January 16, 2025 / 12:07 IST

A majority of analysts, out of the 37 who track shares of Bajaj Finance, have a ‘buy’ rating on the company -- there are 28 buy calls, 5 hold calls and 4 sell calls for the stock.

Here’s a breakdown of the factors leading to the optimism.

The company is targeting 27% AUM growth for FY2025, with a medium-term expectation of 25-26 percent. This growth is supported by efforts to expand its customer base and diversify into new product areas, such as personal loans, gold loans, and two-wheeler loans.

Its Long-Range Strategy (LRS-3) aims to significantly increase its customer base to 200 million by FY2029, which analysts view as a potential driver for continued revenue growth, especially through cross selling.

Its long-range strategies (LRS-3) for FY2025 to FY29 includes, among other things, increasing the customer base from 92.1 million in H1FY25 to 200 million by FY29, increasing AUM per customer to Rs 80,000-85,000 by FY29 through deeper customer engagement, expanding market share in the payments business from 0.27% in FY25 to 0.4-0.5% by FY29, and expanding its physical presence to over 5,200 locations by FY29.

Despite these growth prospects, analysts have raised concerns about credit costs. Bajaj Finance has revised its credit cost guidance for FY2025 to 2.05 percent, up from an earlier estimate of 1.75-1.85 percent.

This reflects increased delinquencies in certain unsecured loan segments, which may impact profitability in the short term. Analysts have noted a slight increase in Gross Non-Performing Assets (GNPAs) as well, which could put pressure on credit costs if delinquency rates continue to rise.

Additionally, regulatory risks and increasing competition in retail lending are also factors to monitor. Although there is a possibility for credit costs to normalise in the medium term as the company’s business mix stabilises.
There’s likeliness of continued profitability, with expected RoEs of 20-22 percent in the medium term, supported by a diversified business model, cost optimisation efforts through technological advancements such as AI/ML, and anticipated improvements in operating leverage.

Sharekhan has a ‘buy’ recommendation on Bajaj Finance, with a target price of Rs 9,500 and so does Anand Rathi, with a target price at Rs 8,800. While JP Morgan has a comparatively lower target price of Rs 7,300, even Way2Wealth research recommends accumulating the stock.

CLSA expects Bajaj Finance's PAT growth to rebound in FY26, maintaining an “Outperform” rating and sees an upside of nearly Rs 2,000. Global brokerage firm Citi has also recommended “Buy” at target price of Rs 8,150 while also opening a ’90-day catalyst watch’ window from the start of the new year 2025.

The NBFC's deposits grew by 18.6 percent from Rs 58,008 crore to Rs 68,800 crore between December 31, 2023 and December 31, 2024.

Bajaj Finance is trading at a reasonable multiple relative to its growth, with analysts suggesting a (P/B) ratio of around 4.0x for FY2026. While the stock has performed well recently, analysts caution that it could remain range-bound in the near term until there is more clarity on asset quality trends.

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