Bajaj Finance shares fell nearly 3% on October 21, 2026, despite the non-banking financial company (NBFC) reporting a 29% year-on-year rise in Q2 FY27 net profit to ₹6,367 crore. The decline reflects concerns about rising funding costs, potential pressure on lending margins, emerging stress in short-term gold loans and regulatory uncertainty. Although brokerages such as Jefferies and Nomura retained Buy ratings, some reduced their earnings estimates or target prices. For investors, the key question is whether Bajaj Finance can sustain its strong growth while protecting profitability and asset quality.
Bajaj Finance Q2 FY27 Results: Key Numbers
Bajaj Finance reported healthy growth across its lending business in the July to September quarter. However, investors are also assessing the sustainability of earnings and the risks that could affect future returns.
| Financial metric | Q2 FY27 | Year-on-year change |
|---|---|---|
| Consolidated net profit | ₹6,367 crore | +29% |
| Net interest income (NII) | ₹13,335 crore | +24% |
| Assets under management (AUM) | ₹5.85 lakh crore | +26% |
| Gross non-performing assets (GNPA) | 1.06% | Down from 1.24% |
| Net non-performing assets (NNPA) | 0.42% | Down from 0.60% |
| New loans booked | 13.45 million | +11% |
Net interest income is the difference between interest earned on loans and interest paid on borrowings. Assets under management represent the outstanding value of loans managed by the company.
The results indicate that Bajaj Finance continues to expand its lending business. Its gross and net bad-loan ratios also improved compared with the year-ago quarter. Nevertheless, markets often react to future expectations rather than historical growth alone.
Why Did Bajaj Finance Shares Fall Despite Strong Earnings?
1. Rising interest rates could pressure margins
Bajaj Finance borrows money to lend to consumers and businesses. When its funding costs increase faster than the interest income earned on loans, its net interest margin (NIM) can come under pressure.
Nomura has flagged marginal NIM headwinds in a rising-rate environment. Even when loan demand remains strong, slower margin expansion can limit the pace of future profit growth.
2. Short-term gold loans are showing early stress
Bajaj Finance has identified emerging stress in some short-tenure gold loans. While overall asset quality improved year-on-year, investors are watching whether these early signs remain contained or spread to a wider part of the lending portfolio.
Jefferies noted the slight rise in stressed loans linked to gold loans, while management indicated that the impact on profits was expected to be limited.
3. Regulatory changes could affect fee income and lending growth
Potential changes involving revolving credit and insurance commissions have introduced additional uncertainty. If new rules affect customer borrowing patterns or distribution income, Bajaj Finance may need to adjust its business model to protect profitability.
These risks do not necessarily mean earnings will decline, but they make future forecasts less certain.
Why Are Brokerages Cutting Bajaj Finance Target Prices?
Brokerage firms can remain positive about a company’s long-term prospects while lowering their target prices. This happens when analysts believe the business is performing well but expect slightly slower earnings growth, lower valuation multiples or additional risks.
Jefferies: Buy, but with a lower target
Jefferies retained its Buy rating but reduced its target price to ₹1,230 from ₹1,280. It marginally lowered earnings estimates because of concerns around gold-loan stress, flexi-loan terms and insurance distribution fees. The brokerage nevertheless expects profit to grow at a compound annual growth rate of around 25% between FY26 and FY29.
Nomura: Buy with lower earnings estimates
Nomura maintained its Buy rating and a target price of ₹1,270. However, it cut its FY28 and FY29 earnings-per-share estimates by 2% to 3%, citing potential margin pressure from rising interest rates. It expects return on assets of 4.2% and return on equity of 19.9% over FY28 to FY29.
Axis Securities: Target price reduced
Axis Securities retained its Buy rating but lowered its target price to ₹1,255 from ₹1,305. It reduced the valuation multiple applied to its estimated adjusted book value, reflecting a more cautious approach to the price investors should pay for the company’s future earnings.
Motilal Oswal and Nuvama remain positive
Motilal Oswal Financial Services retained its Buy rating with a target price of ₹1,250, while Nuvama Institutional Equities maintained a Buy rating with a target of ₹1,175. Both acknowledge the company’s growth potential while highlighting risks that could affect future performance.
The important distinction is that a lower target price does not automatically mean a brokerage has turned bearish. Analysts may still expect the stock to appreciate, but see less upside than previously estimated.
What Could Support Bajaj Finance Shares Going Forward?
Bajaj Finance has several potential growth drivers. Its customer franchise reached 128.85 million by September 30, 2026, while management raised its FY27 loan growth guidance to 26% to 27%, from the earlier 22% to 24% range.
Further growth could be supported by:
- Strong demand for consumer and small-business loans.
- Expansion in assets under management and customer acquisition.
- Improved credit-cost management and stable asset quality.
- Better operating efficiency as the business scales.
However, higher loan growth must be balanced with prudent lending standards. Rapid expansion can create problems if credit checks weaken or borrowers struggle to repay.
