Bajaj Finance Ltd. will convene an extraordinary general meeting on Oct. 31 to seek shareholder approval for the proposed fundraising of up to Rs 10,000 crore through a combination of preferential issues and qualified institutional placements.
Last week, the non-banking financial 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.
Bajaj Finance will allot up to 15.5 lakh warrants, convertible into an equivalent number of equity shares with a face value of Rs 2 each, to promoter Bajaj Finserv Ltd., according to an exchange filing on Monday. The issue price will be determined on the basis of the market price on Sept. 29.
Following the issue, the promoter's stake will rise to 52.57% from the pre-allotment of 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 warrant.
Purpose Of Fundraise
Bajaj Finance aims to utilise up to Rs 8,000 crore for repayment of loans, commercial papers, non-convertible debentures, and interest payments through the proceeds of warrant issues and QIP.
The remaining Rs 2,000 crore will be used for general corporate purposes, according to its EGM notice.
Staying Well-Capitalised
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.
In its September note, HSBC estimated a capital infusion of approximately 12–15% of the net worth in the first quarter of the current financial year, ranging between Rs 7,000 crore and Rs 8,000 crore. That implied a dilution of approximately 1.6–1.7% in the number of shares, the brokerage said.
A fundraising effort of almost $1 billion could lower the NBFC's return ratio, according to Jefferies. While return on equity may fall to 22% in the current fiscal as compared with 23% in the previous fiscal, the company's return-on-asset ratio will remain unchanged at 4.7% for the current fiscal, the brokerage said.
However, the fundraise will 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 the first quarter, Jefferies said.
With a "healthy" tier-I capital adequacy ratio of 23%, the NBFC has geared up to diversify the risk on its balance sheet, according to PhillipCapital.
Shares of Bajaj Finance closed 1.73% lower at Rs 8,026.45 apiece on the BSE as compared with a 0.73% decline in the benchmark Sensex. The announcement was made during market hours. The shares have advanced by 2.25% since Oct. 5 when the board approved the fundraise.
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