Financials · investment research
Bajaj Finance
BAJFINANCE
Verdict
WATCHLIST
medium confidence · 3-5 years
Composite score
56/100
Weighted across all eight pillars
Business quality
62/100
Moat, returns, balance sheet, cash, management
Valuation score
28/100
At 46.9x against a sector median of 46.9x, the price embeds roughly 31% earnings growth. Anything less has to come out of the multiple.
Decision intelligence
Every conclusion states what would make it wrong
WHAT
Good business, wrong price. Track it and wait for a better entry.
WHY
- • Profitability & returns scores 100/100 (stable) — ROCE was 31.4% a year ago. Sustained ROCE above the cost of capital is what compounds value.
- • Industry & macro scores 88/100 (improving) — Financials (India) demand is improving.
- • Growth quality scores 20/100 (deteriorating) — Top-line compounding over the reported history.
- • Valuation scores 28/100 (stable) — At 46.9x against a sector median of 46.9x, the price embeds roughly 31% earnings growth. Anything less has to come out of the multiple.
WHERE
Financials · Large cap · position sized to at most 0% of an equity portfolio.
WHEN
Revisit if the price approaches ₹9,975 or earnings catch up with the multiple.
WHAT IF WRONG
- • The thesis is wrong if ROCE falls below 27% or cash conversion stays under 70% for two straight quarters.
- • Valuation support fails below ₹9,975 of fair value — a drawdown to that level is a re-underwrite, not automatically a buy.
- • Watched risk: Promoter pledge — 14.4% of promoter holding is pledged.
WHAT NEXT
- • Read the latest quarterly cash-flow statement alongside the P&L.
- • Check Repo rate — it moves the earnings base independently of execution.
- • Compare against the sector peers listed below before sizing anything.
Bajaj Finance is a moat-protected financials business compounding revenue at 8.6% and profit at -14.9%, earning 30.8% on capital. Quality scores 62/100 and valuation 28/100 at 46.9x. The decision is therefore watchlist with medium confidence — this is analysis for learning, not investment advice.
What does this business actually do?
Business understanding before ratios
Bajaj Finance operates in the Indian financials sector with a large-cap footprint and a listed market value of about ₹440k Cr.
Revenue is earned across 4 reported segments; profitability is driven by realisations, mix and operating leverage rather than one-off items.
Revenue drivers
- • Volume growth in the core segment
- • Realisation / pricing power
- • Mix shift toward higher-margin lines
- • Net interest margin and credit growth
Cost drivers
- • Raw material and input costs
- • Employee cost inflation
- • Interest cost on borrowings
- • Distribution and marketing spend
Moat · 65/100
Switching costs
Deeply embedded systems make customer churn slow and expensive.
Segment mix
Growth 19.6% · margin 27.7% — Fastest growing part of the mix — watch whether margins hold as it scales.
Growth 18% · margin 32.4% — Growing broadly in line with the overall business.
Growth 13.2% · margin 29.6% — Growing broadly in line with the overall business.
Growth 7.1% · margin 9.2% — Growing broadly in line with the overall business.
Analysis pillars
Score, trend and the drivers behind each — no bare numbers
Business & moat
53/100Trend: deteriorating · weight 14%
- MoatSwitching costs
Deeply embedded systems make customer churn slow and expensive.
- Segment concentrationRetail lending is 29.3% of revenue
Revenue is spread across segments, which softens single-market shocks.
- EBITDA margin15.0%
Margin moved from 16.0% to 15.0% year on year.
Profitability & returns
100/100Trend: stable · weight 16%
- ROCE30.8%
ROCE was 31.4% a year ago. Sustained ROCE above the cost of capital is what compounds value.
- ROE31.9%
Return on equity after leverage — read alongside debt levels.
- Net margin8.3%
Share of every rupee of revenue that reaches reported profit.
Growth quality
20/100Trend: deteriorating · weight 15%
- Revenue CAGR (4y)8.6%
Top-line compounding over the reported history.
- Profit CAGR (4y)-14.9%
Profit lags revenue, so growth is being bought with margin.
- Growth sourceAsset-light / incremental
Capex is 9.0% of revenue this year.
Balance sheet
49/100Trend: deteriorating · weight 12%
- Debt / EBITDA1.76x
Leverage is serviceable from current cash generation.
- Debt / equity0.86x
Capital structure relative to shareholder funds.
- Working capital64 days
Cycle is tight, so growth is largely self-funding.
Cash conversion
54/100Trend: stable · weight 13%
- OCF / PAT90%
Reported profit is backed by operating cash.
- Free cash flow₹-2,905 Cr
Cash left after maintaining and expanding the asset base.
Management & governance
54/100Trend: improving · weight 14%
- Guidance delivery89% of last 8 quarters
Whether management historically delivered what it promised.
