“So, I believe Bajaj Finance is in a very favorable position, and I wouldn’t be surprised if the stock doubles in two years. The only thing we need to monitor is whether the company can guide credit costs and confirm that the worst is behind them,” says Vinit Bolinjkar, Ventura Securities.
How did you assess the market this week? Clearly, money seems to be moving into large caps. The index benchmarks were higher, while the broader market faced pressure and didn’t perform as well. However, for large caps, it was an outstanding week.
Vinit Bolinjkar: If you look at the market’s performance, money is definitely moving into large caps. There are about 1,000 stocks where leverage needs to come off by the end of September. Stocks that have been bought on margin at brokerages will take a hit. This leverage is primarily coming from defense, railway stocks, and the typical extravagant bulls of the past few months. If you look at Bajaj Finance, you’ll see that after spinning off the housing finance business, the remaining focus is on the entire consumer segment. If I were to share some data, close to Rs 50,000 crore is going to be distributed by the government to women across all states and the center, and a similar amount is expected to be given to the youth and men. So, where will this money be spent? It will obviously be spent on products like garments and consumer durables. Already, outsourcing companies are talking about 40% growth in air conditioner sales, for example, and who’s going to finance this? Two out of three loans in this sector are financed by Bajaj Finance. So, I believe Bajaj Finance is in a very favorable position, and I wouldn’t be surprised if the stock doubles in two years. The only thing we need to monitor is whether the company can guide credit costs and confirm that the worst is behind them. Let’s talk about a stock that performed exceptionally well today, rising nearly 7-8%. I’m referring to Paytm, which has seen significant moves from the 350 level, buoyed by more good news. They’ve obtained a license for payment services, meaning they can now apply for an aggregator license and focus on their core business. Brokerages are turning bullish, and you also have an optimistic target for Paytm. What’s your rationale? What has made you so bullish on the stock?
Vinit Bolinjkar: Last year, Paytm’s performance for FY24 was very strong. At that time, the stock was priced around 800-900 rupees. Then, after the RBI’s restrictions, the stock dropped as low as 350 rupees. But if you look closely, nothing fundamentally changed in the business except for the fact that Paytm Bank was taken away from them. The management successfully retained their merchants. They discontinued some lines of business that could have faced friction with the RBI, even though it wasn’t mandatory to do so. Despite shutting down those businesses, their merchant business continued to perform well, as did the UPI and marketing services segments. Now, with the marketing services being sold to Zomato, we still expect 20% growth over the next three years, which is a significant number based on FY24’s figures. In terms of loan origination fees, we expect the pool of funds raised through loans to increase fourfold in the next three years, and we see merchant business commissions doubling during this period. Therefore, we anticipate the company will return to EBITDA positivity in Q4, and we don’t foresee any more regulatory challenges. Everything that needed to happen has already happened, and now we expect the stock to start moving upward. Even with today’s 12% increase, the stock is still below the 800 rupee level it traded at during business-as-usual conditions. So, I still think the stock is undervalued, which explains our ambitious target.
How did you assess the market this week? Clearly, money seems to be moving into large caps. The index benchmarks were higher, while the broader market faced pressure and didn’t perform as well. However, for large caps, it was an outstanding week.
Vinit Bolinjkar: If you look at the market’s performance, money is definitely moving into large caps. There are about 1,000 stocks where leverage needs to come off by the end of September. Stocks that have been bought on margin at brokerages will take a hit. This leverage is primarily coming from defense, railway stocks, and the typical extravagant bulls of the past few months. If you look at Bajaj Finance, you’ll see that after spinning off the housing finance business, the remaining focus is on the entire consumer segment. If I were to share some data, close to Rs 50,000 crore is going to be distributed by the government to women across all states and the center, and a similar amount is expected to be given to the youth and men. So, where will this money be spent? It will obviously be spent on products like garments and consumer durables. Already, outsourcing companies are talking about 40% growth in air conditioner sales, for example, and who’s going to finance this? Two out of three loans in this sector are financed by Bajaj Finance. So, I believe Bajaj Finance is in a very favorable position, and I wouldn’t be surprised if the stock doubles in two years. The only thing we need to monitor is whether the company can guide credit costs and confirm that the worst is behind them. Let’s talk about a stock that performed exceptionally well today, rising nearly 7-8%. I’m referring to Paytm, which has seen significant moves from the 350 level, buoyed by more good news. They’ve obtained a license for payment services, meaning they can now apply for an aggregator license and focus on their core business. Brokerages are turning bullish, and you also have an optimistic target for Paytm. What’s your rationale? What has made you so bullish on the stock?
Vinit Bolinjkar: Last year, Paytm’s performance for FY24 was very strong. At that time, the stock was priced around 800-900 rupees. Then, after the RBI’s restrictions, the stock dropped as low as 350 rupees. But if you look closely, nothing fundamentally changed in the business except for the fact that Paytm Bank was taken away from them. The management successfully retained their merchants. They discontinued some lines of business that could have faced friction with the RBI, even though it wasn’t mandatory to do so. Despite shutting down those businesses, their merchant business continued to perform well, as did the UPI and marketing services segments. Now, with the marketing services being sold to Zomato, we still expect 20% growth over the next three years, which is a significant number based on FY24’s figures. In terms of loan origination fees, we expect the pool of funds raised through loans to increase fourfold in the next three years, and we see merchant business commissions doubling during this period. Therefore, we anticipate the company will return to EBITDA positivity in Q4, and we don’t foresee any more regulatory challenges. Everything that needed to happen has already happened, and now we expect the stock to start moving upward. Even with today’s 12% increase, the stock is still below the 800 rupee level it traded at during business-as-usual conditions. So, I still think the stock is undervalued, which explains our ambitious target.
