Life for non-banking finance companies (NBFCs) is gradually returning to normal after three years of struggle. In signs of financial markets easing up for shadow banks that were shut out after the collapse of IL&FS in 2018, companies are raising funds through the public sale of bonds at interest rates lower than what they were paying before it imploded.
Indiabulls Housing, which seeks to be an originator of loans rather than engaging in direct lending, and Edelweiss are in the market selling bonds to retail investors. Piramal Capital & Housing,
, Muthoot FinCorp, Indel Money, , and JM Financial are likely to raise at least ₹10,000 crore in total by December.
“Retail money is more sticky and helps in diversification of the investor base,” said Oommen K Mammen, chief financial officer at Muthoot Finance.
Credit demand is improving with rising vaccinations. Investors are also benefitting as they get better rates and an option to invest for the long term. “It makes sense for NBFCs to tap this route as past apprehensions have been allayed,” Mammen said.
Muthoot Finance is raising up to ₹2,000 crore by December via a public sale of bonds, said people with knowledge of the matter. It intends to focus exclusively on retail investors for public issuance, in one or two tranches, they said.
‘Attractive Rates for Investors’
Typically, public bonds are categorised into four based on investors — pure retail, wealthy individuals, institutions and corporates. Muthoot FinCorp is raising about ₹500 crore through a public sale of non-convertible debentures in the next few weeks. “Ahead of the festival season, we see credit demand coming back, which will gain momentum with the rising vaccination drive,” said director George Muthoot.
Indiabulls Housing raised about ₹270 crore in the first three days of issuance. It is aiming to get up to ₹1,000 crore. Edelweiss Financial closed its public issue of ₹400 crore of bonds against which it had obtained significantly higher bids. “NBFCs have come up a long way, shrugging off past baggage,” said Ajay Manglunia, managing director and head of institutional fixed income at JM Financial.“Rates are also attractive enough to entice yield-hungry retail investors. NBFCs are seen queuing up for retail sales of bonds via public issuances as the economy is opening up fast.”
Those bonds can offer as much as 9.75% for longer tenors, locking yields at fixed coupons. However, the coupon varies, depending on credit ratings — higher the rating, lower the offer. Individual borrowers did not comment on their precise public bond sale plans. “Our fund raising programme is ongoing and it involves regular private placement of our bonds and public issue at opportune moments,” said a spokesperson from Manappuram Finance.
Piramal Capital & Housing is seeking to raise about ₹1,200 crore after completing its takeover of Dewan Housing Finance. It recently raised more than ₹800 crore, getting bids for four times more than the actual offer.