The Bajaj Finance Ltd board will meet on October 5 to consider the financing. Motilal Oswal said such an announcement came much earlier than expected as Bajaj Finance had already expected its consolidated assets under management (AUM) to grow by 29% annually from FY2023 to FY2025. The domestic brokerage revealed several possible reasons that may have prompted Bajaj Finance’s management to evaluate the equity capital raise despite reasonable leverage and high equity capital. However, the domestic brokerage stressed that it feels strongly that the capital is not for the stress that may exist in the (local) personal loan book.
Geo Financial Services
“Details about Jio Financial Services’ strategy are not yet known, but the company initially plans to expand into consumer lending and merchant lending. Part of the channel check is that Jio Financial already has The capital increase signals that BAF is preparing its capital ammunition for how the competitive environment evolves in the coming years. It may be a tacit admission that the
Growth outlook for assets under management
Bajaj Finance reported 29% growth in core asset balances in FY23 and 32% growth in June quarter. Motilal Oswal said this growth could potentially give Bajaj Finance confidence that the CAGR of assets under management would exceed 30% in the next few years, compared to the initial forecast of 26-27%. He said there is.
“Additionally, we are now moving into newer product segments such as automobiles, MFIs, tractors and CVs, and asset growth could also be 1-2% higher than previously expected. This means that: Raising new equity capital is being “primarily deployed to fund growth.Retail continues to perform well across financial institutions.Continuation of strong growth in retail loans in the coming years is also expected to continue in the coming years,” says management. It may have prompted them to consider this capital raise,” Motilal Oswal said.
M&A opportunities
Motilal Oswal said there are unlikely to be any M&A opportunities in the short term. He pointed out that in the new financing product segment of MFIs and vehicle finance, there are not many large-scale assets currently available for acquisition, so it is unlikely that there will be M&A in the financing sector in the near future.
“BAF’s financial lending franchise is expanding well and we will first build the MFI franchise organically before evaluating potential M&A opportunities in MFIs. BAF’s DNA has always been to The goal was to build a product and ace the product before considering an acquisition.”
Meets ROE guidance
Motilal Oswal said Bajaj Finance management’s long-term return on equity (ROE) outlook is 21-23%. However, with current leverage, you can achieve a RoE of 24-25%. The capital raise could also be an attempt to keep ROE within induced levels, he added.
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