Bajaj Finance, India's largest non-banking finance company (NBFC) by market capitalisation, intends to raise up to Rs 10,000 crore through a restricted share sale to shore up its capital position in the wake of Reliance Industries' Jio Financial's entry into retail lending. Equity would be divested in favour of institutional investors and the holding company, Bajaj Finserv, as part of the exercise.

This is the company's first equity capital raise since November 2019, and it comes at a time when it has a comfortable capital adequacy of 23% — more than double the 10% mandated by the Reserve Bank of India for NBFCs classified in the upper layer and deemed important to India's financial system.

Bajaj Finance will issue Rs 8,800 crore in shares to institutional investors via a qualified institutional placement (QIP), as well as Rs 1,200 crore in shares to promoter company Bajaj Finserv. The proposed extraordinary general meeting of the company's shareholders will have to approve the fundraising. Analysts believe that by selling these shares, the company is preparing for future growth as well as arming itself against upcoming competition.

“India is clearly in the midst of a strong retail lending cycle as Bajaj Finance’s pre-results numbers show. They have enough capital for now, but they are building ammunition for increased competition from the likes of Jio in the future,” said Shewta Daptardar, analyst at Elara Capital. “This capital could also be useful if the company wants to pursue acquisitions in the future.”