Paytm, Groww to PB Fintech: Jefferies names 5 financial stocks with 11% to 25% upside  

In its report titled The 25% compound annual growth rate (CAGR) Club of Indian Financials, Jefferies said the five companies can compound growth despite their relatively higher valuations. 

The report estimates operating profit growth of more than 25% for each of the five companies over the period. Jefferies said its assessment does not depend on a normalisation of credit costs or a low base.

Jefferies on Groww: ‘Buy’

Jefferies has initiated coverage on Groww with a ‘Buy’ rating and a target price of Rs 240, implying an upside of 23%. The brokerage expects Groww to deliver a 30% compound annual growth rate in net profit over financial year 2026 to financial year 2029.

Jefferies said Groww is the largest broker in India by active clients, with a 28% market share. The brokerage expects growth to come from its existing broking business as well as newer offerings such as margin trading facility and wealth management.

“We believe Groww has several levers to drive 28% EPS CAGR over FY26-29,” Jefferies noted.

The brokerage expects Groww’s revenue to rise at a 24% compound annual growth rate over financial year 2026 to financial year 2029, while earnings before interest, taxes, depreciation and amortisation could grow at a 31% compound annual rate. It expects the company’s earnings before interest, taxes, depreciation and amortisation margin to improve by 10 percentage points over the period.

Jefferies also expects Groww’s expansion into margin trading facility and wealth management to contribute more than 20% of revenue by financial year 2029, compared with 1% in financial year 2025. The brokerage expects the planned launch of US stocks later in financial year 2027 to provide another earnings opportunity.

Jefferies on Paytm: ‘Buy’

Jefferies has a ‘Buy’ rating on Paytm and has raised its target price to Rs 2,100 from Rs 1,600. The revised target implies an upside of 20%.

The brokerage sees Paytm benefiting from better monetisation of its large merchant base as the prospect of a merchant discount rate on Unified Payments Interface transactions improves. Jefferies expects Paytm’s revenue to grow at a 25% compound annual rate over financial year 2026 to financial year 2029.

“Paytm stands out on monetisation of client base in near-zero MDR regime, which is now changing favourably,” Jefferies reported.

Jefferies expects operating synergies to support a sharp increase in earnings before interest, taxes, depreciation and amortisation and profit. The brokerage has also factored in opportunities from credit on Unified Payments Interface, cloud artificial intelligence inference models, wealth services and overseas expansion.

Its estimates point to a much faster rise in profitability than revenue. Net profit is expected to increase from Rs 5,523 million in financial year 2026 to Rs 35,410 million in financial year 2029, according to Jefferies estimates.

The brokerage has also raised its financial year 2028 and financial year 2029 earnings estimates by 20% to 25% after factoring in its assumption of a 25 basis point merchant discount rate on Unified Payments Interface transactions.

Jefferies on PB Fintech: ‘Buy’

Jefferies has a ‘Buy’ rating on PB Fintech with a target price of Rs 2,050, implying an upside of 14%. The brokerage expects the company to benefit from rising insurance penetration and the growing preference for online insurance purchases.

PB Fintech operates Policybazaar and Paisabazaar, its online insurance and lending platforms. Jefferies expects premiums to grow at a 35% compound annual rate between financial year 2026 and financial year 2029.

“Digital brokers are gaining from rising insurance penetration and customer shift to online channels,” Jefferies added in its report.

The brokerage expects operating leverage and a growing renewal book to drive a fourfold expansion in adjusted earnings before interest, taxes, depreciation and amortisation between financial year 2026 and financial year 2029. Revenue is projected to grow at a 31% compound annual rate over the same period.

Jefferies expects adjusted earnings before interest, taxes, depreciation and amortisation margin to increase from 11% in financial year 2026 to 20% in financial year 2029. Net profit is projected to rise from Rs 6,701 million to Rs 23,331 million over the same period.

The brokerage has based its Rs 2,050 target price on 38 times September 2028 estimated enterprise value to adjusted earnings before interest, taxes, depreciation and amortisation.

Jefferies on AU Small Finance Bank: ‘Buy’

Jefferies has initiated coverage on AU Small Finance Bank with a ‘Buy’ rating and a target price of Rs 1,270, implying an upside of 20%.

The brokerage expects the bank’s transition from a small finance bank to a universal bank to improve its funding profile and broaden its customer base. Jefferies expects loan growth of 22% annually between financial year 2026 and financial year 2029, which it says would be the highest among the banks in its coverage.

“A universal bank license will enhance brand and create a level playing field and enable bank to lower cost of deposits,” Jefferies said.

Jefferies expects stronger deposit growth to support credit expansion, while fee income is also projected to increase. The brokerage expects return on assets to reach 1.8% by financial year 2028 and remain around that level through financial year 2029.

The bank’s net profit is projected to rise from Rs 26.4 billion in financial year 2026 to Rs 57.9 billion in financial year 2029. Jefferies expects return on equity to increase from 14.4% to 16.3% over the same period.

Jefferies on Poonawalla Fincorp: ‘Buy’

Jefferies has initiated coverage on Poonawalla Fincorp with a ‘Buy’ rating and a target price of Rs 560, implying an upside of 25%.

The brokerage expects the Non-Banking Financial Company’s new products to drive a strong increase in assets under management. It forecasts a 33% compound annual growth rate in assets under management between financial year 2026 and financial year 2029.

“Strategic reset & new products scale up to drive 33% AUM CAGR over FY26-29e,” Jefferies noted.

Poonawalla has introduced six new products as it seeks to diversify its lending portfolio. Jefferies expects growth in these newer segments and a more balanced unsecured lending mix to support net interest margin expansion. The brokerage also expects credit costs to decline as legacy stress fades and the portfolio mix improves.

Jefferies expects earnings to grow sharply over financial year 2026 to financial year 2029, with return on assets rising from 1.1% to 2.3% and return on equity increasing from 5.9% to 16.5%.

The brokerage has based its Rs 560 target price on 2.7 times September 2028 price-to-book value.

Conclusion

Jefferies’ 25% CAGR club is built around five very different financial businesses, but the brokerage sees a common earnings story across them. Groww is expanding beyond broking, Paytm is gaining new monetisation avenues, PB Fintech is riding insurance growth, AU Small Finance Bank is preparing for its universal bank transition and Poonawalla Fincorp is scaling newer lending products. With ‘Buy’ ratings across the group and target-price upsides ranging from 14% to 25% in the brokerage’s 12-month framework, Jefferies is betting that stronger earnings growth can support these valuations.

Disclaimer

The ratings, target prices, earnings estimates and views mentioned in this article are based on Jefferies’ research report and represent the brokerage’s analysis, not that of Financial Express or the author. The information is provided for informational purposes only and should not be considered investment advice or a recommendation to buy or sell any security. Readers should conduct their own research and consult a qualified Sebi registered financial adviser before making investment decisions. The securities quoted are for illustration only and are not recommendations. Investment in securities market is subject to market risks. Read all related documents carefully before investing.