How did you rate the market this week? Obviously, the money seems to be going to large caps. Index benchmarks were higher, while the broader market faced pressure and underperformed. However, for large caps, it was an outstanding week.
Vinit Bolingkar: If you look at the market performance, money is definitely moving in large caps. There are about 1,000 stocks where leverage is needed by the end of September. Stocks bought on margin at brokerages will take a hit. The gains came mainly from defenses, railway stocks and the general bull run of the past few months. If you look at Bajaj Finance, you will see that after spinning off the housing finance business, the rest of the focus is on the consumer segment as a whole. If I share some data, about Rs 50,000 crore will be distributed by the government to women in all states and the centre, and the same amount is expected to be given to 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 a 40% increase in sales of air conditioners, for example, and who will 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 have 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, up around 7-8%. I am referring to Paytm, which has seen a significant move from the 350 level, buoyed by more good news. They have obtained a license for payment services, meaning they can now apply for an aggregator license and focus on their core business. The brokerage is bullish, and you have an optimistic target for Paytm as well. What is your logic? Why do you think the stock is so bullish?
Vinit Bolingkar: Last year, Paytm’s performance for FY24 was very strong. At that time the share price was around Rs 800-900. Subsequently, after the RBI restrictions, the stock fell as low as Rs 350. But if you look closely, nothing fundamentally changed in the business except that Paytm Bank was taken away from them. Management successfully retained their traders. They closed down some lines of business which might have faced friction with the RBI, though it was not mandatory to do so. Despite closing those businesses, their merchant business continued to perform well, as did the UPI and marketing services segments. Now, with marketing services being sold to Zomato, we still expect 20% growth over the next three years, which is a significant number based on FY24 figures. In terms of loan origination fees, we expect the pool of funds raised through loans to quadruple over the next three years, and we see merchant business commissions doubling over this period. Therefore, we expect the company to return to EBITDA positivity in Q4, and we do not foresee any further regulatory challenges. Everything that was supposed to happen has happened and now we expect the stock to start moving upwards. Even with today’s 12% gain, the stock is still below the Rs 800 level it was trading at during business-as-usual conditions. Therefore, I still think the stock is undervalued, which explains our ambitious target.
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