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Bajaj Finance Growth Forecasts Rise as Capital Raise Risks Dilution
Bajaj Finance grew the amount of money it lends and manages during the second quarter.
It also brought in more new customers than a year earlier.
J.P. Morgan thinks the company’s growth may stay strong and has raised its forecast for future growth.
However, higher borrowing costs may make it harder for the company to earn as much from its loans.
HSBC says a planned capital raise could give Bajaj Finance more money to expand.
The new shares could slightly reduce existing shareholders’ ownership, and returns on equity may dip for a few years.
HSBC believes growth in newer businesses could help the company use the extra money and improve returns over time.
The company’s actual capital raise and updated guidance were not detailed in the article.
Bajaj Finance’s assets under management rose 26.5% year-on-year to Rs 5.85 lakh crore in the second quarter, beating J.P. Morgan’s estimate.
New customer additions increased 7% year-on-year to 4.4 million, while first-half additions reached 9.52 million against a FY27 target of 15–17 million.
J.P. Morgan raised its FY27 AUM growth forecast to 25.8% from 24% and expects a 12-basis-point sequential decline in second-quarter net interest margins.
HSBC estimates a proposed capital raise could increase the share count by about 3%, lift book value per share by 7.6%, and add roughly 170 basis points to the Tier-1 capital ratio.
HSBC expects return on equity to moderate to 19–20% in FY27–FY29, but says expansion opportunities could help the company deploy the funds and rebuild ROE.
- Who
- Bajaj Finance; J.P. Morgan and HSBC Global Research provided forecasts and analysis.
- What
- The article assesses Bajaj Finance’s second-quarter business update, growth outlook, and proposed capital raise.
- Where
- India.
- When
- The update concerns the second quarter; forecasts cover FY27–FY29, and a leadership transition is expected next year.
- Why
- Strong AUM and customer growth, alongside a proposed capital infusion, may support expansion while creating margin and ROE dilution risks.
Capital-raise concerns
Capital-raise benefits
Shareholder dilution and returns
Capital-raise concerns
The estimated share-count increase of about 3% and lower projected ROE of 19–20% in FY27–FY29 could weigh on returns.
Capital-raise benefits
HSBC expects book value per share to rise about 7.6% and the Tier-1 capital ratio to increase by roughly 170 basis points.
Need for additional capital
Capital-raise concerns
With a Tier-1 capital ratio around 20%, Bajaj Finance does not appear to need new capital simply to sustain its existing growth rate.
Capital-raise benefits
HSBC says capital could help fund newer businesses, a potential acceleration in SME lending, and expansion plans while giving the company financial flexibility.
Key facts
- AUM
- Rs 5.85 lakh crore; up 26.5% year-on-year and 6.9% sequentially.
- New customers
- 4.4 million in the quarter, up 7% year-on-year.
- FY27 customer-addition target
- 15–17 million; first-half additions were 9.52 million.
- J.P. Morgan FY27 AUM growth forecast
- 25.8%, increased from 24%.
- Expected NIM change
- J.P. Morgan forecasts a 12-basis-point sequential contraction in the second quarter.
- Estimated share-count dilution
- About 3%, assuming an issue price near Rs 950 per share, according to HSBC.
- Estimated ROE
- HSBC expects 19–20% in FY27–FY29, compared with its earlier 21–22% estimate.
Sources
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