The tale of Two Companies – Bandhan Bank Ltd. vs. Bajaj Finance Limited – Arthvigyan

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This is a story of two people who took divergent views and still end up being successful.

One is Mr. Chandra Shekhar Ghosh of Bandhan Bank Ltd. And another one is Mr. Rajeev Jain of Bajaj Finance Ltd.

Mr. Chandra Shekhar Ghosh created one of the most successful companies by lending to poor people to whom even most of NBFC and Banks were not willing to lend.

Mr. Rajeev Jain focus on consumer loan when most of the banks were struggling with the high operational cost and high bad assets (NPA)

How are they able to achieve success?


Both managers focus on different customer segments but are able to achieve the same level of success.

This reinforces the point that in commodity type of business (lending is the commodity as it is easier to lend to anyone), management’s risk management and execution skill plays a dominant role.

When to invest in these companies?

Neeraj Marathe, a renowned investor in India, has mentioned that – The market gives you either certainty or valuation, never both.

What he means by that is when there is a certainty, the stock is trading at a fair valuation (all the positive information is already factored in).

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But when there is uncertainty, the market may become behave irrationally.

Currently, both companies are trading 20% to 30% valuation as compared to pre-covid valuation.

(Bandhan Bank was trading at Rs. 423 as on 4th Mar-20 and it is currently trading at Rs.300 as on 6th Oct-20 and BFL was trading at Rs. 4300 as on 4th Mar-20 and currently trading at Rs. 3300 as on 7th Oct-20)

There is a lot of uncertainty around the amount of NPAs that the banking sector as a whole will report.  Given job loss and contraction in the economy, both of these companies are facing tough times.

How to make decisions?

When there is uncertainty, among all the other factors below three factors play a dominant role

  1. Understanding the business model
  2. Management execution skills
  3. Understanding how the business performed in the previous downturn or recession may give investors a fair idea about the damage to be expected on the business.

As with the case of Bandhan and BFL, they have a robust business model and exceptional management execution skills.

In the case of Bandhan, they had gone through different types of setback – Andra Pradesh Microfinance crisis in 2010, IF&FS Crisis in 2018, Natural calamity crisis in West Bengal and Assam (Bandhan is dominant in these 2 states), etc. and they come out of them with flying colors.

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In the case of Bajaj finance, they come out of– Global financial crisis of 2008-09, the IL&FS Crisis in 2018, etc.


Based on the above 3 factors – Strong Business Model, Great Management execution skill, an impeccable track record, investors can fairly conclude that Bandhan Bank and Bajaj Finance will come out of this crisis with flying colors.


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Vivek Chitale

Vivek Chitale

Life long learner | Passionate about investing in the stock market | Trying to bring differential insights
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