Faf du Plessis was ruled out of the ninth edition of the IPL on Thursday last week due to a fractured finger, which will take six weeks to heal.
Pune Supergiants will be Bailey's third IPL franchise. He has already represented Chennai Super Kings and Kings XI Punjab, where he was the captain in 2014 and 2015 before the franchise decided to release him.
Bailey, who had listed his base price as Rs 1 crore ($148,000 approx), did not find any buyers at the auction in February, despite his name coming up twice.
Supergiants, one of the two new franchisees introduced this season, have not tasted much success on the field and are currently sixth on the points table with just two wins in eight games. Injuries to their star players have further added to their woes with four of their first-pick overseas players being ruled out over the past week.
Before du Plessis, former England batsman Kevin Pietersen tore his calf while batting in the home match against Kolkata Knight Riders. Australian allrounder Mitchell Marsh played just three matches before a side strain sidelined him earlier this week. But, the biggest blow came on Monday morning when Steven Smith, who had scored his maiden T20 century on April 29, was ruled out of the IPL with a wrist injury and was sent back to Australia.
"Smith's [news] been a bummer. He was just coming into his own and this happened," Raghu Iyer, chief executive at Supergiants, was quoted as saying by espncricinfo.com.
"It is a challenging time. Before we could settle down we lost the core group of players around whom you build a team around."
According to Iyer, given Bailey's leadership experience, he can cover for the loss of Smith and Pietersen. "We lost four crucial players, but we are looking ahead. Bailey has tremendous experience and had a very successful season before last. He can contribute to the leadership group," Iyer said. In 34 IPL games, Bailey has 579 runs at 25.17, with a strike rate 129.82.
Iyer said they are likely to announce Marsh's replacement in the next two days. They have already signed Australia batsman Usman Khawaja as Pietersen's replacement.