Mumbai: Global brokerage Jefferies has identified five Indian financial companies that it expects could deliver at least 25% annual growth in operating profit over the next three years, putting them among its preferred growth picks despite their relatively high valuations.
The list includes fintech companies Paytm, Groww and PB Fintech, along with AU Small Finance Bank and Poonawalla Fincorp. Jefferies has assigned a Buy rating to all five stocks, arguing that sustained earnings growth could support returns even when valuations remain elevated.
The brokerage’s selection focuses on companies with market capitalisations of around or above $5 billion and businesses that can combine strong revenue growth with operating leverage and increasing scale.
Paytm gets Rs 2,100 target
Paytm is one of Jefferies’ key fintech picks. The brokerage has set a price target of Rs 2,100, compared with the reference price of Rs 1,752.25 cited in its report.
Jefferies expects Paytm to benefit from its large merchant base, expansion of its financial-services business and improving operating leverage.
The brokerage also sees room for earnings improvement as Paytm increases monetisation across its payments ecosystem. The company has been working to expand beyond its core payments business, with financial services emerging as an important contributor to growth.
The target implies meaningful potential upside from the reference price, although investors should note that brokerage targets are estimates rather than guaranteed returns.
Groww seen delivering 30% operating profit growth
Groww has emerged as another major pick in Jefferies’ financial-growth basket.
The brokerage has set a Rs 240 target price, compared with the reference price of Rs 194.60, implying around 23% upside.
More importantly, Jefferies expects Groww’s operating profit to compound at approximately 30% through FY29.
The brokerage sees several potential growth drivers, including an increase in broking clients, market-share gains, margin-trading facilities and the expansion of wealth-management services.
Groww’s newer initiatives could also contribute to its longer-term earnings profile as the company expands its financial-services offering.
Jefferies’ view reflects the broader shift towards digital investment platforms in India, where rising retail participation and the increasing use of online financial services could provide a longer runway for growth.
PB Fintech gets Rs 2,050 target
PB Fintech, the parent company of Policybazaar and Paisabazaar, is the third fintech name on the list.
Jefferies has assigned a Rs 2,050 target price, compared with the reference price of Rs 1,799.30. This represents nearly 14% potential upside based on the levels cited in the report.
The brokerage expects India’s expanding insurance penetration and the continued shift towards online insurance distribution to support premium growth.
Another important factor is operating leverage. Jefferies expects PB Fintech’s growing renewal book and improving operating leverage to drive a sharp expansion in adjusted EBITDA.
The company operates two major digital financial platforms, with Policybazaar focused on insurance distribution and Paisabazaar operating as a credit comparison platform.
AU Small Finance Bank targets universal banking growth
AU Small Finance Bank rounds out the banking component of Jefferies’ picks.
The brokerage has set a Rs 1,270 target price, compared with the reference price of Rs 1,061, implying around 20% upside.
Jefferies expects AU Small Finance Bank’s transition towards becoming a universal bank to support its earnings growth. Stronger deposit mobilisation and credit growth are also expected to contribute to the bank’s expansion.
The bank’s ability to scale its deposit franchise while maintaining credit growth will therefore remain important to the investment thesis highlighted by Jefferies.
Poonawalla Fincorp has 25% upside
Poonawalla Fincorp is the fifth stock in the brokerage’s high-growth financial basket.
Jefferies has assigned a Rs 560 target, against the reference price of Rs 448.50. This indicates around 25% potential upside.
The brokerage expects the company’s assets under management to grow at a 34% compound annual growth rate through FY29.
Growth is expected to come from expansion in personal loans, gold loans and other lending products. Jefferies also expects improving credit costs to support the company’s profitability.
The combination of rapid AUM growth and improving credit metrics is central to the brokerage’s positive outlook on Poonawalla Fincorp.
What is driving Jefferies’ financial stock picks?
The common theme across all five companies is the potential for sustained profit compounding.
Jefferies believes investors may continue to assign higher valuations to companies that can maintain rapid earnings growth over several years. In its view, strong revenue expansion combined with operating leverage can allow these businesses to deliver substantial improvement in operating profits.
However, high growth does not automatically mean low investment risk. Valuations, regulatory changes, competition, credit quality and execution remain important factors for investors to consider.
The five companies also operate in different parts of the financial ecosystem. Paytm and Groww are focused heavily on digital financial services and investing, PB Fintech operates in insurance and credit distribution, AU Small Finance Bank is expanding its banking franchise, while Poonawalla Fincorp is focused on lending.
This gives the list exposure to several structural themes within India’s financial sector rather than a single business model.
Brokerage targets are not guaranteed returns
Jefferies’ recommendations provide an indication of its expectations for earnings and valuations, but the target prices should not be interpreted as assured returns.
Stock prices can move significantly depending on market sentiment, interest rates, regulations, company performance and broader economic conditions. Investors should therefore consider their own risk appetite and investment horizon before acting on any brokerage recommendation.
For Jefferies, the central argument behind these five financial stocks is straightforward: companies capable of compounding profits at 25% or more annually may justify premium valuations if that growth is sustained.