Headline numbers muted; core strength remains intact.….
About the stock: Bajaj Finserv (Finserv) is a financial conglomerate with a holding in the financing business (Bajaj Finance), life insurance (Bajaj Life Insurance), general insurance (Bajaj General Insurance) and securities business.
• Consistent, faster business growth and profitability remain in focus
Q4FY26 performance: Bajaj Finserv reported a steady Q4FY26 performance, with consolidated revenue growing 5.7% YoY to ₹38,508 crore, impacted by mark-to- market (MTM) losses in insurance investment portfolios amid geopolitical volatility; adjusted revenue growth stood higher at ~14%. Consolidated PAT grew 5% YoY to ₹2,539 crore, while adjusted PAT (excluding MTM impact) rose ~24% YoY, reflecting strong underlying performance. The lending business remained robust, with Bajaj Finance delivering strong AUM growth of 22% YoY to ₹5,09,975 crore and healthy profitability. In General Insurance, GWP remained flat at ₹4,322 crore, due to a calibrated pullback in crop & motor segment, with combined ratio elevated at 113.6% due to timing impact in government health business. Life Insurance delivered healthy traction with GWP growth of ~21% YoY to ₹11,199 crore, VNB growth of ~29% to ₹709 crore and margin expansion to 24.5%.
Investment Rationale
• Disciplined underwriting with calibrated growth sustains profitability across cycles: GWP remained flat at ₹4,322 crore due to tactical pullback in crop and motor, while ex-crop/health growth stayed healthy at ~8%, indicating underlying momentum. Combined ratio rose to 113.6% due to a one-off retro treaty impact, but ex-bulky segment, combined ratio witnessed improvement, supporting management’s guidance of ~100% CoR over the cycle through pricing discipline and diversified mix.
• BALIC 2.0 driving structural margin reset with improving visibility: VNB grew 29% YoY to ₹709 crore with margins expanding to 24.5% (+240 bps YoY), achieved despite ~500 bps GST headwind, of which ~90% is now mitigated. Improved product mix (protection growth at +67% YoY) and operating leverage supports sustainability of ~24–25% margins, with growth visibility aided by new banca tie-ups and steady RWRP growth.
• Diversified platform with scaling adjacencies and RoE tailwinds: Lending franchises remain strong with Bajaj Finance AUM crossing ₹5 lakh crore (+22% YoY) and stable asset quality, while emerging businesses continue to scale (AMC avg AUM +52% YoY; Health revenue +41% YoY). Despite temporary MTM-led volatility in reported earnings, completion of Allianz stake buyback enhances capital efficiency and is RoE accretive, supporting improving medium-term earnings visibility.
Rating and Target Price
• While headline numbers seem to be impacted owing to recent heightened geopolitical volatility, improving product mix, structural margin reset under BALIC 2.0 and disciplined underwriting across insurance businesses are expected to support sustained profitability and earnings stability.
• Valuing business using SOTP valuation, we revise our target price to ₹2150 (earlier ₹2200). Upgrade rating from Hold to Buy.
