This is the company’s first equity capital raise since November 2019 and comes even as it is sitting on a comfortable capital adequacy of 23% — more than double the 10% mandated by the Reserve Bank of India for NBFCs classified in the upper layer and considered important for India’s financial system.
Bajaj Finance will issue Rs 8,800 crore worth of shares to institutional investors through a qualified institutional placement (QIP) and will also allocate shares worth Rs 1,200 crore to promoter company Bajaj Finserv.
The fundraising will have to be approved by the company’s shareholders in a proposed extraordinary general meeting. Analysts say the company is preparing both for future growth and arming itself against the upcoming competition through this share sale.
“India is clearly in the midst of a strong retail lending cycle as Bajaj Finance’s pre-results numbers show. They have enough capital for now, but they are building ammunition for increased competition from the likes of Jio in the future,” said Shewta Daptardar, analyst at Elara Capital. “This capital could also be useful if the company wants to pursue acquisitions in the future.”
Jio Financial Services, the financial business separated from India’s largest company Reliance Industries, debuted on the local stock market in August.
Although not much is known yet about what Jio will exactly do, the company is widely expected to compete in the consumer finance space hitherto dominated by Bajaj.
Jio has already announced a tie-up with investment giant BlackRock to launch an asset management company — a space where Bajaj itself is a relatively new entrant.
In an event last month, Bajaj Finserv chairman Sanjiv Bajaj said the Indian market is large enough to accommodate more NBFCs.
“Even being present in 4,000 cities (currently) with assets close to Rs 3 lakh crore, we still have less than 2% of India’s credit market…We know nothing about Jio’s plans; hence it is very difficult to comment on that.
They have a large base of customers with tremendous technological and digital strengths. We are already servicing some customers through their stores, which is a small business for us,” Bajaj had then said, responding to a question on Jio’s entry into financial services.
To be sure, Bajaj has a customer franchise of 76.56 million as of September 2023, with a 26% growth in new loans. Pre-earnings data published by the company this week showed that assets under management (AUM) expanded a third to Rs 2.90 lakh crore as of September 30, from Rs .18 lakh crore a year ago. The company had a liquidity surplus of Rs 11,400 crore as of September, with deposits of Rs 54,800 crore.
