Bajaj Finance To Raise Rs 10,000 Crore Via QIP, Preferential Issue

Bajaj Finance Ltd. will raise an aggregate of Rs 10,000 crore through a combination of preferential issues and qualified institutional placements.

The company's board approved the proposals to raise up to Rs 8,800 crore via QIP and up to Rs 1,200 crore via preferential issue of warrants, according to an exchange filing on Thursday.

"The company will be seeking approval of the shareholders for the proposed QIP and PI by convening an extra ordinary general meeting, subject to applicable provisions/circulars issued by the Ministry of Corporate Affairs," the filing said.

Bajaj Finance will allot up to 15.5 lakh warrants, convertible into equivalent number of equity shares of face value of Rs 2 each, to promoter Bajaj Finserv Ltd. The issue price will be determined at a later stage.

Following the issue, the promoter's stake will rise to 52.57% from the pre-allotment 52.45%.

An amount equivalent to 25% of the consideration shall be payable at the time of subscription and allotment of warrants, and the remaining 75% on the exercise of options against each such warrant.

Bajaj Finance's plans to raise capital will help improve its book value and growth outlook on profit and assets under management, according to HSBC Global Research.

HSBC, in its September note, estimated a capital infusion of approximately 12–15% of Q1 FY24 net worth, ranging between Rs 7,000 crore and Rs 8,000 crore. That implied a dilution of c.1.6–1.7% in the number of shares, the brokerage said.

A fundraising of almost $1 billion could lower the NBFC's return ratios, according to Jefferies. Though return on equity may fall to 22% in FY24E, compared to 23% in FY23, the company's return on assets ratio will remain unchanged at 4.7% for FY24E, compared to FY23, the brokerage had said.

The fundraise will, however, keep Bajaj Finance well capitalised with a tier-1 capital adequacy ratio of 23%. The planned capital raise is primarily expected to be for "upfronting of capital to support strong AUM growth" of 32% in Q1, Jefferies said.

With a healthy Tier I capital of 23%, the non-banking financial company has geared up to diversify the risk on their balance sheet, according to PhillipCapital.

Bajaj Finance, in its provisional update on Wednesday, reported deposit growth of 39% year-on-year to Rs 54,800 crore in the quarter ended September. Its assets under management stood at Rs 2.9 lakh crore, up 33% year-on-year, higher than market expectations. The total customer franchise stood at 7.66 crore, up 22% year on year.

The company will disclose its September quarter results on Oct. 17.

Shares of Bajaj Finance Ltd. closed 0.07% lower at Rs 7,849.25 apiece, before the announcement. This compares to a 0.62% advance in the benchmark S&P BSE Sensex.