MUMABI: Bajaj Finance , the country’s most valued nonbanking finance company (NBFC), plans to raise as much as $1.2 billion in a share sale to boost its capital. This is seen buffering it against a likely slowdown that could see a rise in bad loans and put it in a position to lend when the downward cycle turns.The fundraising exercise is likely to be in the second half of the fiscal year, coinciding with the likely revival of demand during the festival season and an impending resumption of investment. The share sale will likely be to institutional investors.“We are going through a volatile period and we have to be agile and watchful,” said Rajeev Jain, CEO of Bajaj Finance. “If the current environment continues, growth could be lower. Given that (we have) a 37 million customer franchise, we can grow without diluting underwriting standards.”Bajaj will be joining other financial institutions such as Axis Bank IndusInd Bank and RBL Bank , which have lined up share sales in the next few months as they prepare for the revival of demand once the government’s welfare measures trickle through and lift consumer sentiments.“The fundraising is likely to be in the second half of the year,” said Jain. “Last time we raised $700 million and this time we may raise $1 billion to $1.2 billion.”The timely raising of equity funds will also bolster the capital position ahead of an impending tightening of rules by the Reserve Bank of India (RBI) to strengthen the financial system after last year’s default by Infrastructure Leasing & Financial Services (IL&FS) led to a credit squeeze and pushed some NBFCs to the verge of bankruptcy.Considered one of the better-run companies in the industry, Bajaj Finance has a leverage ratio of 6.6 times, the point at which it typically initiates capital-raising plans. It raised capital in 2017, 2015 and 2012 when the leverage ratio had touched around this level.The company has a capital adequacy ratio — the proportion of capital to assets — of 19.5 per cent.Bajaj Finance is also turning cautious in preserving liquidity after the market shut out many NBFCs because of their leverage and fears of likely defaults due to asset-liability mismatches. It had Rs 6,400 crore liquidity at the end of June in the form of cash and cash equivalent. Its consolidated borrowings stood at Rs 1.12 lakh crore — in the ratio of 37:50:13 among banks, money markets and deposits as of June 30.The company’s commentary has turned cautious in the first quarter even as it reported a 43 per cent increase in net profit and 41 per cent growth in assets under management to Rs 1.3 lakh crore. The cost of funds has been stable at 8.47 per cent. The incremental borrowing over May and June has been lower than previously because of a rally in government securities and surplus liquidity in the system.While many NBFC stocks have crashed, investors are now looking at the sector positively and may be keen to buy shares where valuations have turned attractive.“Investor appetite has gone up as valuations are now rerated downwards,” said Ashok Wadhwa, CEO of Ambit Group. “They are at more realistic levels now. The general belief is that the economy will start growing again. Financial institutions will require significant amounts for the credit offtake. They are preparing for such next level of credit growth.”Following the squeeze, finance companies have also diversified their sources of debt funds with some selling bonds overseas. Offshore fundraising could top the record $49 billion touched in 2014.Companies have raised $21.64 billion through foreign currency bonds and loans so far this calendar year until July 11, according to data from Dealogic, a global analytics company. India Inc raised $27.1 billion in 2018 for both capital expenditure and refinancing.