Bajaj Finance shares in focus as NBFC to acquire 26% stake in Pennant for Rs 268 crore in cash deal

Shares of Bajaj Finance will be in focus on Tuesday after the NBFC said it has entered into a binding term sheet with Pennant Technologies (‘Pennant’) for acquisition up to 26 per cent equity stake in the company for Rs 267.50 crore in cash deal. Pennant, as per Bajaj Finance, is engaged in providing business-driven technology services and software products for the banking and financial services industry. This would be a strategic investment by Bajaj Finance with an aim to strengthen its technology roadmap. Bajaj Finance said while its promoter or promoter group or group companies do not have any interest, Bajaj Finance may have commercial transaction in normal course of business with Pennant.

Bajaj Finance would acquire 5,71,268 compulsorily convertible preference shares (Series A CCPS) of face value of Rs 100 each. Besides, it would buy 4,22,738 equity shares from promoters and existing shareholders of Pennant. Pennant Technologies logged a turnover of Rs 74.28 crore in FY23, Rs 52.07 crore in FY22 and Rs 40.48 crore in FY21.

Bajaj Finance suggested December 30 as an indicative time period for completion of the acquisition "subject to satisfaction of the conditions to be set out in the definitive agreements to be entered."

The announcement came on the day of Bajaj Finance's September quarter results.

Bajaj Finance has reported highest ever sequential AUM growth of 7.5 per cent (up 33 per cent YoY) in the seasonally weak quarter. It also along with strong new customer acquisition (3.6 million – second highest in its history), IIFL Secuities noted.

"Margin compression (10 bps QoQ) due to higher COF is expected to result in slightly slower NII growth of 30 per cent YoY (up 7 per cent QoQ). We expect credit costs to inch up to 165 bps (up 12bps QoQ) partially offset by lower opex as benefits of operating leverage play out. Adjusted for tax rate normalization, Bajaj Finance should deliver earnings growth of 27 per cent YoY/ 5 per cent QoQ and ROA as percentage of AUM at 5.1 per cent," the domestic brokerage said.

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