Bajaj Finserv Ltd Valuation Shifts to Fair; Market Sentiment Turns Bearish

Valuation Metrics Reflecting Improved Price Attractiveness

As of 2 Feb 2026, Bajaj Finserv’s P/E ratio stands at 31.38, a figure that, while still elevated relative to many peers, represents a moderation from previous levels that had classified the stock as expensive. The price-to-book value ratio at 3.97 further supports this reclassification to a fair valuation grade, indicating that the market is now pricing the company closer to its intrinsic book value than before.

Other valuation multiples such as the enterprise value to EBIT (EV/EBIT) at 13.09 and enterprise value to EBITDA (EV/EBITDA) at 12.78 also align with this more balanced valuation stance. These multiples suggest that while Bajaj Finserv remains a premium holding within the financial services sector, the premium has contracted, potentially offering a more reasonable risk-reward profile for investors.

Comparative Analysis with Industry Peers

When benchmarked against its peers, Bajaj Finserv’s valuation appears more palatable. For instance, Bajaj Finance, a closely related entity, is still rated as very expensive with a P/E of 30.72 but a significantly higher EV/EBITDA multiple of 18.16, indicating greater market expectations for growth or profitability. Similarly, Jio Financial’s P/E ratio of 97.39 and EV/EBITDA of 80.37 place it firmly in the very expensive category, underscoring Bajaj Finserv’s relative valuation advantage.

Conversely, companies like Life Insurance and SBI Life Insurance are classified as very attractive based on their lower P/E ratios of 9.89 and 79.97 respectively, though the latter’s EV/EBITDA multiple is exceptionally high at 145.92, reflecting sector-specific dynamics and growth expectations. Bajaj Finserv’s fair valuation grade thus positions it as a middle ground option within the holding company sector, balancing growth potential with valuation discipline.

Financial Performance and Returns Contextualising Valuation

Bajaj Finserv’s return on capital employed (ROCE) and return on equity (ROE) stand at 11.45% and 12.66% respectively, indicating solid operational efficiency and shareholder returns. These figures, while respectable, do not command the highest premiums in the sector but do justify a fair valuation given the company’s steady earnings profile.

From a price performance perspective, the stock has experienced a 2.66% decline on the day of reporting, closing at ₹1,901.40 from a previous close of ₹1,953.35. Over the past week and month, the stock has underperformed the Sensex, with returns of -2.42% and -6.65% compared to the benchmark’s -1.00% and -4.67% respectively. Year-to-date, Bajaj Finserv’s return of -6.74% also trails the Sensex’s -5.28%, reflecting some near-term headwinds.

However, the longer-term performance remains robust, with a 1-year return of 8.56% outperforming the Sensex’s 5.16%, and an impressive 10-year return of 917.42% dwarfing the benchmark’s 224.57%. This historical outperformance underscores the company’s capacity to generate substantial shareholder value over time, supporting the rationale for a fair valuation rather than a discount.

Mojo Score and Rating Implications

Bajaj Finserv’s current Mojo Score is 47.0, which corresponds to a Sell rating, a downgrade from its previous Hold status as of 1 Feb 2026. This shift reflects a more cautious stance by analysts, likely influenced by the recent price declines and the company’s valuation dynamics. The Market Cap Grade remains at 1, indicating a relatively modest market capitalisation grade within the broader universe of stocks.

The downgrade to Sell despite the improved valuation grade suggests that while the stock is more attractively priced, concerns remain regarding near-term catalysts or sectoral headwinds. Investors should weigh these factors carefully, considering both the valuation improvement and the rating downgrade in their decision-making process.

Sector and Market Context

Operating within the holding company sector, Bajaj Finserv benefits from diversified financial services exposure, including insurance, lending, and asset management. This diversification supports stable cash flows and mitigates risks associated with any single business line. However, the sector has faced challenges from regulatory changes and competitive pressures, which have influenced investor sentiment and valuation multiples.

In comparison, peers such as Shriram Finance and Tata Capital remain expensive, with P/E ratios of 20.48 and 38.92 respectively, and EV/EBITDA multiples of 12.03 and 17.36. Bajaj Finserv’s fair valuation grade thus positions it competitively within this peer group, offering a more balanced risk-return profile.

Price Range and Volatility

The stock’s 52-week high of ₹2,194.65 and low of ₹1,620.00 indicate a relatively wide trading range, with the current price of ₹1,901.40 closer to the lower end of this spectrum. Today’s trading range between ₹1,900.00 and ₹1,952.50 suggests some intraday volatility, consistent with the broader market’s cautious tone.

Investors monitoring Bajaj Finserv should consider this price volatility alongside valuation metrics to identify optimal entry points, particularly given the company’s strong long-term performance record.

Investment Outlook and Strategic Considerations

For investors evaluating Bajaj Finserv, the recent valuation grade improvement to fair from expensive offers a compelling argument for reconsidering the stock as a potential buy candidate, especially given its robust long-term returns and solid financial metrics. However, the downgrade in Mojo Grade to Sell signals caution, suggesting that the stock may face near-term challenges or lack immediate catalysts to drive a sustained rally.

Investors should also consider the company’s dividend yield of 0.05%, which is modest and indicates that returns are primarily driven by capital appreciation rather than income. The PEG ratio of 2.27 suggests that growth expectations are priced in at a moderate premium, aligning with the company’s steady but unspectacular growth profile.

Overall, Bajaj Finserv’s valuation shift reflects a market recalibration that balances its premium status with more realistic pricing, making it a stock worth monitoring closely for potential entry points as part of a diversified financial services portfolio.

Conclusion

Bajaj Finserv Ltd’s transition from an expensive to a fair valuation grade marks a significant development in its market narrative. While the stock’s P/E and P/BV ratios have moderated, offering improved price attractiveness, the downgrade in analyst rating to Sell tempers enthusiasm. Investors must weigh the company’s strong historical returns and solid fundamentals against current market headwinds and valuation realities. In this context, Bajaj Finserv presents a nuanced investment case that rewards careful analysis and timing.

Unlock special upgrade rates for a limited period. Start Saving Now →