MUMBAI - In a recent assessment, UBS has downgraded Bajaj Finance to a "sell" rating, setting a target price of ₹6,800. The financial services giant is facing heightened competition, particularly from Jio Financial Services (JFS), which is contributing to concerns over Bajaj Finance's growth prospects. UBS analysts project that Bajaj Finance will experience a contraction in its net interest margin (NIM) by the fiscal year 2026 due to these competitive pressures, coupled with rising funding costs.
The brokerage's outlook suggests that Bajaj Finance could see a potential earnings downgrade amid a slowdown in asset under management (AUM) growth and earnings per share (EPS) compound annual growth rate (CAGR) from FY23 through FY26E. The challenges stem from the company's struggle to maintain its market dominance, especially in the urban consumer financing segment.
Despite Bajaj Finance's strategic moves to diversify its loan portfolio, including ventures into gold and auto loans, UBS warns of a potential diluted return on assets (RoA). This is attributed to the aggressive expansion of JFS's loan book, which is significantly ramping up competition in the sector. The report indicates that Bajaj Finance's efforts to branch out may not be sufficient to counter the competitive threat posed by JFS, necessitating caution among investors regarding the company's future performance.
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