Bajaj Finance’s loan book, whether in size or granularity, doesn’t come close to that of India’s largest bank — State Bank of India (SBI). Yet, Bajaj Finance’s stock made waves lately when it pipped SBI in terms of market capitalisation. Trading at nearly 8x its 2019-20 (FY20) book, valuations have always been pricey for the Bajaj Finance stock. At current levels, it is at 10–20 per cent above its five-year average valuation.
It is true that high quality commands high valuations, and in tough times, the market leader and niche players tend to gain investor faith. However, the question is