Global brokerage Bernstein has turned cautious on Bajaj Finance, forecasting that the stock could fall by more than 20 percent from current levels. The bearish outlook has caught market attention, especially given Bajaj Finance’s long standing reputation as one of India’s most consistent and high growth non banking financial companies. Bernstein’s view is rooted not in a single negative trigger, but in a combination of slowing growth expectations, margin pressure, and valuation concerns.
One of the key reasons behind the downgrade is the expected moderation in growth. Bajaj Finance has delivered strong expansion for years, driven by rapid customer additions and aggressive growth in assets under management. Bernstein believes this pace is unlikely to continue at the same intensity. As the company scales up and the base becomes larger, maintaining earlier growth rates becomes more challenging, which could lead to slower revenue and earnings expansion in the coming years.
Profitability is another area of concern. According to Bernstein, the scope for further margin expansion appears limited. Rising competition in consumer and retail lending, along with higher funding and operating costs, may put pressure on margins. At the same time, increased credit costs, especially in unsecured and small business loan segments, could weigh on overall profitability and earnings growth.
Earnings expectations form a crucial part of Bernstein’s argument. The brokerage expects Bajaj Finance’s earnings per share growth to fall below market expectations over the medium term. While the company is still projected to grow, the pace may not justify the premium valuation at which the stock has been trading. Any disappointment on earnings could therefore result in sharper downside compared to lower valued peers.
Valuation sensitivity plays a major role in the bearish call. Bajaj Finance has long commanded a premium due to its strong execution, brand value, and return ratios. Bernstein argues that when growth and margin assumptions soften, such premium valuations become vulnerable. Even a modest downgrade in growth outlook can trigger a meaningful correction in the stock price.
Despite the negative stance, Bernstein’s view does not question the company’s business quality or long term franchise strength. Instead, it highlights the risk of elevated expectations meeting a more normalized growth environment. For investors, the report serves as a reminder that even fundamentally strong companies can face stock price pressure when growth slows and valuations remain stretched.
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