“I think there is no rush to buy . It is a great franchise and they have done really well for themselves. Let us wait for it to settle down. Maybe this is a year where it will find its true multiples and somewhere later in the year, we can look at nibbling these stocks. But it is too early to start today,” says Digant Haria, Co-founder, GreenEdge Wealth
The Bajaj Finance stock is getting slammed left, right and centre?
Yes, I think a realisation has dawned on people. In the last 10 years, the management would always say we will grow at 25-30%, but they always grew at 35%. Even now the management is saying we will grow at 25-27% and they grew at 26%.
The Bajaj Finance stock is getting slammed left, right and centre?
Yes, I think a realisation has dawned on people. In the last 10 years, the management would always say we will grow at 25-30%, but they always grew at 35%. Even now the management is saying we will grow at 25-27% and they grew at 26%.
I think this entire readjustment is happening because there always was a halo effect in Bajaj Finance that they will always manage to do better than what they say. But that did not happen this quarter despite it being the festive season and we had record sales across all the product categories in the festive season. So that growth did not come and the realisation is now dawning on investors finally that it is a company which will grow at 25% and not at 30-35%. Some amount of readjustment in the multiples had to happen and that is why this violent reaction.
What should one do? Buy Bajaj Finance in this fall? Today there is panic and the stock is down 15-18%. But the growth rate of 27% or 25% or even 20% is still the highest in the industry?
Right, it is the highest in the industry but during the last decade, they grew at 35% while all the other banks ICICI, Axis grew at 15%. The differential was almost 20-25%. Now even the Axis and ICICI of the world are growing at 20% and Bajaj Finance is growing at 25%. So I will not want to pay significantly higher multiples for this company versus the others.
Let us say Bajaj grows at 25% for the next two years. They will make around Rs 20,000 crore of profit in FY25. So the company is still at 18-20 times on FY25 and let us not forget that they have some more milestones to cross.
They will eventually have to become a bank and compete with fintech online. I think there is no rush to buy Bajaj Finance. It is a great franchise and they have done really well for themselves. Let us wait for it to settle down. Maybe this is a year where it will find its true multiples and somewhere later in the year, we can look at nibbling these stocks. But it is too early to start today.
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