Bajaj Finance To Raise Rs 10,000 Crore Through QIPs, Preferential Issue; Here's What Shareholders Should Know

Bajaj Finance's much-awaited fundraising plan has finally been announced, and on expected lines, the NBFC giant will raise to Rs 10,000 crore or approximately $1.21 billion through a mixture of qualified institutional placements (QIPs) and preferential issues. The decision was made in a board meeting held on October 5th.

Bajaj Finance's QIPs:

As per the regulatory filing, Bajaj Finance will raise to Rs 8,800 crore through issuance of Qualified Institutions Placement (QIPs) to institutional buyers. The equity shares offered in QIPs will have a face value of Rs 2 each.

Bajaj Finance's Preferential Issue:

Further, the company will raise Rs 1,200 crore through preferential issues. Under this plan, the NBFC will issue up to 15,50,000 warrants convertible into equivalent number of Equity Shares of face value of Rs 2 each. Promoter and holding company, Bajaj Finserv is the proposed allottee in the preferential issue.

Bajaj Finserv's shareholding in Bajaj Finance will increase to 31,93,66,130 equity shares or 52.27% in the post-preferential issue, compared to the pre-issue where its shareholding is at 31,78,16,130 equity shares or 52.45%.

The issue price will be determined at a later stage in accordance with applicable law.

Moreover, it needs to be noted that each of the warrants is convertible into an equivalent number of Equity Shares within a period of eighteen months from the date of allotment. Also, an amount equivalent to 25% of the consideration shall be payable at the time of subscription and allotment of warrants, and the remaining 75% of the consideration shall be payable on the exercise of options against each such warrant.

Further, if Bajaj Finserv does not exercise the option for Equity Shares against any of the warrants within eighteen months from the date of allotment of such Warrants, the unexercised Warrants shall lapse, and the consideration paid by the Proposed Allottee shall be forfeited by the Company.

On BSE, Bajaj Finance shares ended flat at Rs 7849.25 apiece.

Earlier this week, Axis Securities had recommended buying Bajaj Finance shares. It said, "While the impact on margins in Q1FY24 was lower than anticipated (by 4-6bps), in absence of opportunities to pass on the higher interest rate to the customers along with refinancing of maturing liabilities at higher rates, margins will continue to face pressure and are expected to contract by ~30bps over the next couple of quarters before stabilizing. Even as BAF continues to invest in technology, operating leverage kicking in will help gradually improve its cost ratios over FY24. Thus BAF remains well poised to deliver healthy RoA of 4.6-4.7% over FY23-25E."

Axis Securities set a target price of Rs 8,590 on Bajaj Finance.

Meanwhile, parent company Bajaj Finserv shares are also recommended as buy. In its latest research note dated October 4th, B&K Securities initiated a coverage on Bajaj Finance shares. It said. "We value BFL at 6x FY25E book value (in line with B&K's coverage of BFL), BAGIC at 27x FY25E PAT and BALIC at 2.1x FY25E embedded value. Over and above this, we believe these new ventures to have significant option value in the long-term. We arrive at a target price of Rs 1,867, which implies an upside of 22%, initiating coverage with a Buy."

Disclaimer:

The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.