Non banking financial companies tap public issue market to raise funds
MUMBAI: Financial intermediaries who tapped banks and private placement market primarily for raising debt are now directly approaching investors as three companies hit the capital markets one after other this week. Tata Capital Financial Services' non-convertible debentures (NCD) issue opened for subscription on Monday, Indiabulls Commercial Credit opens on Tuesday, and Aadhar Housing Finance is scheduled to open on Friday.
Though the cost of funding is higher for public issue of NCDs compared to private placement of NCDs, these non-banking finance companies are also looking at the issuances as creating larger customer interface – the NCD investors can be potential borrowers and vice versa, an investment banking official said. Private placement market has also slowed down after regulations made electronic bidding compulsory. Tata Capital’s issue with a base size of Rs 2,000 crore with an option to retain oversubscription up to Rs 7,500 crore including an unsecured NCDs of Rs1,500 crore.
The issue opened to a positive response on day one getting cumulative bids of 61 per cent. The issue is AAA/stable rated by CRISIL and carries an interest rate of 8.7 per cent to 9.10 per cent for tenures of 3, 5 and 10 years. Indiabulls Commercial Credit, a subsidiary of India Bulls Housing Finance Ltd’s issue has a base size of Rs 1,000 crore and option to retain oversubscription of another Rs 1,000 crore. The AAA-rated NCDs carry interest rates of 8.80 to 9.10 per cent with tenures ranging 3, 5 and 10 years. Aadhar Housing Finance, active in the affordable housing lending segment is looking to raise the base amount of Rs 500 crore and up to a maximum of Rs 1,400 crore. The AA + (SO) rates issues carries an interest of 9.60 per cent to 9.75 per cent with tenures ranging from 3, 5 and 10 years.
With banks limiting their exposure to sectors to follow the regulatory norms, as well as their efforts to clean up their bad debts, have limited the financing option available for non-banking finance companies/financial intermediaries, market observers said. But, the financial intermediaries are seeing an increase in fund requirements as housing finance and other loans are seeing increasing demand, one investment banker said. “This is also an opportunity for investors who are looking at higher yield, and also an investment avenue away from equities in the current scenario,” he said.