UBS upgrades L&T Finance and Bajaj Finance on personal-loan growth outlook
UBS sees a fresh unsecured-credit cycle led by personal loans, forecasting about 30% growth for NBFCs versus 9% for banks. It raised L&T Finance’s target to Rs 380 from Rs 350 and Bajaj Finance’s to Rs 1,100 from Rs 910.
What happened
UBS upgraded L&T Finance to Buy and Bajaj Finance to Neutral, forecasting a new Indian unsecured-credit cycle led by personal loans. It expects roughly 30%
Key facts
- L&T Finance target price raised to Rs 380 from Rs 350
- Bajaj Finance target price raised to Rs 1,100 from Rs 910
- Personal-loan growth forecast: around 30% for NBFCs and 9% for banks
- L&T Finance FY28E EPS: Rs 21 versus Rs 20.20 earlier
- L&T Finance target multiple: 18x versus 17x
- Bajaj Finance FY28E EPS: Rs 49 versus Rs 48.50 earlier
- Bajaj Finance target P/E: 22x versus 19x
- Large diversified NBFC stocks declined 2%-10% over the past month
Why this matters
The projected unsecured-credit upcycle could make personal-loan origination, data-led underwriting and collections partnerships more strategically valuable for NBFCs seeking scale.
What to watch
- Monthly/quarterly personal-loan disbursal and AUM growth versus the projected roughly 30% NBFC pace.
- Stage-2/Stage-3 assets, net credit costs, collection efficiency and early-bucket delinquency trends.
- RBI commentary or policy changes on unsecured consumer-credit risk weights, capital requirements and underwriting practices.
- NBFC borrowing spreads, deposit/funding costs and liquidity conditions.
- Competitive loan pricing and evidence of higher customer-acquisition costs.
- Quarterly guidance on NIMs, operating expenses and return-on-assets/return-on-equity.
- Bajaj Finance and L&T Finance may increase digital personal-loan sourcing, pre-approved offers and cross-sell to existing customers.
- Competitors may raise marketing spend, partner with fintechs and offer faster approval journeys, increasing customer-acquisition intensity.
- Banks may selectively re-enter unsecured lending for salaried, high-credit-score borrowers if NBFC growth gains become material.
- Investors may rotate toward consumer-finance NBFCs, lifting sector valuations until delinquency trends provide a counter-signal.