Bajaj finance board approved fundraising of total 10000 cr.
Bajaj finance ROE is about 25% (ROA of 5% multiplied by leverage ratio of 5 times) Which means they can keep growing at 25% without raising funds. Banks or NBFCs needs to raise funds when they want to grow at higher rate than thier ROE. Mr market is now excited because market now believes that Bajaj finance management has the visibility to grow higher than thier last given guidance of 24-26% which they gave in the last conference call.
When balance sheet attains a particular size there is a risk of slow down in growth. Street was fearful after witnessing recent valuation crush played out in HDFC bank, though there are multiple reasons for that. It looks like Bajaj finance is still some time away from slow down due to large size if that time ever has to come.
The timing of there capital raise is always exemplary. Last they raise the capital was back in 2019 before the Covid at 10 times price to book. That raise enable them to sail through entire covid cycle without any fresh raise of capital when valuations in terms of PB multiples were below there historic levels. And now again they found a period of good valuation for fresh raise of capital.
Disclosure: invested