Bajaj Finance Rises 4% On Fund Raise Reports; Should You Invest Or Avoid?


Last Updated: September 25, 2023, 15:07 IST

Bajaj Finance Share Price Today: Shares of Bajaj Finance gained over 4 per cent on September 25 in an otherwise weak market after the company said its board of directors will meet next week to consider raising funds.

The Board of Bajaj Finance is scheduled to meet next week to consider a proposal for raising funds through any or all of various methods including by way of preferential issue or QIP. At 12:50 pm, the stock was quoting at Rs 7,808 on the NSE, up over 4.5 per cent from the previous close.

“A meeting of the board of directors of Bajaj Finance will be held on Thursday, 5 October 2023 to consider the proposal for raising funds through any or all of various methods including by way of preferential issue, qualified institutions placement, subject to such regulatory and statutory approvals as may be required, including approval of the shareholders of the company,” Bajaj Finance said in an exchange filing post market hours last Friday.

Should You Invest Or Avoid?

Following the development, foreign brokerage firm CLSA, which has a ‘buy’ call on the stock, raised its price target for Bajaj Finance to Rs 9,500 per share, reflecting a strong upside potential of over 27 per cent. The firm sees a 10-13 per cent book value per share (BVPS) accretion from the fund raise, which will still keep Bajaj Finance’s return on equity (RoE) over 20 per cent.

Brokerage firm Motilal Oswal Financial Services believes the stock can rise further after the company announced its plan for a capital raise.

“While we still do not have finer details on the game plan of Jio Financial, it has plans to initially foray into consumer and merchant lending. Some of the channel checks suggest that Jio Financial has already started consumer lending pilots in consumer durable/lifestyle stores owned by Reliance. This capital raise could then be a tacit acknowledgment that Bajaj Finance is readying its capital ammunition for how the competitive landscape is going to evolve over the next few years,” said Motilal Oswal.

The brokerage firm has a buy call on the stock with a target price of Rs 8,800, implying an 18 per cent upside potential.

Motilal pointed out that Bajaj Finance’s digital ecosystem and ‘omni-channel’ transformation will provide it with good levers for increasing its fee income in addition to giving it the firepower for strong customer acquisitions and disbursement momentum.

“Management’s long-term RoE (return on equity) guidance stands at 21-23 per cent but at current leverage, it can clock RoE of 24-25 per cent. This capital raise could also be an attempt to bring the RoE within the guided levels. We model nearly 29 per cent AUM (assets under management) CAGR over FY23-FY25E for a sustainable RoE of 25 per cent,” Motilal Oswal said.

Among the global brokerage firms, Jefferies has a buy call on Bajaj Finance with a target price of Rs 8,830, according to CNBC-TV18.

“Assuming Bajaj Finance raises 10-15 per cent of net worth, the issue size may be about Rs 8,000 crore. This would lead to the dilution of 2 per cent whereas FY24 EPS and BVPS may rise 6 per cent and 11 per cent, respectively. RoE may see a slight fall to 22 per cent,” CNBC-TV18 reported Jefferies saying so.

Disclaimer:Disclaimer: The views and investment tips by experts in this report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.

Aparna DebAparna Deb is a Subeditor and writes for the business vertical of Among other things, financial market, economy and policies interest her …Read More



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