This Finance Stock is a Multibagger #Jiofinance | Jio Finance Stock

imagine this that you're watching IPL on geoc Cinema you see an ad for a mutual fund and that ad runs for 30 seconds now in order to run this 30C ad the company will easily spend 60 lakhs and in a match it will easily run this ad at least five times so the total spend comes out to be roughly 3 crores now the very next day you receive a message on your phone from another rival mutual fund let's call it geom mutual fund but it was able to reach you by spending 100th of the total spent that was done by its rival now this is one of the key competitive advantages that Geo Financial currently has just to understand the context Geo Financial recently got listed on the Indian Stock Exchange it currently does not even have a business model that they have like offices and bunch of other different different things but still it has been valued as the second biggest nbfc non-banking Finance Company in India right now according to me this part of the Reliance group could very well become a multibagger stock right now it is falling in the market lower P lower circuit but in case you wish to be an investor in this company you already hold the stock this piece of analysis will help you understand the comparator landscape it will help you understand the DNA of the Monopoly and more importantly it will help you understand whether or not you should be investing in such businesses so let's discuss four things how Reliance more specifically Gio builds it businesses and how it is actually going to build Geo Financial number two why geo financials will be an extremely profitable business going forward number three what kind of competitor landscape will it change how will it hit companies like PTM how will it hit Bajaj Finance all these stocks are happening so we'll discuss that fourth and finally what is the right time of entry for this stock and when is it that I'm going to buy it whether or not I'm going to buy it I will reveal all those points so here is the typical business model that Reliance is exhibiting in its current set of businesses and I will give you couple of relevant examples also and it consists of four simple steps number one is that you procure capital or you partner with other big players for example you might be aware of the news that during covid or just after covid Reliance ended up forming a lot of strategic Partnerships with Facebook with Google and silver Leake Partners on top of this when it comes to Geo financials it has partnered with black rock which is the largest asset management company then comes the Second Step that the specific business that it targets it ends up doing a lot of prize war and it undercuts the competition this model has has been exhibited in the Telecom space how Gio ended up becoming one of the largest Telecom players or the largest Telecom player how did it happen well free mobile free data this that right so with that they were able to undercut the competition and take the market share away from other players then comes the third step where you literally kill the competition for example again take a look at this graphic and you will notice that approximately like 10 years back there were lot more Telecom players in India the market was fragmented Gio came in killed a lot of players and now only large conglomerate players are left then comes the final or profitability stage this is where the prices are Jagged up for example right now you are seeing this in Geo Telecom that free that everything was free FOC earlier now the prices have been Jagged up quite aggressively now some of you might say that okay you're handpicking an example here can you show some other example from Reliance group where this is happened or is happening well take a look at the streaming service so geoc cinema right now offers one of the most competitive plans so you can take a snipp here please calculate it on yearly basis what the subscription plans are and you will see that right now geoc Cinema is at this stage which is price cutting the moment the market share gets killed for other competitors they will increase the prices so I have given you two examples but if you study any of the business models of Reliance group geog group as of now this is what they are typically doing am I approving it am I disapproving it I'm no one to do any of that thing I'm simply telling you whatever they are doing this is a business analysis video I'm not here to comment whether this is a good step bad step I'm simply analyzing the entire thing also on another note if you like analytical stuff do consider supporting these type of videos it will reach out to more people will make them fundamentally more aware I had to do a lot of study to make this video you will see a lot of insightful points along the way so do consider supporting now if we study this framework from Geo Financial design point of view right now the design of entire financial company of Gio is not out yet but I'm approximating that they are going to enter in all these space announcements have been made there are news in bits and pieces here and there if you put it together you will see that they are working on these five six key things the first key thing is that they are going to come in the mutual fund industry this is going to happen now in mutual fund industries does cutting prices does it really help the short answer is yes because people really worry about the type of commissions or the extent of commissions that they are paying this is the same strategy that na'vi