Header image source: Bajaj Finance shares rise 2% as Jefferies names it top NBFC pick – The Economic Times via The Economic Times via Google — cropped to 16:9 and colour-adjusted.
Key takeaways
- Jefferies sees 23.8% upside to Rs 1,280 for Bajaj Finance
- AI adoption positions Bajaj as top compute user in India
- Growth plan targets 23% CAGR with leverage cuts every 3 years
Jefferies just slapped a Rs 1,280 price target on Bajaj Finance—23.8% upside from yesterday’s Rs 1,033.80—and called it one of its top NBFC picks. A full-throated endorsement straight from a September 2026 roadshow with MD Rajeev Jain and his team. It’s anchored to 5× estimated September 2028 book value, a horizon that assumes Bajaj can grow assets under management at 23% CAGR for a decade while cutting leverage by 0.25× every three years. Oh, and AI adoption so aggressive Jefferies claims Bajaj is now among the top compute users of key tech vendors in India.
It’s a bet on a needle most NBFCs can’t thread: grow aggressively, slash leverage, and still deliver 19-20% ROE. UBS, meanwhile, sits on the fence with a Rs 1,100 target and a neutral rating, upgraded from sell.
The Jefferies Thesis: Why Rs 1,280 Isn’t Just Another Number
Jefferies’ Rs 1,280 target is pegged to 5× estimated September 2028 book value. At today’s price, Bajaj trades at 23× P/E and about 1× PEG.
The 23. Management expects strong demand, asset quality and efficiencies to offset slight pressure on net interest margins. Its Rs 1,100 target provides a contrasting view to Jefferies’ bullish stance.
Jefferies is buying the roadshow narrative: Bajaj can grow AUM at 23% CAGR, cut leverage, and still hit 19-20% ROE.
Growth vs. Leverage: The 10-Year Roadmap That Defies Sector Trends
It’s aggressive. For context, Bajaj’s 23% CAGR target is ambitious compared to typical NBFC growth rates.
The leverage plan is equally bold: cut it by 0.25× every three years while maintaining 19-20% ROE. The mechanism isn’t detailed—management expects efficiencies to help achieve these targets, but what does that mean?
Management expects slight pressure on net interest margins but expects strong demand and asset quality to offset it. Rural stress and unsecured lending pressures are real, but Jefferies notes that diversified NBFCs like Bajaj have “relatively lower exposure” to rural risks.
AI as a Moat: Beyond the Hype, Compute Capacity as a Competitive Edge
Jefferies’ claim that Bajaj is “among the top users of compute capacity” of key tech vendors in India is intriguing.
Bajaj’s “AI across verticals” suggests a company-wide push, not just pilot projects. That’s a step ahead of peers that may have more limited AI adoption.
Sector Tailwinds: Why Bajaj Outperforms in a Challenging NBFC Landscape
Rural demand risks? Bajaj has “relatively lower exposure.” That’s not to say Bajaj is immune—just that it’s better positioned than some peers with different risk profiles.
Jefferies’ other top NBFC picks—Cholamandalam, Aditya Birla Capital, and Shriram Finance—have different risk profiles. These companies have different business focuses and risk exposures. Bajaj stands out because of its diversification and relatively lower exposure to rural risks.
If unsecured lending grows faster than secured lending, asset quality could come under pressure. The brief doesn’t break down the loan mix, but maintaining asset quality will be crucial.
The Valuation Debate: Is 5× 2028 Book Value Realistic?
At 23× P/E and 1× PEG, Bajaj trades at valuation multiples that reflect growth expectations.
The track record isn’t provided in the brief, but achieving 19-20% ROE while cutting leverage would be challenging.
The Contrarian View: Why UBS Isn’t Convinced
Upgraded from sell to neutral with a Rs 1,100 target, UBS provides a contrasting view to Jefferies’ bullish stance.
Various execution risks could potentially derail the plan.
Market sentiment is mixed. Bajaj’s YTD gain of 6.34% outpaces the broader market, but the one-year return of 0.91% suggests recent momentum isn’t yet a trend. Is this a rally or a structural re-rating? UBS isn’t betting on the latter.
The Open Question: Can Bajaj Thread the Needle?
Jefferies’ bull case is compelling: 23% AUM CAGR, 19-20% ROE, AI leadership, and sector tailwinds. The 23.8% upside is attractive, but it’s predicated on flawless execution. UBS’s neutral rating and margin concerns are a reality check.
The lack of granularity on AI ROI and leverage reduction mechanics is a concern. Bajaj’s roadmap is unique, but the devil is in the details. For growth-oriented NBFC investors, this is a story stock—one where the narrative is strong, but the proof is still pending.
The real question isn’t whether Bajaj can grow. It’s whether it can grow smart. Can it cut leverage without compressing ROE? Can AI adoption deliver tangible efficiency gains? Can it maintain asset quality in a high-growth environment?
If the answer is yes, Rs 1,280 is just the beginning. If not, the premium valuation could unravel quickly. The market isn’t pricing in failure—but it isn’t fully pricing in success either. That’s the tightrope Bajaj walks. And right now, investors are split on whether it can keep its balance.