Bajaj Finance vs M&M Finance: Which NBFC Stock Is the Better Buy for Long-Term Growth?

Synopsis: Citi is more bullish on both NBFCs but sees slightly higher upside in M&M Financial versus Bajaj Finance. Bajaj shows strong profitability and improving credit costs, while M&M Financial is driven by steady growth, stable collections, improving asset quality, and strong liquidity.

Citi has offered contrasting near-term outlooks on two major NBFC stocks, Bajaj Finance and M&M Financial Services, signaling differing upside potential in the current market environment. In this article, we examine Bajaj Finance vs M&M Finance to see which stock Citi sees as better positioned for near-term upside.

Bajaj Finance Limited

Bajaj Finance Limited is one of India’s leading non-banking financial companies (NBFCs) that provides loans, EMI financing, and deposit services. It is a subsidiary of Bajaj Finserv and is headquartered in Pune. The company offers a wide range of financial products, such as personal loans, consumer durable loans, business loans, and credit cards, mainly focused on retail and small business customers. 

With a market capitalisation of Rs. 6,44,262.03 crores on the day’s trade, the shares of Bajaj Finance Ltd rose upto 1.9 percent, reaching a high of Rs. 1,038.60 per share compared to its previous closing price of Rs. 1,018.75 per share.

Q1 FY27 Update

For the quarter ended 30 June 2026, the company reported strong growth across key operating metrics. Customer franchise stood at 124.43 million, compared to 106.51 million in the previous year, with an increase of 5.10 million during Q1 FY27. New loans booked rose by 20% to 16.13 million versus 13.49 million in Q1 FY26, indicating healthy demand momentum.

Assets under management (AUM) grew by 24% year-on-year to approximately Rs. 5,46,900 crore as of 30 June 2026, with an increase of about Rs. 36,900 crore during the quarter. The deposits book stood at around Rs. 68,500 crore. The data is provisional and subject to review by statutory auditors.

Citi on  Bajaj Finance

The stock is in focus after one of the leading Global brokerage firm, Citi, initiated a Buy Target of Rs. 1,120 on it with an upto 10 percent upside Potential from the previous day’s close of Rs. 1,018.75.

Reason for the target

Citi’s upgrade on Bajaj Finance is primarily driven by a strong earnings beat and improving credit quality. The company delivered ~22% PAT growth with a superior return on assets (RoA) of 4.6%, ahead of Citi estimates. At the same time, core credit costs have declined to 1.75%, better than expected, supported by slower stress formation in the loan book. Management also built a prudent Rs. 1.4bn overlay buffer, reinforcing balance sheet caution.

A key positive shift is visible in asset quality trends across loan vintages (3MOB/6MOB/9MOB), which has improved confidence in forward credit cost guidance. Management now expects FY27 credit costs to further moderate to 1.45–1.60%, implying a meaningful step-down versus FY26. This signals that earlier stress pockets are normalizing, reducing earnings volatility, and supporting higher sustainable profitability.

Growth visibility is also improving. Earlier headwinds in MSME stress and captive 2W/3W portfolio runoff are now largely behind the company. Management has guided for 22–24% AUM growth in FY27, about 2x system growth, while slightly moderating long-term growth expectations to 23–25% from 25–27%. Overall, the combination of improving credit costs, strong RoA, and still-high growth outlook supports the “Buy” upgrade and higher target price.

Mahindra & Mahindra Financial Services Ltd

Mahindra & Mahindra Financial Services Ltd is a leading non-banking financial company (NBFC) in India and part of the Mahindra Group. It primarily focuses on providing financing solutions for rural and semi-urban customers, especially vehicle loans for tractors, cars, and commercial vehicles. The company also offers services like fixed deposits, SME financing, and insurance broking. It plays a key role in supporting mobility and small business growth across India.

With a market capitalisation of Rs. 46,466.74 crores on the day’s trade, the shares of Mahindra & Mahindra Financial Services Ltd rose upto 4.7 percent, reaching a high of Rs. 333.35 per share compared to its previous closing price of Rs. 318.15 per share.

Q1 FY27 Update

Mahindra & Mahindra Financial Services Limited has shared its business update for Q1 FY27. The company estimates total disbursements of around Rs. 15,560 crore, reflecting a year-on-year growth of approximately 21% (excluding finance lease). Business Assets are estimated at Rs. 1,37,300 crore, showing a growth of roughly 12% compared to June 2025. Collection Efficiency remains stable at about 95%, similar to Q1 FY26.

Asset quality indicators show improvement, with Stage-3 estimated in the range of 3.4%–3.5% (vs. 3.8% in June 2025) and Stage-2 in the range of 4.9%–5.0% (vs. 5.9% in June 2025). The company also reported a strong liquidity position, maintaining a liquidity buffer of over Rs. 14,600 crore on its balance sheet.

Citi on M&M Financial Services

The stock is in focus after one of the leading Global brokerage firms, Citi, initiated a Buy Target of Rs. 380 on it with an upside potential of up to 19 percent from the previous day’s close of Rs. 318.15.

Reason for the target

Citi maintains a BUY rating with a target price of Rs. 380 on M&M Financial Services, reflecting strong confidence in the company’s steady business recovery and improving fundamentals.

The outlook is supported by robust operational performance, with disbursements rising 21% YoY and business assets growing 12.7% YoY, indicating sustained growth momentum. Collection efficiency remains strong at around 95%, showing healthy repayment trends and stability in the lending environment.

On the risk side, asset quality continues to remain resilient with only seasonal, marginal stress in overdue accounts. Additionally, prudent risk management through Rs. 217 crore of overlays and ~Rs. 490 crore of estimated write-offs helps keep credit costs under control. A strong liquidity position with a buffer of over Rs. 14,600 crore further strengthens earnings visibility, justifying the optimistic valuation and the Rs. 380 target.

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