Valuation: P/E of 31.63x and P/BV of 3.53x represent substantial premiums to sector averages without commensurate returns
- High Leverage: Debt-to-equity of 4.44x amongst highest in peer group, increasing financial risk
- Margin Compression: PAT margin declined 40 bps QoQ to 23.10%, indicating rising cost pressures
- Severe Underperformance: Stock down 22.53% in one year versus sector gain of 17.13%, creating 39.66% performance gap
- Low Institutional Holdings: Just 2.33% institutional ownership limits buying support and liquidity
- Bearish Technicals: Trading below all major moving averages with multiple indicators flashing sell signals
Outlook: What to Watch
POSITIVE CATALYSTS
- ROE Improvement: Management initiatives to enhance asset yields and reduce cost-to-income ratio could drive capital efficiency higher
- Valuation Correction: Further price decline toward ₹75-80 range would improve risk-reward and attract value buyers
- Institutional Accumulation: Continued increase in FII/MF holdings from current low base could provide price support
- Margin Stabilisation: Successful management of funding costs and asset pricing could arrest PAT margin compression
- Technical Reversal: Break above ₹92.25 (20 DMA) with volume could signal trend change
RED FLAGS
- Further Margin Decline: PAT margin falling below 22% would signal deteriorating profitability and pricing power erosion
- Asset Quality Stress: Any signs of rising delinquencies or provisioning requirements could trigger sharp de-rating
- Promoter Stake Dilution: Accelerated stake sale by Bajaj Finance beyond current pace may signal lack of confidence
- Institutional Selling: Reversal of recent buying trend by MFs/Insurance would remove key price support
- Technical Breakdown: Sustained trading below ₹87.15 (52-week low) could trigger stop-loss selling and fresh downside
The Verdict: Quality Business, Wrong Price
Score: 40/100
For Fresh Investors: Avoid initiating positions at current levels. Bajaj Housing Finance offers solid operational fundamentals with consistent growth, but the 31.63x P/E multiple and 3.53x P/BV represent unjustified premiums given the company's below-average 11.15% ROE. Wait for meaningful valuation correction toward ₹75-80 range (25x P/E) before considering entry. The bearish technical setup and severe underperformance versus peers suggest limited near-term upside potential.
For Existing Holders: Consider booking profits or reducing exposure, particularly if holding from listing levels. Whilst the company's long-term growth prospects remain intact backed by the Bajaj brand and India's housing finance opportunity, current valuation offers limited margin of safety. The 22.53% decline over the past year and ongoing technical weakness suggest the correction may not be complete. Holders may use rallies toward ₹95-100 as exit opportunities unless the company demonstrates meaningful ROE improvement or valuation becomes more reasonable.
Fair Value Estimate: ₹75 (16.29% downside from current levels)
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.
