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The market expects Bajaj Finance to do better than it ever has.
At today’s share price, buyers are assuming Bajaj Finance earns about 24.9% a year on the money invested in it, from here on. Over the last ten years it actually earned about 20.1% a year. So the share price only makes sense if the business improves on its own track record. If it simply carries on as before, buyers today have paid for something they will not get.
- How it is valued: Excess return — the correct lens for an NBFC.
- What the price assumes: 24.9% return on equity, against 20.1% the model takes from its own record.
- Ten-year record: Between FY2020 and FY2026, Bajaj Finance's revenue went from ₹26,374 crore to ₹81,982 crore — it compounded at about 21% a year over 6 years.
- Biggest swing factor: Return on equity. Main risk: Regulatory tightening.
01A lender built on the EMI
Bajaj Finance is India's largest non-bank consumer lender and part of the Bajaj Finserv group. It made its name financing consumer durables at the point of sale — the EMI on a phone or a fridge — and has grown into personal loans, small-business loans, loans against property, gold loans and, through its listed subsidiary Bajaj Housing Finance, home loans.
Unlike a bank, it cannot take current or savings deposits, so it funds itself through bonds, bank borrowing and fixed deposits. Its edge is data and distribution: a customer base in the tens of millions that it can cross-sell to quickly and cheaply.
02What the market is assuming
Work backwards from today's share price and you can see what buyers are quietly taking for granted. Here is the return on equity that price implies for Bajaj Finance, next to what the model assumes from the company's own record.
The further apart these two numbers are, the bigger the bet a buyer at today's price is making.
03Bajaj Finance's record, in plain numbers
Between FY2020 and FY2026, Bajaj Finance's revenue went from ₹26,374 crore to ₹81,982 crore — it compounded at about 21% a year over 6 years. Net profit grew from ₹5,264 crore to ₹19,332 crore, about 24% a year — faster than revenue, so margins widened. In FY2026 it kept 23.6% of revenue as net profit — against a low of 20.0% in FY2020 and a high of 27.8% in FY2023. The latest year added 17.6% to revenue, well behind its own long-run pace. FY2021 is missing from the filed series used here, so that year is left out rather than estimated.
Revenue and earnings per share in ₹, return on equity and leverage as ratios — all from the filed statements.
Revenue and net profit by year (₹ crore)
| Year | Revenue | Net profit | Margin |
|---|---|---|---|
| FY2020 | 26,374 | 5,264 | 20.0% |
| FY2022 | 31,632 | 7,028 | 22.2% |
| FY2023 | 41,397 | 11,508 | 27.8% |
| FY2024 | 54,969 | 14,451 | 26.3% |
| FY2025 | 69,684 | 16,779 | 24.1% |
| FY2026 | 81,982 | 19,332 | 23.6% |
04How Bajaj Finance gets valued — and why
Excess return — the correct lens for an NBFCA lender is not valued with a discounted cash flow. Borrowing is the raw material of the business and interest is operating income, so enterprise value means nothing here. It is valued on excess return instead — the profit it earns above the cost of the equity funding it.
05What decides Bajaj Finance's value
Return on equity
The premium only holds if returns stay well above the cost of equity. The figure in 'What the market is assuming' shows the return today's price needs.
Loan growth
Value compounds with the book. A slowdown in growth hits a premium lender harder than a cheaply priced one.
Funding costs
As an NBFC, its borrowing costs follow bond yields and bank rates more closely than a bank's deposit costs do.
Credit costs in unsecured loans
Personal and consumer loans earn the most and default the most when households are stretched.
06What could go wrong
- Regulatory tightening. The RBI has raised capital requirements on unsecured consumer lending and acted against specific Bajaj Finance products in November 2023.
- A consumer-credit downturn. Rising defaults among stretched borrowers would hit provisions and growth together.
- Competition. Banks and fintech lenders are chasing the same customers with cheaper funding or slicker apps.
07What the full Bajaj Finance valuation shows
Sign in free to see the complete Bajaj Finance valuation
- ✓Fair value per share — from the excess-return model used for lenders
- ✓The lender workpaper — book value, cost of equity and sustainable return, step by step
- ✓Bull, base and bear cases — and exactly which assumptions move between them
- ✓Peer comparison — against Bajaj Finserv, HDFC Bank, Cholamandalam and Kotak Mahindra Bank
- ✓Downloadable report — the full write-up, yours to keep
08Compare Bajaj Finance with peers
The same valuation, run side by side.
Bajaj Finance vs Bajaj FinservThe parent holding company — the same franchise, valued differently.→Bajaj Finance vs HDFC BankA lender with deposits against one funded in the wholesale market.→Bajaj Finance vs Cholamandalam FinanceThe closest listed NBFC comparison on mix and growth.→Bajaj Finance vs Kotak Mahindra BankA smaller, higher-margin bank against a lender with no deposits at all.→09Questions people ask about Bajaj Finance
Why is Bajaj Finance so expensive on price-to-book?
Because it has historically earned a much higher return on equity than most lenders. Price-to-book reflects how much the market expects it to earn above its cost of equity, and for how long.
Is Bajaj Finance a bank?
No. It is a non-banking financial company (NBFC): it lends like a bank but cannot offer current or savings accounts, so it funds itself in the market. That is why it is valued on excess return rather than a DCF.
What is the difference between Bajaj Finance and Bajaj Finserv?
Bajaj Finserv is the holding company that owns a majority of Bajaj Finance along with insurance businesses; Bajaj Finance is the lender itself. The two have their own side-by-side comparison page.
Is Bajaj Finance overvalued?
At ₹1,117 the market is pricing in roughly 24.9% sustained ROE, against the ~20.1% its own record supports. That is more than it has delivered, so the price is justified only if the business can hold a rate it has not previously sustained.
What is the intrinsic value of Bajaj Finance?
It is computed from the filed financial statements using the method that fits this business (excess return), with every assumption shown alongside the result. The per-share figure and the full working are in the report.
How much debt does Bajaj Finance carry?
Debt to equity stands at 1.51, down from 1.70 at the start of the period — the balance sheet is a core input to the cost of capital used here.