With aggressive expansion plans ahead of them and a vibrant domestic market to cater to, most non-banking finance companies (NBFCs) are taking the retail debenture issue route to scale up their business. At least Rs 5,000 crore worth retail non-convertible debenture (NCD) issue is likely to hit the market in the next six months, going by announcements made by NBFCs.
Gold loans major Manappuram General Finance is planning to raise about Rs 1,000 crore this year through the issue, according to a senior company official.
The largest asset financing company in the country, Shriram Transport Finance, has also announced its plans to raise up to Rs 2,000 crore through an NCD issue, while group company, Shriram City Union Finance, which is into gold and SME lending, plans to mop up Rs 750 crore through the same route. Another major gold loans firm Muthoot Fincorp also plans to raise about Rs 100 crore through a retail NCD issue.Considering that the new financial year has just begun and companies are still charting their fund raising plans for the year, the sum is only expected to be higher.
For NBFC in the gold, vehicle and housing finance business, the going has been good for the past few years. Fund raising through equity is possible only once in a year or two and bank loans too can be raised only up to a certain extent. Beyond that, to meet the growing needs, raising resources through an NCD is the best option, according to experts.“
Apart from being one of the few funding sources to meet the high growth rate and requirement of funds, an NCD issue also increases the visibility and awareness of the company among the public,” Thomas John Muthoot, chairman of Muthoot Pappachan group, told Financial Chronicle.
With interest rates going upwards, retail investors could also see higher interest rates from the forthcoming NCD issues against the 9-11 per cent seen earlier, according to experts.“
Most of these NBFCs have a good track record, so fund raising through a retail issue of NCDs should not be a problem. For customers too, these debt products give a reasonable rate of interest and good option to diversify their investment basket,” said Kamal Bansal, head, investment banking, Bonanza Portfolio.
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Priyanka Kothari
Client Service Executive
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