Target: ₹9,040

CMP: ₹6,592.25

We initiate coverage on Bajaj Finance with Outperformer rating and a TP of ₹9,040 (5x FY26E P/BVPS) and mark it as a preferred BFSI pick. BAF is India’s largest NBFC with primarily a retail/MSME product suite focussed on mass affluent and above demographics, built on a uniquely successful cross-sell/upsell model.

Riding on increasingly potent omni-channel presence, we expect loan/EPS CAGR (FY23-26E) of 30/26 per cent while maintaining RoEs at 22-23 per cent. Asset strategy will remain key. The shifting household economic pyramid of India convinces us that BAF should deliver high-twenties loan growth till 2030, in-line with its long-term guidance.

BAF’s innovative initial business development funnel built from upselling an appropriate subset of its consumer durable financing customers, has now transformed into a full-service credit, payment and distribution play with a ‘phygital’ seamless omni-channel distribution.

High loan growth ensures that BAF could potentially hit its internal dilution threshold leverage by FY26. Our analysis suggests that a 3/5 per cent dilution is potentially a 15/25 per cnt boost to BVPS and ensures that its current trading multiple of 4.4x FY25E P/B is rather attractive in lieu of the accelerated compounding.

Cyclical asset risks remain the key monitorable.

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