Bajaj Finance to Acquire 26% Stake in Pennant for INR 267 Crore

Bajaj Finance is in the process of acquiring a 26% stake in Pennant Technologies for INR 267 crore in a cash transaction. Pennant Technologies, which reported a turnover of INR 74.28 crore in FY23, specializes in providing technology services and software products for the banking and financial services sector. Bajaj Finance characterizes this strategic investment as a move to bolster its technology roadmap, according to its regulatory filing.

At 9:26 am on October 17, Bajaj Finance shares were trading approximately 1.5% higher at INR 8,152 on the NSE.

As part of the deal, Bajaj Finance will procure 5.71 lakh compulsorily convertible preference shares (Series A CCPS) with a face value of INR 100 each. Additionally, it will acquire 4.22 lakh equity shares from Pennant’s promoters and existing shareholders. Bajaj Finance has tentatively set December 30 as the completion date for the acquisition.

Anticipated Q2 Results

This acquisition announcement precedes Bajaj Finance’s release of its second-quarter (Q2FY24) earnings, scheduled for later on October 17. The non-banking financial company is expected to announce a significant increase in its net profit for Q2FY24, supported by steady asset quality and robust loan growth. Projections also indicate a rise in net interest income (NII).

According to brokerage firm Motilal Oswal Financial Services, Bajaj Finance may witness a marginal decrease of approximately 30 basis points and 40 basis points in margins and spreads, respectively, on a quarter-on-quarter (QoQ) basis. Analysts at Phillip Capital predict a 33% year-on-year (YoY) growth in Bajaj Finance’s loan book, with a slight uptick in the cost of funds, while asset quality is expected to remain stable.

In 2023 thus far, Bajaj Finance’s share price has climbed more than 24%, outperforming the benchmark Nifty 50, which has risen by approximately 9% during the same period. Over the last six months, Bajaj Finance’s stock has surged by 37%.