In the largest institutional placement of equity shares by a non-banking finance company post IL&FS crisis, the Government of Singapore has cornered maximum shares of Pune-headquartered Bajaj Finance under the recent Rs 8,500 crore equity offering.
The government of Singapore has purchased shares close to Rs 2,500 crore, which represented 30 per cent of the total offering of Rs 8,500 crore. The NBFC belonging to the Rahul Bajaj Group also saw widespread participation from other marquee investors such as sovereign wealth funds, pension funds, foreign funds and domestic mutual fund and insurance industry. Some big names included Pioneer Investment Fund, Nomura, BNP Paribas and Monetary Authority Of Singapore.
Government of Singapore, which is already a shareholder in the NBFC, will now have close to 4 per cent equity shareholding in the company.
Clearly, the strong fundamentals of the Bajaj Finance has attracted such a high interest by a single investor. In fact , NBFCs in the post IL&FS period are struggling to raise both equity and debt funds from the market. Banks are also reluctant to lend to NBFCs. The government had even announced public sector banks buying the pool assets of NBFCs with a fund size of Rs 1 lakh crore. But Bajaj Finance stock remained unscathed from the turmoil in NBFCs. The company's stock is currently trading at Rs 4,200 as against the qualified institutional placement (QIP) of Rs 3,900 per share.
Bajaj Finance is not a small NBFC. The company with a balance sheet size of over Rs 1.46 lakh crore rubs shoulders with mid-sized banks such as Federal Bank, United Bank of India, Punjab & Sind Bank in terms of total assets. In a five-year period, the company has trebled its standalone financial numbers. Take, for instance, between 2014 and 2018, the total income has grown from Rs 4,073 crore to Rs 13,329 crore while the net profits have jumped from Rs 719 crore to Rs 2,646 crore.
The new Rs-8,500 crore capital raise is expected to support the growth of the company over the next few years. Market experts say that this is the good opportunity to underwrite quality business as other NBFCs are either not growing because of lack of capital or going slow because of challenging operating environment. Currently, total borrowings are at Rs 1.19 lakh crore where the banks' contribution is close to 40 per cent. The highest borrowing is through the market at 46 per cent. The deposits contribute about 15 per cent to total borrowings.
The company's current offering was for 2.17 crore equity shares at an issue price of Rs 3,900 per equity share. More than 200 institutional investors from the overseas and domestic market have invested in the QIP. In a post issue scenario, the promoter (Bajaj Group) holding is likely to drop from 58.3 per cent to 56.2 per cent, while the share of institutional investors is improving from 29.9 per cent to 32.5 per cent.
Bajaj Finance, runs by Rahul Bajaj's younger son Sanjiv Bajaj, is the largest financial services business along with insurance, especially life insurance and general insurance. The company has half a dozen business verticals such as consumer lending, SME , commercial lending , rural lending and mortgages. In fact, the company was pioneer in introducing a technology solution via mobile for buying consumer goods on loan. This was later replicated by other NBFCs and some banks.