Is Explicit Finance overvalued or undervalued?

As of 16 October 2025, the valuation grade for Explicit Finance has moved from very expensive to expensive, indicating a slight improvement in its valuation outlook. However, the company remains overvalued based on its current financial metrics. The PE ratio stands at 48.78, significantly higher than peers like Bajaj Finance at 38.01 and Bajaj Finserv at 34.99. Additionally, the EV to EBITDA ratio is 7.38, which is also elevated compared to competitors in the industry.
Explicit Finance's key ratios reveal concerning performance, with a ROCE of only 1.83% and a ROE of 2.40%, suggesting inefficiencies in generating returns on capital and equity. In comparison, Life Insurance boasts a much lower PE ratio of 11.63 and an attractive valuation, highlighting the disparity in market positioning. Despite a strong year-to-date return of 39.86%, which outpaces the Sensex's 6.82%, the overall valuation metrics suggest that Explicit Finance is overvalued in its current market context.