Pune-headquartered two-wheeler and three-wheeler major Bajaj Auto is ramping up its wholly-owned captive finance subsidiary Bajaj Auto Credit Ltd (BACL) and plans to invest more than Rs 3,000 crore over financial years 2024-25 and 2025-26, a senior company official said.
Rajiv Bajaj, managing director of Bajaj Auto Ltd, said that BACL has already commenced commercial operations and will be scaled up further. Speaking on the sidelines of the event unveiling Bajaj Group’s Corporate Social Responsibility identity, Bajaj said, “The investments will be more than Rs 3,000 crore.”
Rating agency CRISIL recently said that BACL commenced operations on January 1, 2024, after receiving its licence from the Reserve Bank of India (RBI) in August last year. As of January 31, 2024, the company’s assets under management stood at Rs 103 crore, corresponding to a net worth of Rs 78 crore and debt of Rs 151 crore, the rating agency noted. It further added that thus far, the company has received Rs 145 crore as equity capital from its parent Bajaj Auto Ltd (BAL), and is expected to receive a cumulative quantum of over Rs 3,300 crore over financial years 2025 and 2026.
“Henceforth, the two-wheeler and three-wheeler financing business will be carried out through BACL with all new loan originations being made at BACL in a phased manner and the existing two-wheeler and three-wheeler portfolios of Bajaj Finance Ltd (BFL) about Bajaj Auto Ltd-manufactured vehicles getting organically redeemed. This entire transition is expected to culminate by June 2025,” it said.
BACL is a wholly-owned captive finance subsidiary of BAL, established exclusively for financing two-wheelers and three-wheelers manufactured by BAL and its subsidiaries. This business was earlier housed under BFL as its auto finance division.
CRISIL has assigned a ‘CRISIL AAA/Stable/CRISIL A1+’ rating to BACL. “The ratings centrally factor in the expectation of strong support from, and the company’s strategic importance to, BAL. The ratings are further driven by the adequate capitalisation of BACL and its experienced management team. These strengths are partially offset by the nascent stage of the company’s operations and its undemonstrated ability to successfully operate as an independent captive financier,” it said, explaining the ratings’ rationale.
BAL has sold 2,067,581 units of two-wheelers during the April to February period of 2023-24 in the domestic market, registering a 25 per cent year-on-year (Y-o-Y) growth, and the company has also sold 426,749 units of three-wheelers during the same period, registering a 60 per cent growth. Total domestic sales combining two-wheelers and three-wheelers for April-February 2023-24 stood at 2,494,330 units, up 30 per cent.
Analysts are bullish on BAL. After the third quarter earnings, Deven Choksey Research noted that strong growth and market share gains in the over 125 cc segment in domestic two-wheelers, as well as domestic three-wheelers, are major contributors to BAL’s revenue and profitability. Analysts expect BAL to maintain healthy margin levels through continued traction in the domestic three-wheelers and the over 125 cc two-wheeler segment.
First Published: Mar 24 2024 | 2:49 PM IST