Bajaj Finance, a non-bank finance lender, has announced plans for a mega fund raise of $800 million to $1 billion. The decision has been positively received by brokerages, with some even increasing their price targets for the company’s stock.
One brokerage firm, HSBC, believes the fund raise is a positive move given the favorable market conditions and the company’s growth aspirations. HSBC has raised its AUM (assets under management) and EPS (earnings-per-stock) growth estimates for Bajaj Finance in light of the incoming capital of Rs 8,000 crore. The firm also raised its price target for Bajaj Finance to Rs 9,500, reflecting an upside potential of over 21 percent.
Similarly, CLSA also raised its price target for Bajaj Finance to Rs 9,500 while maintaining its ‘buy’ recommendation. The firm expects a 10-13 percent book value per share (BVPS) accretion from the fund raise, ensuring that Bajaj Finance’s return on equity (RoE) remains above 20 percent.
Jefferies, however, views the fund raise as upfronting of capital to support the company’s strong assets under management growth. The firm expects Bajaj Finance to raise around Rs 8,000 crore or $1 billion, leading to a dilution of RoE by 2 percent to 22 percent. On the other hand, Jefferies predicts a 6 percent increase in FY24 earnings-per-stock and an 11 percent increase in BVPS.
Investors have responded positively to the news, with the stock price of Bajaj Finance rising around 5 percent. Brokerage firm Goldman Sachs remains cautious and awaits clarity on the plans for the utilization of the funds raised.
The fundraising is expected to be done through the QIP or/and preferential issue route, with four investment banks shortlisted for the proposed deal. The final decision on the fund raise plans, deal size, and mechanism will be made after a board meeting on October 5.
The proceeds from the fundraise are expected to be used for growth capital and to strengthen Bajaj Finance’s balance sheet. The company aims to leverage the fund raise to further expand its business and capitalize on opportunities in the market.
Overall, the fund raise announcement has been well-received by brokerages and investors, with expectations of increased growth and profitability for Bajaj Finance. The final decision on the fund raise plans will be eagerly awaited by market participants.