Jefferies Bullish on Financial Stocks: 4 Picks Across Fintech, Banking and NBFCs Investors Can Track
India’s financial-services sector is increasingly expanding beyond traditional banks. Digital investment platforms, payments companies, small finance banks and retail-focused NBFCs are now participating in different parts of the country’s broader financialisation trend.
For investors, however, user growth, lending, or transactions alone may no longer be enough. As several financial businesses have already scaled substantially, the next phase of stock performance could increasingly depend on whether revenue growth converts into sustainable earnings, stronger margins, and better return ratios.
This appears to be the central theme behind Jefferies’ constructive stance on the sector. The brokerage has identified opportunities across different financial-services models, with Groww representing digital financial distribution, Paytm offering a payments-led profitability story, AU Small Finance Bank providing exposure to lending and improving return ratios, and Poonawalla Fincorp standing out for its expected earnings acceleration.
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Groww : Can the Investing Platform Sustain Its Growth?
Groww is one of Jefferies’ preferred digital-finance plays, with the brokerage assigning the stock a Buy rating and a target price of Rs.240, implying approximately a 31% upside from its CMP. The investment case is linked to the continued expansion of online investing in India. Groww has built a large retail-investor platform, and Jefferies expects operating profit to compound at around 30% through FY29.
The brokerage expects this growth to be supported by continued expansion in broking, market-share gains, margin-trading facilities and wealth management. Newer initiatives could provide additional sources of monetisation as the platform expands beyond its core broking business.
The key issue for investors is therefore no longer simply customer acquisition. The more important question is whether Groww can continue increasing revenue and operating profit as its customer base and product ecosystem scale.
With Jefferies expecting around 30% operating-profit growth through FY29, the company’s ability to maintain operating leverage will remain central to the thesis.
Paytm: Margin Expansion Becomes the Main Trigger
Paytm represents another operating-leverage story among Jefferies’ financial picks. The brokerage has assigned the company a Buy rating and a target price of Rs.2,100, implying an upside of approximately 27% from its CMP. Jefferies expects Paytm’s revenue to compound at approximately 25% between FY26 and FY29.
The growth thesis is linked to Paytm’s large merchant ecosystem, increasing monetisation and expansion in financial services. As the company generates more revenue from its existing ecosystem, operating leverage could become an increasingly important driver of profitability. Jefferies expects operating profit to grow by at least 25% annually over the next three years across its financial-services stock picks, with Paytm among the companies included in this group.
For investors, the key variables are therefore revenue growth, merchant monetisation, financial-services expansion and the pace at which operating expenses grow relative to revenue. The target price also means that the market will be closely watching whether Paytm can convert its large payments ecosystem into a consistently higher-profit business rather than relying primarily on transaction growth.
AU Small Finance Bank: Returns Could Improve Along With Growth
AU Small Finance Bank offers a different investment proposition because its thesis is centred on lending growth, funding costs and improving return ratios. Jefferies has assigned the bank a Buy rating and a target price of Rs.1,270, implying an upside of approximately 27% from its CMP. The brokerage expects loan growth of approximately 22% annually between FY26 and FY29.
A major part of the thesis is AU Small Finance Bank’s transition towards becoming a universal bank. Jefferies expects the transition to improve the bank’s funding profile and broaden its customer base, while a larger deposit franchise could help support credit expansion. The brokerage expects return on assets to reach approximately 1.8% by FY28 and remain around that level through FY29. It also expects return on equity to improve from 14.4% in FY26 to approximately 16.3% in FY29.
Jefferies projects net profit to increase from approximately Rs.2,640 crore in FY26 to Rs.5,790 crore in FY29. The key variables for investors will therefore include loan growth, deposit mobilisation, funding costs, asset quality and the extent to which the universal-bank transition translates into better profitability.
Poonawalla Fincorp: Highest Earnings Growth Expectation
Poonawalla Fincorp stands out for the expected pace of balance-sheet expansion. Jefferies has assigned the NBFC a Buy rating and a target price of Rs.560, implying an upside of approximately 24% from its CMP. The brokerage expects AUM to compound at approximately 33% between FY26 and FY29.
The growth is expected to come from the company’s strategic reset and the scaling of newer lending products. Poonawalla has introduced six new products as it works to diversify its lending portfolio. Jefferies expects the newer businesses and a more balanced unsecured-lending mix to support net interest margins. It also expects credit costs to decline as legacy stress fades and the portfolio mix improves.
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The brokerage forecasts a substantial improvement in profitability, with ROA rising from approximately 1.1% in FY26 to 2.3% in FY29. ROE is expected to increase from 5.9% to 16.5% over the same period. For investors, the key indicators will be AUM growth, product diversification, net interest margins, credit costs and the pace at which the newer lending businesses scale.
Which Jefferies Financial Pick Looks Most Interesting?
Jefferies’ four financial picks represent different business models, but the brokerage sees a common earnings-growth opportunity across them. Groww is expected to benefit from continued expansion in broking, margin trading, wealth management and other financial services, with operating profit expected to compound at around 30% through FY29.
Paytm’s thesis is centred on monetisation of its merchant ecosystem, financial-services expansion and operating leverage, with revenue expected to compound at approximately 25% between FY26 and FY29.
AU Small Finance Bank is expected to benefit from approximately 22% annual loan growth through FY29, alongside an improvement in ROA towards 1.8% and ROE towards 16.3%. Poonawalla Fincorp carries an expected AUM CAGR of approximately 33% through FY29, supported by newer lending products and an improving credit-cost profile.
The common factor across the four companies is therefore earnings growth rather than a single sector-wide catalyst. Jefferies expects these businesses to use scale, new products, stronger monetisation and operating leverage to compound operating profits at more than 25% annually over the next three years.
For investors tracking these stocks, the important question is whether the individual operating metrics behind these forecasts materialise. For Groww, this means sustaining digital-financial distribution growth and monetisation. For Paytm, merchant monetisation and operating leverage remain important. For AU Small Finance Bank, loan and deposit growth alongside improving returns will be key, while Poonawalla Fincorp will need to demonstrate that rapid AUM growth can be accompanied by improving margins and asset quality.