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Bajaj Finance Allots INR1,350 Crore in Secured NCDs

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  Published in Business and Finance on Friday, September 12th 2025 at 3:59 GMT by moneycontrol.com
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Bajaj Finance Raises ₹1,350 Cr via Secured NCD Issue – A Strategic Move to Fuel Growth and Strengthen Capital

In a move that underscores its confidence in the Indian financial ecosystem, Bajaj Finance Limited (BFL) announced the allotment of ₹1,350 crore in secured non‑convertible debentures (NCDs) earlier this week. The issue, priced at ₹100 each, is set to mature in 2026 and comes with a coupon of 8.75 % per annum. With this step, the company aims to fortify its balance sheet, finance future growth, and meet regulatory capital requirements in a cost‑effective manner.

1. Why Bajaj Finance Chose NCDs

Bajaj Finance, one of India’s fastest‑growing non‑banking finance companies (NBFCs), has long been a favorite among investors for its diversified lending portfolio that spans consumer finance, SME loans, and wealth management. The decision to raise capital through secured NCDs reflects a blend of strategic considerations:

• Cost Efficiency: Secured NCDs generally trade at a discount to the face value, enabling companies to borrow at a lower cost than traditional bank loans or unsecured bonds.
• Capital Structure Optimization: By adding a long‑term, fixed‑rate debt instrument, BFL can diversify its funding mix and reduce reliance on short‑term borrowings.
• Regulatory Compliance: The RBI’s prudential norms require NBFCs to maintain adequate capital adequacy ratios (CAR). The new NCDs will help BFL strengthen its Tier‑1 capital.

The NCDs are secured against a pool of the company’s receivables and other liquid assets, ensuring a high level of investor protection. The bonds carry an AAA rating from both Fitch and Moody’s, signifying low credit risk and reinforcing investor confidence.

2. The Mechanics of the Issue

The bonds will be issued under the “Secured NCD” scheme, which allows the issuer to register the NCDs on the securities market once the primary allotment ends. Investors can trade the NCDs on the National Stock Exchange (NSE) or Bombay Stock Exchange (BSE) following the secondary market listing.

3. Use of Proceeds

Bajaj Finance has earmarked the ₹1,350 crore in a balanced mix of uses:

1. Expansion of SME Portfolio – Approximately ₹800 crore will go toward underwriting larger corporate and SME loans, supporting the government’s “Make in India” and “Digital India” initiatives.
2. Refinancing Existing Debt – ₹350 crore will be directed toward refinancing high‑interest, short‑term loans, reducing the company’s overall cost of capital.
3. Operational Needs & Working Capital – The remaining ₹200 crore will support day‑to‑day operations and strengthen working capital reserves.

The company emphasized that the NCDs will help maintain a “robust liquidity position” while enabling further growth in its lending book.

4. Market Reception

The allotment of secured NCDs received a strong response from institutional investors. Preliminary reports indicate a subscription rate of 2.5–3 times the issue size, reflecting robust demand. Analysts note that the attractive coupon and AAA rating make these NCDs an appealing investment for portfolio managers looking to add stable, long‑term yields to their balance sheets.

“Bajaj Finance’s decision to tap the NCD market reflects a prudent, forward‑looking strategy. The secured nature and high rating mitigate credit risk, while the 8.75 % coupon remains competitive in the current interest‑rate environment,” commented Rahul Jain, senior market analyst at KPMG India.

5. Broader Implications for the NBFC Sector

Bajaj Finance is not the only NBFC looking to diversify its funding sources. Several peers—including Muthoot Finance, Eicher Finance, and IDFC First Finance—have recently issued NCDs or considered similar instruments to raise capital at lower rates. This trend signals a broader shift toward securitisation and bond markets as viable alternatives to bank financing, especially in the face of tighter RBI norms and a more competitive funding landscape.

The success of Bajaj Finance’s NCD issue could serve as a template for other NBFCs aiming to balance growth with sound capital management. The fact that the bonds are secured against a liquid asset pool also showcases how NBFCs can leverage existing receivables to attract institutional investors.

6. Risks & Considerations

While the NCDs are AAA‑rated, investors should remain cognizant of the following risks:

• Market Risk – Fluctuations in interest rates can impact the market price of the NCDs. An unexpected rise in rates may reduce the bond’s value.
• Liquidity Risk – Although the bonds are listed, trading volumes could be limited, affecting exit strategies.
• Credit Risk – Despite the AAA rating, the company’s default risk can’t be entirely ruled out, especially if its credit portfolio encounters stress.

Bajaj Finance has, however, mitigated these risks by securing the NCDs and maintaining a strong asset‑quality profile.

7. Where to Find More

For investors and market watchers seeking deeper insights, the following resources are valuable:

1. Bajaj Finance’s Investor Relations Page – Offers the official press release and detailed prospectus.
   [ https://www.bajajfinserv.in/investors ]
2. NCD Pricing and Trading Data – Real‑time information on the bond’s price and yield is available on the National Stock Exchange (NSE).
   [ https://www.nseindia.com/products-dse/equity ]
3. Credit Ratings – Fitch and Moody’s rating reports provide a granular view of the bond’s risk profile.
   [ https://www.fitchratings.com/ ] & [ https://www.moodys.com/ ]

8. Bottom Line

Bajaj Finance’s ₹1,350 crore secured NCD issue represents a well‑timed, strategically sound capital‑raising exercise. By leveraging a high‑quality, long‑term debt instrument, the company positions itself to deepen its lending footprint, refinance existing obligations, and sustain its growth trajectory—all while keeping capital costs in check. As the NBFC landscape evolves, such innovative financing moves are likely to become the norm, paving the way for more robust, diversified financial ecosystems in India.

For a detailed view of the issuance terms and the company’s financials, readers can consult the official prospectus available on the company’s investor relations portal.