Last updated: Sep 25, 2023 3:07 PM IST
Bajaj Finance share price today: Shares of Bajaj Finance rose more than 4 percent on September 25 in an otherwise weak market after the company announced that its board of directors will meet next week to consider raising funds.
The Bajaj Finance board will meet next week to consider a proposal to raise funds through one or more of several methods, including through preferential issuance or QIP. At 12.50 pm, the stock was trading at Rs 7,808 on the NSE, up over 4.5 percent from its previous close.
“A meeting of the Board of Directors of Bajaj Finance will be held on Thursday, October 5, 2023 to consider the proposal to raise funds through one or more of the various methods including through preferential issuance, placement of qualified institutions, subject to such regulatory and regulatory approvals as may be necessary, including approval of the shareholders of the company,” Bajaj Finance said in a stock exchange filing after trading hours last Friday.
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Following the development, foreign brokerage firm CLSA, which has put a ‘buy’ call on the stock, raised its price target on Bajaj Finance to Rs 9,500 per share, reflecting a strong upside potential of over 27 per cent. The company sees a book value per share (BVPS) increase of 10 to 13 percent on the back of the fundraising, which still leaves Bajaj Finance’s return on equity (RoE) above 20 percent.
Brokerage firm Motilal Oswal Financial Services believes its share price could rise further after the company announced its capital increase plan.
“While we still don’t have finer details about Jio Financial’s game plan, it has plans to initially experiment with consumer and merchant lending. Some channel checks show that Jio Financial has already started consumer lending pilots at Reliance-owned consumer/lifestyle stores. This capital raise could then be a tacit admission that Bajaj Finance is readying its capital ammunition for how the competitive landscape will evolve in the coming years,” said Motilal Oswal.
The brokerage firm has put a buy call on the stock with a price target of Rs 8,800, implying an upside potential of 18 percent.
Motilal pointed out that Bajaj Finance’s digital ecosystem and ‘omni-channel’ transformation will provide the company with good leverage to grow its fee revenue, besides firepower for strong customer acquisition and payout momentum.
“Management’s long-term RoE (return on equity) guidance is 21-23 percent, but with current leverage it can achieve a RoE of 24-25 percent. This capital increase could also be an attempt to bring the RoE within the target range. We model a CAGR of almost 29 percent AUM (assets under management) over FY23-FY25E for a sustainable RoE of 25 percent,” said Motilal Oswal.
Among 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 assets, the issue size could be around Rs 8,000 crore. This would lead to a dilution of 2 percent, while FY24 earnings per share and BVPS could increase by 6 percent and 11 percent, respectively. The RoE could see a slight decline to 22 percent,” CNBC-TV18 said.
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