The Non-Banking Financial Company (NBFC) sector in India plays a pivotal role in financial inclusion, catering to underserved communities and MSMEs. With assets under management (AUM) projected to exceed Rs 50 trillion in FY2025, NBFCs are growing at 13-15 percent annually despite challenges like tight funding and regulatory constraints.
Price Movement
With a market capitalization of Rs 5.42 lakh crore, the shares of Bajaj Finance Ltd were trading at Rs 8,750.30 per share, increasing around 2.22 percent as compared to the previous closing price of Rs 8,567.10 apiece.
Brokerage Recommendation
CLSA, one of the well-known brokerages globally, gave a ‘Buy’ call on the NBFC stock with a target price of Rs 11,000 crore, indicating a potential upside of 25 percent from Tuesday’s price of Rs 8,772.50 per share.
Brokerage Rationale
CLSA noted that FY25 was relatively weak for Bajaj Finance, as growth slowed to 26 percent and Return on Equity (ROE) dropped to 19 percent for 9MFY25. The decline was primarily attributed to increased credit costs, impacting the company’s overall financial performance during the period.
However, CLSA expects Bajaj Finance to regain its strength from FY26 as asset quality concerns ease, shifting investor focus from NIMs and asset quality to growth. Even if ROA drops from 4 percent to 3.5 percent over five years, a 25 percent AUM growth could still yield 22–23 percent PAT CAGR.
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Financial Performance
Bajaj Finance Ltd reported record AUM growth of Rs 24,119 crore and booked over 12 million new loans, adding 5 million customers. Its total customer base reached 97.12 million. PAT and PBT rose 18 percent, while opex-to-income improved to 33.1 percent. Credit costs remained stable at 2.16 percent of average AUM.
Market Outlook
Management projects 25 percent consolidated balance sheet growth and 22–23 percent profit growth for the upcoming fiscal year. While cautious of macroeconomic headwinds, they remain confident in leveraging a strong capital base and customer network, with a clear focus on sustaining margins and managing credit costs without compromising on risk.
Future Developments
The company plans to expand its product offerings under the Airtel partnership, with a roadmap for new launches. It is also focused on strengthening its market position in Tier 3 and Tier 4 regions for gold loans, targeting over 1,000 branches by the end of the year.
Company Profile
Bajaj Finance Ltd. is an India-based non-banking financial company (NBFC). The Company is engaged in the business of lending and accepting deposits. It has a diversified lending portfolio across retail, small and medium-sized enterprises (SMEs) and commercial customers with a presence in both urban and rural India.
Written by Abhishek Singh
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