NEW DELHI: Brokerage firms have turned bullish on Bajaj Finance as the non-banking financial company (NBFC) is expected to raise up to $1 billion to support its future growth plans. Shares of the firm rose nearly 5% on Monday to close at Rs 7,819 a piece after it announced that its board will be meeting on October 5 to consider raising funds.
Following the announcement, global brokerage CLSA raised its target price on Bajaj Finance, predicting a 27% upside over Friday’s close of Rs 7,474.85. CLSA continues to have a ‘Buy’ call on the stock but now the target has been revised to Rs 9,500. It noted that the capital raise would help Bajaj Finance to help fuel long-term growth. It also sees a 10-13% book value per share (BVPS) accretion from the fundraising plan, which will still keep Bajaj Finance’s return on equity (RoE) over 20%.
Brokerage firm Motilal Oswal Financial Services also feels the stock can rise further after the company’s fundraising announcement. Bajaj Finance, the Pune-based financial giant, is aiming to raise about $1 billion via a qualified institutions placement (QIP) or preferential issue, as per reports. This move comes as it is about to face stiff competition from the entry of Jio Financial Services in the NBFC space.
“While we still don’t 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 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 in a report.