Bajaj Finance plans mega $800mn-$1bn fund raise; engages JM Fin, Citi, Morgan Stanley & BofA Securities

According to a second person familiar with ongoing negotiations, a final decision on the deal size and the mechanism would be taken during the upcoming board meet on October 5

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Pune-headquartered NBFC behemoth Bajaj Finance is gearing up for a big-bang fundraising exercise between $800 million to $1 billion via the QIP or/and preferential issue route with four investment banks shortlisted for the proposed deal, multiple industry sources with knowledge of the matter told Moneycontrol.

"JM Financial, Citi, Morgan Stanley and BofA Securities have been mandated by Bajaj Finance. The firm is known to do large trades every few years and this deal was kicked off over the weekend," said one of the persons cited above.

According to a second person familiar with ongoing negotiations, a final decision on the deal size and the mechanism would be taken during the upcoming board meeting on October 5.

Two other persons confirmed the syndicate of i-banks and said the fundraising proceeds were likely to be used for growth capital and to strengthen the firm's balance sheet. The Bajaj Finance stock has risen by 21 per cent in the last six months.

All four persons above spoke to Moneycontrol on the condition of anonymity.

Bajaj Finance declined to comment in response to an email query from Moneycontrol. The i-banks could not be reached for an immediate comment. This article will be updated if we hear from them.

On August 5, Moneycontrol was the first to report that Murugappa Group-backed NBFC Cholamandalam Investment and Finance Co had shortlisted advisors to raise up to Rs 4,000 crore via a QIP ( qualified institutional placement) which was likely to launch in September.

Bajaj Finance: Past Deals & Growth Drivers

On 22 September, Bajaj Finance made the following disclosure to the exchanges, "Pursuant to Regulation 29(1)(d) of the SEBI Listing Regulations, we wish to inform you that a Meeting of the Board of Directors of Bajaj Finance Limited will be held on Thursday, 5 October 2023 to consider, inter alia, proposal for raising of funds through any or all of various methods including by way of preferential issue, qualified institutions placement, subject to such regulatory/statutory approvals as may be required, including approval of the shareholders of the company."

"While it is well capitalized with a tier -1 CAR of 23 per cent, this raise may be upfronting of capital to support strong AUM growth ( 32 per cent in 1Q) and is reasonably ahead of time," Jefferies said in a note released earlier today.

In September 2019, Bajaj Finance raised Rs 8,500 crore via the QIP route and the issue was subscribed five times. The deal saw participation from the likes of Blackrock and GIC of Singapore. In 2017, the firm mopped up Rs 4,500 crore via the same route.

The NBFC plans to expand its product lines, including microfinance, and new car and tractor and gold loan financing, which will provide support to its growth aspirations, according to a recent report by brokerage firm Nomura.

Analysts have pointed out increased competitive intensity for Bajaj Finance due to the entry of Jio Financial Services and the inroads made by private banks like HDFC Bank and ICICI Bank in unsecured lending ( a key part of the Bajaj Finance business model), amongst other factors.

The firm had a liquidity buffer of Rs 12,704 crore as of June 30 and the June quarter saw the addition of the highest number of new customers of 3.84 million. It said it was confident of adding 12-13 million new customers in FY24.

Also read: Bajaj Finance's acquire and cross-sell strategy to be key growth driver in FY24, says Motilal Oswal

Disclosure: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.