Bajaj Finance Plans $800 Million to $1 Billion Fundraising for Expansion

Bajaj Finance, a leading non-banking financial company (NBFC), is preparing for a fundraising endeavor, aiming to secure between $800 million to $1 billion. This capital infusion is set to occur through a Qualified Institutions Placement (QIP) or preferential issue, and the firm has shortlisted four prominent investment banks for the proposed deal. Sources with insights into the matter have confirmed these developments.

A final decision regarding the precise amount to be raised and the chosen fundraising mechanism is expected during an upcoming board meeting scheduled for October 5. The primary objectives for these fundraising proceeds are to bolster growth capital and fortify the company's balance sheet.

Previous Fundraising Efforts

Earlier this month, Bajaj Finance successfully raised ₹1,195 crore through the allotment of 7.85% per annum secured redeemable Non-Convertible Debentures (NCDs). Additionally, the company raised nearly ₹1,700 crore through NCDs in May.

Notably, in September 2019, the company successfully raised ₹8,500 crore through the QIP route, with the issue being oversubscribed five times. Investors like BlackRock and GIC of Singapore participated in the offering. In 2017, Bajaj Finance also garnered ₹4,500 crore through the same route.

Market Response

Following the announcement of the board meeting to discuss fundraising, Bajaj Finance's share price surged over 4% during morning trade on the Bombay Stock Exchange (BSE) on Monday. The stock opened at ₹7,594.95, compared to the previous close of ₹7,472.50, reaching an intraday high of ₹7,780. Bajaj Finance's stock has demonstrated robust performance, surging by 40% over the past six months. Over the past year, Bajaj Finance's share price has underperformed the benchmark Sensex, with a gain of approximately 7% compared to Sensex's over 15% increase during the same period. The stock reached its 52-week high of ₹7,999.90 on July 5 and its low of ₹5,487.25 on March 20 this year.
BoFA Securities projected a potential upside in shares of Bajaj Finance over the next 12 months. They issued a buy recommendation with a price target of ₹8,750. Their bullish stance is attributed to the company's diversification efforts, proactive actions in unsecured growth, and commitment to achieving targets for the financial year 2024.

Expansion Plans

Bajaj Finance is strategically expanding its product lines, which now include microfinance, new car and tractor financing, and gold loans. These initiatives align with the company's growth aspirations, as highlighted in a recent report from brokerage firm Nomura. However, analysts have raised concerns about heightened competition. This competition is driven by the entry of Jio Financial Services and the expansion of private banks such as HDFC Bank and ICICI Bank into unsecured lending, a crucial component of Bajaj Finance's business model.

As of June 30, the company boasts a liquidity buffer of ₹12,704 crore. During the June quarter, Bajaj Finance achieved a significant milestone by adding a record 3.84 million new customers. The company is confident about its ability to add 12-13 million new customers in FY24. Additionally, in the June quarter, Bajaj Finance recorded its highest-ever number of new loans. Moreover, asset quality demonstrated improvement, with Gross NPA decreasing from 0.94% in March to 0.87%, while Net NPA improved sequentially from 0.34% to 0.31%.

Conclusion

Bajaj Finance's strategic fundraising plans reflect its determination to continue its growth trajectory and remain competitive in a changing landscape. The upcoming board meeting on October 5 will be pivotal in shaping the company's financial future.