Bajaj Fin up 3% as nod for Rs10,000 cr fund raise; here's what analysts say

This capital raise could then be a tacit acknowledgment that Bajaj Finance is readying its capital ammunition for how the competitive landscape is going to evolve over next few years, said analyst.

Shares of Bajaj Finance hit a record high of Rs 8,122, gaining 3.5 per cent on the BSE in Friday’s intra-day trade after the non-banking financial company on Thursday received its board’s approval to raise Rs 10,000 crore capital through qualified institutions placement (QIP) and the preferential issue of shares.

The board approved capital raising of around Rs 10,000 crore, which includes raising Rs 8,800 crores through QIP route. Further, the board also approved preferential issue of up to 1.55 million warrants convertible into equivalent number of equity shares to the promoter, Bajaj Finserv for an aggregate amount not exceeding Rs 1,200 crore.

This will be the fourth fundraising by the company by way of QIP in the last eight years. Last it raised Rs 8,500 crore in November 2019, and before that, Rs 4,500 crore in September 2017 and Rs 1,400 crore in June 2015.

Bajaj Finance is one of India’s largest NBFCs for consumer finance with a wide product portfolio comprising of loans for two-wheelers, consumer durables, housing, and small businesses among others.

Such capital raising will strengthen balance sheet for future growth, subject to approval from shareholders, according to analysts.

Bajaj Finance expects its asset under management (AUM) growth to be robust at 29-31 per cent for FY24 vs 25-27 per cent as indicated earlier. Similarly, buoyant growth in the existing segments along with the new products (microfinance, new auto financing and tractor financing) scaling up and contributing to medium-to-long term growth should keep overall AUM growth robust. Analysts at Axis Direct expect Bajaj Finance to register a ~28 per cent CAGR AUM growth over FY23-25E.

The recent announcement of fund raise despite the company having a healthy Tier I capital of ~23 per cent, hints at the company gearing up to achieve its long term growth ambitions. Post fund raise, Bajaj Finance will remain well positioned to deliver a robust RoE of ~21 per cent plus over the medium term vs our current estimates of 23-24.5 per cent, the brokerage firm said.

Bajaj Finance is gradually & granularly switching from a mass affluent to a mass enabler franchise with deepening reach & diversified offerings. BAF has a physical presence in ~3,828 locations (+95 in 1QFY24) and over 167K active distribution points.

The company has aggressively added ground force during Q1FY24 (~3,420 employees added in Q1) to accelerate growth further. Bajaj Finance (organically and without being a bank) intends a customer franchise of ~120m (~22 per cent CAGR) with ~2.5 per cent of India’s credit market share, according to analysts at InCred Equities.

On Bajaj Finance’s fund raising plan, analysts at Motilal Oswal Financial Services said, while we still do not have finer details on the game-plan of Jio Financial, it has plans to initially foray into consumer and merchant lending. Some of the channel checks suggest that Jio Financial has already started consumer lending pilots in consumer durable/ lifestyle stores owned by Reliance.

This capital raise could then be a tacit acknowledgment that Bajaj Finance is readying its capital ammunition for how the competitive landscape is going to evolve over the next few years, the brokerage firm said.