If you compare Bajaj Finance with REC, I know they are into different type of loans. But both should get similar valuation, they both have similar NPA. Hear me out why.
Valuation should be based on future growth. Till now PSU were not getting similar valuation to private player because PSUs were considered as a dying sector. Few year ago, there was no growth, management of PSU companies were not held accountable, asset quality was falling, whatever valuation was on the hope of privatisation of PSU. Whereas private player such as Bajaj had big future opportunity, little to no competition, good and clean management.
Now things have changed, due to government initiatives, PSUs asset quality have been improving, management is being accounted, growth has returned, many PSUs are now competing with private players. Whereas for private players Bajaj finance, future opportunity is still there, but now competition is high with many player pushing into the market.
I might be biased, I hold REC, I sold Bajaj Finance and bought REC on the basis of above thinking and it has been rewarding till now.
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