Leading NBFC Bajaj Finance’s mega fund-raising drive — estimated at $1 billion — will have a mixed impact on its return ratios, brokerages said on Monday.
While book value per share is expected to rise post-fund-raise, return on equity is likely to fall.
Bajaj Finance Limited (BFL) said on Friday its board will meet on October 5 to discuss various fund-raising options such as a preferential issue and qualified institutions placement subject to regulatory and statutory approvals, including that from the shareholders.
Though the Pune-based non-banking finance company (NBFC) did not disclose the sum, reports said it could raise up to $1 billion.
The plan received a thumbs-up from the market with the shares of the company rising 4.64 per cent to Rs 7,819.20 on the BSE.
During intra-day trades, the counter hit a high of Rs 7,848.35, a gain of over 5 per cent compared with its last close.
The markets were responding to brokerages upping their target price on the stock: CLSA maintained a buy rating on BFL, raising its target price to Rs 9,500 from Rs 9,000, an upside of 27 per cent from Friday’s close.
Analysts at Jefferies said the non-bank lender is well capitalised with a tier-1 capital adequacy ratio (CAR) of 23 per cent.
The proposed mobilisation may be an upfronting of capital to support the strong growth of 32 per cent in its assets under management (AUM) in the first quarter.
The brokerage said if Bajaj Finance raises 10-15 per cent of its net worth, the issue size may be around Rs 8,000 crore or $1 billion.
It raised its estimate of book value per share by 6 per cent to Rs 1,232 for this fiscal from Rs 1,106 before the fund-raising plan.
The return on equity is projected to fall to 22 per cent from 24 per cent, while earnings per share may rise 6 per cent.
Jefferies has a buy rating on the stock with a target price of Rs 8,830.
Dnyanada Vaidya, research analyst — BFSI, Axis Securities — said that while the company remains well capitalised the fundraising is predominantly to support its long-term growth ambitions.
“The company will look to foray into new segments such as microfinance, auto and tractor financing. Robust growth visibility in existing segments and new products scaling up and contributing to medium-to-long-term growth could have prompted the management to consider the capital raise,’’ Vaidya said.