Bajaj Finance, HDB Financial, MMFS, Shriram Finance, CIFC: Buy, hold or sell? Target prices

Bajaj Finance Ltd and Shriram Finance Ltd are Nirmal Bang Institutional Equities' top picks in the NBFC space, while the brokerage has upgraded Sundaram Finance Ltd to 'Buy' in its latest sector note. Mahindra & Mahindra Financial Services Ltd (MMFS) and HDB Financial Services Ltd are other 'Buy' calls; Cholamandalam Investment and Finance Company (CIFC) is rated 'Hold' and a 'Sell' is recommended by Nirmal Bang on Poonawalla Fincorp Ltd.

Nirmal Bang said NBFCs delivered a strong March quarter, where robust asset under management (AUM) growth, margin expansion, and broad-based asset quality improvement underscored sectoral resilience despite emerging macro headwinds.

It noted that aggregate pre-provision operating profit (PPOP) for seven of the NBFCs Nirmal Bang tracks surged 27 per cent YoY in Q4, underpinned by 20 per cent YoY AUM growth and broad-based CoF-driven NIM expansion.

Asset quality it said improved at six of seven companies, with Sundaram Finance, MMFS, HDB Financial, and CIFC posting the sharpest sequential  gross NPA declines in a seasonally favourable collections quarter. 

Nirmal Bang noted that Bajaj Finance, MMFS, and CIFC have proactively built a combined Rs 560 crore in management overlays against the Middle East tensions and monsoon risks — a prudent buffer rather than a sign of portfolio deterioration.

"We upgrade SUF to BUY with a TP of Rs4,900, given sector-best credit costs of 60bps, expanding NIMs, and a pure secured book, despite near-term subsidiary drag. Bajaj Finance and Shriram Finance remain our top picks," Nirmal Bang said. 

It suggested targets of Rs 1,100 on Bajaj Finance, Rs 780 on HDB Financial, Rs 1,700 on CIFC, Rs 350 on MMFS, Rs 1,240 on Shriram Finance.

In the case of Sundaram Finance, Nirmal Bang said the NBFC runs the purest secured book in our NBFC coverage, with AUM composed entirely of asset-backed vehicle and equipment financing, carrying zero exposure to MSME and consumer lending at the standalone level. 

"This discipline is the foundation of sector-best credit costs of 60 bps in Q4FY26, a 90 bps advantage over the next-lowest peers and 175 bps below HDB. NIM expanded to 5.5 per cent," Nirmal Bang said.

It said the Sundaram Finance stock currently trades at 2.6 times estimated FY28 price to adjusted book value while offering an estimated 2.8 per cent return on asset (RoA) in FY28. 

"We rate the stock BUY with a target price of Rs 4,900. Downside risks include greater competition in vehicle finance and worse than expected subsidiary performance," Nirmal Bang said.