Bajaj Finance plans Rs 10,000-crore fundraise as Jio takes guard
Bajaj Finance, India’s biggest non-banking finance company (NBFC) by market capitalization, plans to secure as much as Rs 10,000 crore in a restricted share sale as it shores up its funding position amid the entry of Reliance Industries’ Jio Financial into retail lending. The process would involve equity divestment in favor of institutional investors and the holding company, Bajaj Finserv.
This is the company’s first equity capital raise since November 2019 and comes even though it is sitting on a comfortable adequate capital level 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 be issuing 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 shareholders of the business in a proposed extraordinary general meeting. Analysts say the company is preparing both for future success and arming itself against the upcoming competition through this share sale. “India is clearly in the midst of a strong lending cycle, as Bajaj Finance’s pre-results numbers show. They have enough capital for now, but they are developing ammunition for increased competition from the likes of Jio in the future. This funding could also be useful if the company is interested in acquisitions in the future", said Shewta Daptardar, an analyst at Elara Capital.
Jio Financial Services, the financial business separated from India’s biggest corporation 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 investments giant BlackRock to introduce an asset management company a space where Bajaj itself is a relatively recent entrant.
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.
Bajaj has a customer franchise of 76.56 million as of September 2023, with a 26% development 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 funds of Rs 54,800 crore.
This is the company’s first equity capital raise since November 2019 and comes even though it is sitting on a comfortable adequate capital level 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 be issuing 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 shareholders of the business in a proposed extraordinary general meeting. Analysts say the company is preparing both for future success and arming itself against the upcoming competition through this share sale. “India is clearly in the midst of a strong lending cycle, as Bajaj Finance’s pre-results numbers show. They have enough capital for now, but they are developing ammunition for increased competition from the likes of Jio in the future. This funding could also be useful if the company is interested in acquisitions in the future", said Shewta Daptardar, an analyst at Elara Capital.
Jio Financial Services, the financial business separated from India’s biggest corporation 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 investments giant BlackRock to introduce an asset management company a space where Bajaj itself is a relatively recent entrant.
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.
Bajaj has a customer franchise of 76.56 million as of September 2023, with a 26% development 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 funds of Rs 54,800 crore.
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