also used to grow its business really really fast within the mutual fund industry so to say that they came out with a bunch of mutual funds and on that the expense ratio was very less and ratios were very less and they were able to expand their AUM or asset under management very fast so this is the first key thing second is the aggregator model which means that for example PTM if you take a look at you can go and buy mutual funds on an aggregator platform called as PTM now one rule change came in 2016 by RBI when I explain you the nbfc industry I will talk more about it but as per that RBI announced that nbfc firms so for example right now Geo Financial is an nbfc non-banking finance company so non-banking finance company as per 2016 regulation set by RBI they can become aggregator platforms so this is a business line that Geo Financial is going to build then comes the third point that they can sell insurance so most likely they are going to sell insurance via this aggregator then comes the loan business so here people are comparing Gio Financial with something like baj finance that you know what Gio Financial so baj Finance is going to get wiped out now is it going to get wiped out according to me no baj finance will do really well I will take you through the case study also on this video why it is likely to do well nothing is going to come off from baj Finance per se and then comes the fifth point which is that they will also get into UPI now this is a very interesting point as to why geo Financial will get into UPI business okay so because if you think about it UPI are you know what it's not as if that they are taking some money from you when you're transferring 100 rupees to your or you're going and making like some kind of merchant payment all this stuff you're not paying anything probably Merchants are also not paying anything then why is it that UPI business is not only being eyed just by Geo Financial but also by companies like na'vi why are they doing it well it's very simple see think about it this way that what are all these different companies doing for example na'vi is building an app Geo Financial will build an app this aggregator thing what is PTM doing well PTM is also an app so think about it this way that what exactly is na'vi well na'vi is a finance platform so to say or more specifically it's a financial product platform that you can go and buy like a mutual fund right now how often will you go and open this app and interact with this app the chances are that maybe like you know when you getting your salary then you'll say mutual fund I'll go and invest so probably every fifth of every month you'll go and open na'vi app once and you are done so it's da or daily average users are very few right right so in order to improve this da these companies are getting into UPI business also because UPI so you will use the UPI app very frequently so I hope that through this point you got a good perspective of where exactly Geo Financial is going to focus its business now of course I'm not an Insider I have aggregated all this information for you of course they can add lot more business lines to it but for the topic of today's conversation I hope you were able to understand and the broader context of Geo Financial so now comes the second key consideration and we will spend maybe couple of minutes discussing this that why is it that Geo Financial will be extremely profitable with time so for this there are three four critical reasons the first critical reason is that if you study the target market for geo Financial then what is the target market well it is people who have discretionary income these would be people who are earning I would say more than five lakhs right I mean only those people can go and buy Financial products mutual fund they will be able to invest in stocks they will be able to Avail High ticket Consumer loans so the target market in very simple words is the target market of the rich or top 3% of Indians maybe top five now if extreme growth happens in the next 10 years in India then we are looking at a Target or a t of 5 to 10% of the entire Indian market now see folks many of times I get a question that you know what this is like such a small sliver only 5 10% people in India are into all these Financial products then why is it that companies like Zera they are also in finance became a profitable unicorn I'm stressing on the word profitable unicorn because unicorn but profitable unicorn VA is really really tough then why is it that Sachin Manel who co-founded Flipkart got a very good exit he's into Financial why is it that adani Capital has launched their company why is it that Gio Financial is in this group why is it that Kunal chak is in this range because all of them are trying to Target this 5 to 10% class why because this is the most profitable customer segment now it is much better for these companies to Target one person who earns let's say 10 crores versus any other business which is going and targeting like a person who earns only 5 lakhs right so I'm just helping you understand the context here that the target market here is literally the gold market you can go and sell a range of products here that is typically what even cred is doing now I will reveal the answer here that according to my analysis Geo Financial is a much bigger crit to something like GED over something like baj Finance okay so I'll get that to in a minute but I hope this first thing is very clear now the second key point is that entire India is getting financialized now what