Bajaj Finance shares slip as UBS issues "Sell" rating, sees 18% potential downside

For the third quarter of FY25, Bajaj Finance reported a 17 percent rise in consolidated net profit

Shares of Bajaj Finance slipped 1.5 percent to Rs 8,312 apiece on February 20 after brokerage firm UBS issued a "sell" rating on the stock, setting a price target of Rs 6,800—an 18 percent downside from current levels.

Despite this, the non-bank lender's stock has surged 12 percent over the past month, outperforming the Nifty 50 index, which has declined 2 percent during the same period.

Catch all the market action on our LIVE blog

UBS analysts remain wary of Bajaj Finance’s trajectory in 2025, citing concerns over persistently high credit costs, especially in personal and SME loans, which make up 38 percent of the company’s total loan book.

The brokerage also expects a structural decline in the company’s Return on Assets (RoA) and margins, which could fall short of its long-term strategic goals.

"We believe the market is overly optimistic about the company’s consensus Earnings Per Share (EPS) estimates. The current stock price assumes a 10-year EPS Compounded Annual Growth Rate (CAGR) of 23 percent—a challenging target," UBS noted in its report.

Bajaj Finance has soared 20 percent so far in 2025, making it the top-performing stock on the Nifty 50 index, followed closely by Bajaj Finserv, which has gained 18 percent. In contrast, the Nifty 50 has declined 3 percent year-to-date.

For the third quarter of FY25, Bajaj Finance reported a 17 percent rise in consolidated net profit, reaching Rs 4,247 crore. Net interest income (NII) in Q3FY24 climbed 23 percent to Rs 9,382 crore.

However, asset quality showed some deterioration. The NBFC’s gross non-performing assets (GNPA) increased to 1.12 percent in Q3FY25 from 0.95 percent a year earlier, while net NPA rose to 0.48 percent from 0.37 percent.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.