Jefferies' 25% CAGR club: Paytm, Groww among 5 financial stocks that can deliver up to 25% returns

International brokerage Jefferies has identified five Indian financial companies, including Paytm, Groww, Policybazaar-parent PB Fintech, AU Small Finance Bank and Poonawalla Fincorp, that can deliver a 25% compound annual growth rate (CAGR) over the next three years, delivering decent investor returns despite higher valuations.

In its latest note on what it called ‘The 25% CAGR club of Indian Financials’, Jefferies said these five Indian financial companies that have a market capitalisation of near or above $5 billion can deliver strong earnings growth with healthy revenue growth and economies from scale. The international brokerage ignores normalisation of credit costs and low base in its calculations. In most of these companies, founders are also CEOs, Jefferies highlighted as it maintained ‘Buy’ calls on all the five stocks.

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Jefferies on Paytm share price

Paytm was the only stock among the five which saw a target price hike from Jefferies. The international brokerage increased its price target for the stock to Rs 2,100 apiece from Rs 1,600 apiece, while maintaining its ‘Buy’ call. The latest target price implies nearly 21% upside potential from the stock’s previous closing price of Rs 1,739 apiece on NSE.

Jefferies highlighted that Paytm stands out on monetisation of its client base in near-zero MDR regime, which is now changing favourably. The fintech platform’s 4.9 crore merchant base and strong loan-origination model should drive 25% revenue CAGR over FY26-29, which, along with operational synergies will aid sharp rise in EBITDA and profit, it added.

Initiative in credit on UPI, cloud AI inference models, wealth offering and foray into overseas markets can lift growth, the international brokerage said, as it increased earnings estimates for FY28-29 by 20-25% to factor 25 bps MDR on UPI.

Jefferies on Groww share price

Jefferies has a ‘Buy’ call on the shares of Groww with a target price of Rs 240 apiece, implying nearly 23% upside potential from the stock’s previous closing price of Rs 195.84 apiece on NSE. The international brokerage noted that Groww is the largest broker in India with respect to active clients, despite starting the business in FY21.

“We believe the company has several levers to drive 30% PAT CAGR over FY26-29,” Jefferies said, adding that this will be driven by 18% growth in broking business led by client vintage and market share gains, new initiatives like margin trading facility and wealth management, and 10 pp margin expansion.

Further Groww is adding US stocks to its platform later in FY27, which Jefferies believes could add 5-9% to the broker’s FY28 earnings.

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Jefferies on PB Fintech share price

Jefferies has a ‘Buy’ call on the shares of PB Fintech, the parent company of Policybazaar, and has maintained its target price of Rs 2,050 apiece for the stock. This implies an upside potential of nearly 14% from the stock’s previous closing price of Rs 1,800 apiece on NSE.

Digital brokers are gaining from rising insurance penetration and customer shift to online channels, the international brokerage said, adding that PB Fintech operates India's largest online insurance platform which has over 90% market share, and should witness 35% CAGR in premiums over FY26-29.

“Strong operating leverage and growing renewal book should drive 4x adjusted EBITDA expansion over FY26-29…While risks exist from adverse commission regulations, levers exist in form of "Combined Operating" model and claim support/sales investments,” it added.

Jefferies on AU SFB share price

AU Small Finance Bank’s expected transition from a small-finance bank to a Universal bank can lower funding cost, lift fees & strengthen brand to aid growth, Jefferies said as it maintained its ‘Buy’ call for the stock with a target price of Rs 1,270 apiece. This implies an upside potential of more than 20% from the stock’s previous closing price.

“Promoter (Founder, MD & CEO) Sanjay Agarwal owns 23%, while leadership continuity is ensured as his tenure is approved till April 2029. Growth and profitability aid val premium,” Jefferies said.

Jefferies on Poonawalla Fincorp share price

Jefferies has a ‘Buy’ call on the shares of Poonawalla Fincorp, with a target price of Rs 560 apiece, implying around 25% upside potential. The company should deliver 34% AUM CAGR over FY26-29, led by scale up of its new products to 34% of total (16% Q1 FY27), the report said.

“Higher disbursement yields and faster growth in prime PL and gold loans should support NIM expansion. Credit costs should ease with benign asset quality in unsecured, structurally lower credit costs in select segments (eg. gold, education loans),” it added.

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Disclaimer: This article has been written by Debaroti Adhikary, who is not a SEBI-registered Research Analyst or an Investment Adviser. Debaroti Adhikary and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here.