financialization means very simple UPI we are using banking so all that stuff is happening our discretionary income is growing so this is not an industry which is like this right this is an industry which is growing so this is very different from when Gio got into Telecom Telecom was somewhat of a stagnating industry so to say problems the infrastructure this that but this is literally a gold mine industry because the industry itself is expanding at a much faster rate let me also qualify my statement because some people will say k our Telecom was also growing at that time yes it was growing but not at the rate at which currently the financial service industry is growing now if you think about it from a macroeconomics point of view ask yourself what made Europe Rich for example Switzerland banking financialization what made America Rich banking structure what will make India really rich really rich right it is the fact that you know what there will be lot more financialization of India so that has started to happen so to say and Adis and am Manis cannot miss out on this opportunity so they are throwing a gauntlet there third is that see this fundamentally changes reliance's business model now in financial language Geo Financial is going to have one of the highest roic in the Reliance group of universe companies now what is the meaning of roic it's very simple if you invest 100 rupees in let's say reliance's Oil Business by next year it will grow to let's say maybe 105 right but if Geo Financial May if the company is investing Reliance itself is investing 100 rupees of capital then the return on this invested Capital will at least be like 115 why because that is a very basic nature of Finance so the overarching Viewpoint is that back in the day Reliance was an oil company very bad roic even adani their cost of capital is very high and their roic is very low why businesses are extremely Capital High Capital intensive type of businesses then what did Reliance do it transitioned to Telecom Tech where the roic is moderate now they have been able to identify an arm at least a business line where this roic is going to be fairly high so then comes the third point that what kind of companies or other nbfcs would Geo financials impact will it go and hurt cred will it go and hurt PTM will it go and hurt Bajaj Finance what type of nbfcs will get hurt so for this you need to understand first and foremost what is nbfc space to begin with so as per rbi's listing these are the set of nbfcs which are allowed in India it will take the entire one hour but we will talk in very simple terms basically you will see that there are a bunch of companies for example there is asset Finance there's investment loan companies infrastructure companies Housing Finance Company micro finance company but Reliance or Gio what game are they going to play they are going to make money-making game that is what their objective is so in which spaces will they work they are going to work in consumer lending space agregator space asset Finance space and a few other points that I had explained earlier it is unlikely that they are going to get into micro finance and all that compared to all these other set of companies so from that respect you need to understand that which fight is it going to fight here so if I have to quickly draw out a competitor heat map it could look something like this that for example if you study baj finances business model model then they are mostly into Consumer Finance or almost like 70% of consumer durables fridge TV ac they are sold via baj Finance now another related point is the auto automobiles two wheelers selling especially two wheelers that is done via baj Finance now B Finance why did it grow because so B was initially what like automobiles they used to sell they already have a massive distribution Network they have a great risk management system it's a pro one business model that is grown with time so I don't think that as of now Geo financials is going to compete headon in this space now the second key thing is that for example if you consider housing finance companies then this is an entirely different space because here you are targeting a very specific Niche that okay we are going to give out like major money just for purchasing houses for example AAS financiers is into Housing Finance now is the Geo financials directly going to enter this and kill the competition here this also looks little bit unlikely most likely outcome here is that it is going to go after aggregator because this is like a mass Market product you can sell mutual funds you can sell insurance all this stuff so basically this is the first Target that Gio will have that PTM and credit they are directly going to compete why is this more certain simply because of the fact that this business this part of the business can be scaled fairly quickly so when Geo Financial partnered with black rock they got a lot of cloud in the mutual fund industry so to say so this is a fairly easier business to scale compared to something like let's say Housing Finance or something like auto financing and all that because distributor a lot of on ground work needs to happen I'm not saying that Gio Financial will not enter into these spes but it does not look like the first Target then gold so gold again can be aggregated here only mfis it's highly unlikely that they are going to enter it is not a profitable enough segment according to my understanding for geo financials to enter and sort of of spend their energy on so the way that I see is that Geo Financial