Bajaj Finance shares downgraded by JPMorgan; check revised targets after Q1

Shares of Bajaj Finance Ltd., India's largest non-bank lender, have been downgraded by brokerage firm JPMorgan to "neutral" from "overweight" on Friday, July 25, after its June quarter results.

Despite the downgrade, JPMorgan said that Bajaj Finance remains the best quality NBFC that reflects a rare combination of high growth, as well as quality.

However, a pick-up in mortgage attrition, weakness in MSME asset quality and continued weakness in two and three-wheeler loans indicate possibility of negative revisions from the street for this, and potentially for next year's estimates. Therefore, it expects Bajaj Finance's re-rating to pause for a quarter or two.

In its earnings call on Thursday, Bajaj finance said that stress remains in the two-wheeler, three-wheeler, and the MSME segments and that the growth in their Assets Under Management (AUM) is likely to be slow this financial year.

The management expects its overall AUM growth to be between 23% to 25% this year.

UBS also has a "sell" recommendation on Bajaj Finance with a price target of ₹750, which is among the lower end of the street.

The brokerage believes that the MSME segment continues to see stress, and any successor to Rajeev Jain will be announced closer to the end of his tenure in 2028, which clears any near-term uncertainty.

Macquarie too has a "underperform" rating on Bajaj Finance with a price target of 800. It said that the stock is not factoring in the decline in growth guidance and higher credit costs.

At 4.4 times financial year 2027 price-to-book, the positives of 24% to 25% AUM growth have been priced in. It also anticipates a rise in credit costs in case the underlying stress pool increases.

Goldman Sachs wrote in its note that the provision coverage ratio going down by 160 basis points sequentially comes in as a negative development, especially when stress in the MSME book remained elevated.

The management also called out overleveraging as a persistent issue.

Goldman Sachs has a "neutral" rating on Bajaj Finance with a price target of ₹969.

Bernstein retained its "underperformed" with a price target of ₹640. It said that these results support their view of profitability pressures ahead for Bajaj Finance, as there are limited levers to offset the steady decline in loan spreads.

On the flip side, CLSA had an "outperform" rating on Bajaj Finance with a price target of ₹1,150. It said that while this was not a "picture-perfect" quarter, it was decent considering the prevalent environment.

"This achievement is even more pronounced because BAF is predominantly a retail lender, & slowdown in industry credit is in retail," CLSA wrote.

After a slow financial year 2025, CLSA expects Bajaj Finance's Profit After Tax to grow at a Compounded Annual Growth Rate (CAGR) of 25% over the next two years.

Out of the 39 analysts that have coverage on Bajaj Finance, 20 of them have a "buy" rating on the stock, 14 say "hold", while five have a "sell" recommendation.

Shares of Bajaj Finance ended 1.2% lower on Thursday at ₹956.5.