Mumbai: Financial services provider Bajaj Finance expects to launch a share sale to qualified institutions to raise as much as Rs 360 crore ($80.5 million) in the September quarter, its chief executive officer told Reuters on Wednesday.
The non-banking finance company plans to raise a total Rs 750 crore, including issue of warrants on preferential basis to founders, to support growth and shore up its capital base, Rajiv Jain said over the telephone from Pune.
JM Financial and IIFL Capital are the managers to the issue.
“We’d like to raise the funds sooner than later,” Jain said. “Underlying performance of the company is very strong. Our portfolio, asset quality is strong so we should be able to generate reasonable investor interest.”
Shares of Bajaj Finance, valued by the market at $520 million, have fallen about 7% so far this year. The 30-share BSE index has fallen about a tenth in the period.
On Wednesday, the shares closed up 8.4% at Rs 684.95 after rising as much as 15.3% on strong results. Its June quarter net nearly doubled on higher income from operations.
“The company has been growing at a robust pace,” Antique Broking, which has a ‘buy’ rating on the stock, said in a note last month.
“It is well-positioned to deliver sustainable and profitable growth which is scalable with lower risk as it intends to focus on secured business lines. This should lead to significant re-rating of the stock,” it added.
Jain expects loan growth to slow down in the next couple of quarters as rising interest rates curb consumer spending.
Bajaj Finance lends to consumer durables, two-wheelers, mortgages and construction equipment segments and will focus on protecting margins rather than on growth, Jain said.
Last month, India’s central bank raised interest rates for the tenth time since March 2010, to battle sticky inflation, making it difficult for lenders to balance growth and profitability.
Jain said lending to consumer durables has been growing in single digits in last 2-3 months compared with “high double digits” earlier while the two-wheelers segment was still “maintaining momentum.”
“The whole slowing environment will be visible in some part of the businesses in Q2 and in other parts of businesses in Q3,” Jain said, adding mortgages and construction equipment segments could start showing a slowdown in the current quarter.
The firm had disbursed nearly Rs 3600 crore worth of loans in the June quarter which could slow to 32 billion in the quarter-ending September while December quarter—traditionally very strong due to festive demand—may also slow, Jain said.
In FY11, its loan disbursements more than doubled to Rs 9440 crore but this year it will grow at a slower 28% to around Rs 12000 crore, Jain added.
“Margins will compress because incremental cost of borrowing is higher. Compression will be in the region of 60-75 basis points...over the next 2-3 quarters,” he said.
To protect its margins, the company will keep its operating costs muted and will not go for major expansion plans.
Its plans to launch a co-branded credit card with a foreign bank is pending central bank approval. The business will help improve its return on equity and margins, he added.