will first and foremost look to build an aggregator platform they are going to benefit a lot right if you take a look at the Reliance Industries crazy business Empire what you will notice is that they have like retail store they have like Digital Services recharge they already have like a lot of customer data so giving like small Consumer loans right that becomes like a very important stuff VI their digital products they can sell their own consumer products and give small loans for it this seems like a related step these things can happen directly that aggregator platform now digitally push people to take Consumer loans via their digital stores and sort of build your loan business from that perspective another easy business for them would be to enter the credit card business and generally card businesses co-branding cards right they going to expand this business line This is a profitable business so something like SBI cards can also take a hit but at least in the short term it doesn't look like that so now comes the natural question that Geo financials has a bunch of of advantages going for it so should you go and buy immediately should you wait and watch what is it that you should be doing see guys honestly I don't know what the correct valuation is no one know if anyone knew what the exact correct valuation was then life would have become so easy but everyone is guessing here and there is no head orle to it so I will tell you the pros and cons the pro of buying Geo financials right now is that right now there is index rebalancing that is happening so major mutual funds will have to sell Reliance Geo simply because of the fact that they have to rebalance for example when you buy nifty50 and financial then they'll have to rebalance it accordingly right so all this stuff is going down and therefore for the last two days circuit May the stock is there that it is falling and falling so that is happening number two the price discovery of an IPO takes time so pick any IPO now Geo Financial has not been a typical IPO because it got demarched right so that is how the IPO was generated so to say but from a conglomerate business you can't take out just that valuation part and figure out what the correct value is no one can do it everyone is guessing so honestly like you can give it a little bit of time for Price Discovery just wait and watch it's no hurry that you have to do it now after reading a lot of analysis I'm getting a sense that the correct price is somewhere around 235 how people have reached it no clue right just people are just scoring 230 235 range so AB time you could probably wait and watch in case you a very short-term player if you're a long-term player you of the vi see I want to hold it for 3 years getting it at a good price now so can I buy it so yes you could definitely consider building some positions on this stock But please understand the risks see the biggest risk that I see on Geo Financial is very simple it is called as conglomerate risk now what is the meaning of conglomerate risk it means that goo or Reliance is a bunch of businesses it has like these many businesses going yeah Geo Financial it's like a tiny business now what is the issue that is going on in adani Group they have demerged their businesses bunch of companies have been listed separately and there is what issue that is going on at adani group it is we don't know like I mean you guys are doing like one thing in one company probably moving money from X to Y company then why to Z company we don't know right so that is the headache and that is one of the reasons why de also resigned but in case of Reliance companies majority of these businesses are tied to this group and now they have started to demerge it and one of the demerge business is Geo Financial so again that moving money business from entity a to entity B could happen it could create a lot of issues even if Geo Financial is generating a lot of profits so this small tiny Venture is generating a lot of profit but it is not reflecting on its book for some reason because this is being kind of given to this big entity so that kind of creates an issue in the overall business despite really good growth it is not getting reflected into the stock price and one final point that will I be buying Geo financials the answer is yes I will definitely be buying Geo financials at what stage I might make an announcement in the member Community section in order to understand that you could consider checking the links in the description and comment box in case you want to understand more that how these businesses are designed adani G's business Amani G business and will they end up owning and building the entire Monopoly in India please consider watching this video I've given you very relevant unbiased analysis on this entire issue do consider watching it and do consider supporting these type of videos I hope you enjoyed this conversation and I will see you soon

Channel: Akshat Shrivastava

Views: 717,933

Keywords: akshat shrivastava, cases over coffee, wisdom hatch, wisdom hatch courses, stock market courses, akshat shrivastava courses, stock analysis, stock market india, stocks to invest in, how to pick good stocks, stock market course akshat shrivastava, investing for beginners, jio, jio financial, jio reliance, jio financial stock, invest in reliance, invest in jio financial, jio ambani, jio telecom analysis, jio mutual fund, jio black rock, jio and bajaj finserv, nbfc in India

Id: tHlpxlRRuOk

Length: 19min 55sec (1195 seconds)

Published: Wed Aug 23 2023