- Promoter holding30.2% (+1.1 y/y)
Promoter ownership is stable or rising.
- Pledge14.4% pledged
Pledged promoter shares add forced-selling risk in a drawdown.
- Institutional flowFII +2.05 · DII +2.07
Direction of institutional ownership over the last year.
- Capital allocationMost operating cash is reinvested into the core …
Most operating cash is reinvested into the core business.
Industry & macro
88/100Trend: improving · weight 8%
- Demand trendimproving
Financials (India) demand is improving.
- StructureConsolidated
Consolidated — a few large players hold most of the profit pool.
- Competitive intensitylow
How hard it is to keep pricing and share.
- Macro driversRepo rate, Credit growth, Asset quality cycle
Variables that move the earnings base regardless of company execution.
Valuation
28/100Trend: stable · weight 8%
- P/E vs sector46.9x vs 46.9x
At 46.9x against a sector median of 46.9x, the price embeds roughly 31% earnings growth. Anything less has to come out of the multiple.
- Growth-adjusted46.90 (PE/growth)
Below ~1.5 the multiple is supported by growth; above ~2.5 it depends on the market staying optimistic.
- FCF yield-0.66%
Cash return on the current market value, before any growth.
Financial history
Profit, cash and returns over five reported years
| Year | Revenue | EBITDA | PAT | OCF | FCF | ROCE |
|---|---|---|---|---|---|---|
| FY2022 | ₹1.33 L Cr | ₹39,759 Cr | ₹29,024 Cr | ₹23,800 Cr | ₹10,547 Cr | 28.1% |
| FY2023 | ₹1.46 L Cr | ₹39,290 Cr | ₹27,503 Cr | ₹23,103 Cr | ₹5,641 Cr | 28.4% |
| FY2024 | ₹1.59 L Cr | ₹20,606 Cr | ₹11,127 Cr | ₹9,569 Cr | ₹59 Cr | 31.6% |
| FY2025 | ₹1.71 L Cr | ₹27,439 Cr | ₹10,976 Cr | ₹9,659 Cr | ₹-4,061 Cr | 31.4% |
| FY2026 | ₹1.84 L Cr | ₹27,672 Cr | ₹15,220 Cr | ₹13,698 Cr | ₹-2,905 Cr | 30.8% |
No accounting-quality flags in the sample data.
Ownership & management
Who owns it, and have they delivered?
Promoter
30.2%
+1.1 y/y
Pledge
14.4%
Forced-selling risk
FII
9.1%
+2.05 y/y
DII
15.2%
+2.07 y/y
Guidance delivered in 89% of the last eight quarters; average leadership tenure 14 years.
Most operating cash is reinvested into the core business.
- ⚠ Related-party transactions at 7.1% of revenue
Industry & macro context
Financials (India)
Demand trend
improving
Cyclicality
medium
Competition
low
Regulatory pressure
low
Consolidated — a few large players hold most of the profit pool.
Macro drivers: Repo rate · Credit growth · Asset quality cycle
Valuation
fair versus the sector
P/E
46.9x
Sector median P/E
46.9x
P/B
13.69x
Earnings yield
2.13%
FCF yield
-0.66%
PE / growth
46.9
Estimated fair-value band ₹9,975 – ₹12,746 , built on FY2026 EPS of ₹246.3. Gap to the current price: +59.6%. Ranges are a modelling output, not a target price.
At 46.9x against a sector median of 46.9x, the price embeds roughly 31% earnings growth. Anything less has to come out of the multiple.
Risk register
What can break the thesis, and how it is monitored
- Promoter pledgemedium
14.4% of promoter holding is pledged.
Monitor: Pledge disclosures with each shareholding filing.
- Governancehigh
Related-party transactions at 7.1% of revenue
Monitor: Annual report disclosures and auditor commentary.
Ongoing thesis monitoring
The thesis is a living position, not a one-time verdict
| Metric | Currently | Thesis holds if | Thesis breaks if |
|---|---|---|---|
| ROCE | 30.8% | stays above 28% | falls for two consecutive years |
| Cash conversion | 90% | stays above 80% | drops below 70% while revenue grows |
| Revenue growth | 8.6% CAGR | tracks the 31% priced in | slows for two quarters with no margin offset |
| Promoter holding | 30.2% | stable or rising | falls sharply or fresh pledge appears |
Peers in the same sector
Compare before sizing anything
Data quality 72/100
Stated openly, as required by the product principles
- • Fundamentals in this build come from a deterministic sample dataset, not licensed exchange filings.
- • Segment, ownership and management figures are illustrative and must be verified against annual reports.
- • Educational analysis only — not a recommendation to buy or sell any security.