What Should Investors Watch Before Buying or Selling?
Investors evaluating Bajaj Finance shares should monitor four areas in upcoming quarters.
Net interest margins: Check whether lending yields can keep pace with funding costs.
Credit costs: Watch overdue loans, provisions and the performance of short-term gold loans.
Regulatory developments: Assess the actual impact of changes to revolving credit and insurance commission rules once details are finalised.
Capital raising: The company has approved plans to raise up to ₹11,700 crore through a qualified institutional placement and up to ₹5,800 crore through warrants to promoter Bajaj Finserv, subject to the required approvals. The funds could support expansion, but new equity can dilute existing shareholders.
Conclusion
Bajaj Finance’s 29% profit growth and 26% AUM expansion demonstrate strong business momentum, but the share price decline shows that investors are weighing future risks as well as past performance. Rising funding costs, gold-loan stress, regulatory uncertainty and possible equity dilution help explain why some brokerages have trimmed targets or earnings forecasts.
For investors, the decision to buy, hold or sell should depend on valuation, investment horizon and risk tolerance. The next few quarters will be important in determining whether Bajaj Finance can maintain growth while protecting margins and asset quality.
Frequently Asked Questions
1. Why did Bajaj Finance shares fall despite 29% profit growth?
Bajaj Finance shares declined nearly 3% on October 21, 2026, despite strong quarterly earnings. Investors focused on possible margin pressure from rising funding costs, emerging stress in short-term gold loans, regulatory uncertainty and reduced earnings estimates. The market reaction reflects expectations for future performance, not just the latest profit figures.
2. What was Bajaj Finance’s Q2 FY27 net profit?
Bajaj Finance reported consolidated net profit of approximately ₹6,367 crore for Q2 FY27, up 29% year-on-year. Net interest income increased 24% to ₹13,335 crore, while assets under management grew 26% to ₹5.85 lakh crore, indicating continued expansion of the lending business.
3. Why are brokerages cutting Bajaj Finance target prices?
Some brokerages have lowered their targets or earnings estimates because of potential margin pressure, gold-loan stress and uncertainty around regulatory changes. These revisions indicate a more cautious assessment of valuation or future profitability, rather than necessarily signalling that the company’s growth prospects have deteriorated significantly.
4. What is Jefferies’ target price for Bajaj Finance?
Jefferies retained its Buy rating but reduced its target price to ₹1,230 from ₹1,280. It marginally lowered earnings estimates because of concerns around gold loans, flexi-loan terms and insurance distribution fees, while continuing to expect strong long-term profit growth.
5. What is Nomura’s view on Bajaj Finance shares?
Nomura maintained a Buy rating with a target price of ₹1,270. However, it reduced its FY28 and FY29 earnings-per-share estimates by 2% to 3%, citing possible net interest margin pressure from rising rates. This reflects caution about profitability despite healthy lending growth.
6. Is Bajaj Finance’s asset quality improving?
Yes. Its gross non-performing asset ratio declined to 1.06% in Q2 FY27 from 1.24% a year earlier, while its net NPA ratio fell to 0.42% from 0.60%. However, emerging stress in certain short-term gold loans remains a factor investors should monitor.
7. What is the biggest risk for Bajaj Finance investors?
One key risk is margin compression if borrowing costs rise faster than lending yields. Other concerns include higher loan defaults, regulatory changes affecting revolving credit or insurance commissions, and possible dilution from capital raising. These factors could influence earnings growth and the valuation investors are willing to pay.
8. What is Bajaj Finance’s FY27 loan growth guidance?
Bajaj Finance raised its FY27 loan growth guidance to 26% to 27%, from the earlier 22% to 24% range. This signals management’s confidence in business momentum. Investors should nevertheless assess whether this growth can be achieved without weakening lending standards or putting pressure on profitability.
9. Should investors buy Bajaj Finance shares after the fall?
A price decline alone does not establish that a stock is undervalued. Investors should assess the current valuation, earnings outlook, funding costs and asset quality before deciding. The company’s growth prospects remain relevant, but so do the risks identified by analysts following the quarterly results.
10. Should existing investors hold or sell Bajaj Finance shares?
The decision depends on an investor’s purchase price, time horizon, portfolio concentration and tolerance for risk. Long-term investors may monitor whether earnings growth remains sustainable, while others may reassess their exposure if the investment thesis has changed. Brokerage targets are estimates, not guarantees of future share prices.
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Jaspreet Singh Arora is the Chief Investment Officer at Equentis, where he heads a seasoned team of equity analysts and turns two decades of market experience into portfolios that consistently beat the benchmark. A go-to voice on cement, building-materials, real-estate, and construction stocks, Jaspreet previously ran research desks at leading brokerages, honing an eye for the metrics that truly move share prices. His plain-spoken analysis helps investors cut through noise and act with conviction. When he’s not deep-diving into earnings calls, you’ll find him unwinding over sports, weekend cricket or a good history podcast.
