Bajaj Finance's Fundraising Plan May Push Risk-Adjusted Capital Above 15%: S&P Global
This capitalisation should also benefit from the listing of its subsidiary Bajaj Housing Finance Ltd., S&P said.
Bajaj Finance Ltd.'s plans to raise Rs 100 billion, or Rs 10,000 crore, via equity may push its risk-adjusted capital ratio to above 15% for fiscal 2024, according to S&P Global Ratings.
This increase would be compared with an RAC ratio of about 14.3% as of March 31 of this year, it said.
However, the ratings firm does not expect the NBFC's RAC to stay above 15% over fiscal 2025 and 2026. This is because the company is expected to grow more than 30% a year over the next two years, it said.
"Hence, the company's pre-diversification RAC ratio could taper down to about 14.3%–14.7% over the next two fiscal years," the note said.
Since the company has stated its intention to maintain high capital, it is expected to have a stronger capitalisation as compared with peers, it said.
This capitalisation should also benefit from the listing of its subsidiary, Bajaj Housing Finance Ltd., the note from S&P Global said.
"As BHFL is included in the upper layer of the Reserve Bank of India's scale-based regulations, it will have to be listed by September 2025. This will attract further inclusion of capital into BHFL and at a consolidated level at BFL," according to S&P Global Ratings.
However, the company's return on average assets is expected to moderate to about 4.5% for fiscals 2024–2026 due to margin pressure, it said.
On Oct. 5, the board of Bajaj Finance approved raising up to Rs 10,000 crore. Of this, Rs 8,800 crore would be raised via a qualified institutional placement and up to Rs 1,200 crore through the preferential issue of shares, according to an exchange filing.
This capital-raising plan would strengthen the company's already solid capital buffer, the global ratings agency said.
Hence, the rating agency also does not expect any impact on the ratings, which are on par with sovereign ratings for India. Bajaj Finance's ratings stand at BBB-, stable, and A-3, according to S&P Global Ratings.
While its aggressive loan growth strategy poses some risks, the company's adequate underwriting standards and mass-affluent borrower profile will "partially offset" it, the agency said.
Shares of Bajaj Finance rose 0.29% as compared with a 0.65% advance in the NSE Nifty 50 as of 2:49 p.m.
Of the 35 analysts tracking the company, 26 suggest 'buy,' four recommend 'hold', and five maintain 'sell,' according to Bloomberg data.
