Bajaj Auto to invest over Rs 3,000 crore into finance subsidiary BACL

Bajaj Auto Credit Ltd is a wholly-owned captive finance subsidiary of BAL, established exclusively for financing two-wheelers and three-wheelers manufactured by BAL and its subsidiaries

Bajaj Auto, India’s leading two-wheeler (2W) and three-wheeler (3W) maker, is scaling up its wholly owned finance subsidiary, Bajaj Auto Credit Ltd (BACL), with an investment of more than Rs 3,000 crore planned over the next two financial years, company’s Managing Director Rajiv Bajaj said. BACL has already started commercial operations, Bajaj recently said on the sidelines of the group’s CSR identity event.

According to rating agency CRISIL, BACL’s operations began on January 1 after receiving its licence from the Reserve Bank of India (RBI) in August last year. 
 

BACL was established exclusively for financing 2Ws and 3Ws manufactured by Bajaj Auto and its subsidiaries. It was housed under Bajaj Finance as its auto finance division. 
 

“The financing of 2W and 3W business will be carried out through BACL, with all new loan originations being made at BACL in phases. Bajaj Finance’s existing 2W and 3W portfolios pertaining to the Bajaj Auto manufactured vehicles will get organically redeemed. This entire transition is expected to culminate by June 2025,” CRISIL said.
 

Bajaj Finance and Bajaj Housing Finance are two group entities in the RBI’s list of upper layer non-banking financial companies (NBFCs). The entities in the upper layer have to be listed within three years from the date on which revised norms for NBFCs, or scale-based regulations, came into effect. The revised norms became effective from October 1, 2022. 
 

While Bajaj Finance is listed on exchanges, the housing finance unit remains unlisted. The group has sought dispensation on listing of housing finance arm.  According to CRISIL, BACL’s assets under management stood at Rs 103 crore corresponding to a net worth of Rs 78 crore, and debt of Rs 151 crore, as on January 31. The company has received Rs 145 crore as equity capital from its parent Bajaj Auto, and is expected to get a cumulative amount of over Rs 3,300 crore over FY25 and FY26.
 

CRISIL has assigned a ‘CRISIL AAA/Stable/CRISIL A1+’ rating to BACL. “The ratings centrally factor in the expectation of strong support and the company’s strategic importance to Bajaj Auto. The ratings are driven by adequate capitalisation of BACL and its experienced management team,” it said, explaining the rationale behind the ratings. “These strengths are partially offset by the nascent stage of the company’s operations and its ability to successfully operate as an independent captive financier,” it said. 

Bajaj Auto during the April-February FY24 period sold over 2 million 2W units in the domestic market, 25 per cent year-on-year (Y-o-Y) growth. Its 3W units saw 60 per cent Y-o-Y growth at 426,749 units during the same period. The total domestic sales for the period stood at 2.5 million units, up 30 per cent Y-o-Y.

After the third quarter earnings, Deven Choksey Research said strong growth and market share gain in the over 125 cc segment in both 2W and 3W domestic market were major contributors to Bajaj Auto’s revenue and profitability. Analysts expect it to maintain healthy margin levels through continued traction in the domestic 3W and the over 125 cc 2W segment.