Big NBFCs raise billions as credit boom brews, RBI watches with interest

Flush with parent backing and top credit ratings, India's largest NBFCs are raising record sums without chasing bank licences, as they prepare for a fresh wave of private sector credit demand

Tata Capital this week filed plans with the regulator to raise Rs 17,200 crore from the market, making it one of the largest ever in the country’s financial sector. Next door, Jio Financial Services plans to raise a comparable Rs 15,830 crore through a sale of shares to its founder Reliance Industries.

 

Around them, other financial sector companies, or NBFCs, have also begun raising strong tranches of capital. HDB Financial Services, with promoter HDFC Bank, for instance, has raised about the same — Rs 12,500 crore or about $1.5 billion.

 

There are more. A diverse range of companies including vehicle and business loan company SK Finance, education loan financing company Avanse Financial Services, and even MSME loan company Veritas Finance have entered the fund-raising space.

 

The public issues had become necessary because the RBI had set a September deadline for the upper tier NBFCs to be listed. Post the listing expect more actions in the debt market as these companies use their financial strength to raise more debt. Just as RIL, the parent company of Jio Financial Services, had floated a 100-year bond paper about 30 years ago, some of these companies, after the listing, could do something similar. LIC has already requested the RBI to float these extra-long papers from the government to park its investible surplus. Some of the private sector leaders could follow suit soon.

 

The presence of the large industrial groups in the mix is the most visible part of the fundraising plans. These companies, however, do not expect to get a bank licence. RBI Governor Sanjay Malhotra has made clear he is not open to the idea of industrial groups setting up banks, though in recent years the RBI has offered licences for numerous types of banks, including payments and small finance banks.

 

So what makes them go into the market to raise fresh capital? “Obviously these companies expect a big surge for credit. To shore up their equity gives them tremendous leverage when borrowing to meet the demand for credit,” said Dhirendra Kumar, founder and CEO of Value Research, an independent provider of investment information and research.

 

The ratings industry also thinks on similar lines. A note on Tata Capital from ICRA writes that due to the strong loan book growth in FY2025, the gearing increased to 6.5 times as on March 31, 2025. It was 6 times a year ago. “To maintain prudent capitalisation levels, the Group may require external capital if portfolio growth is higher than internal capital generation. In this regard, ICRA takes note of TCL’s IPO plan for the current fiscal, which is likely to result in a fresh capital raise to support its growth plans.”

 

The leverage for Jio Financial Services is even better. Crisil put the gearing ratio at a mouth-watering 0.03 for March 31, 2025.

 

These NBFCs do not need to enter the banking space. The RBI has relaxed the rules for lending and borrowing operations for these firms, including the dilution of risk weights for lending to infrastructure. The only trick they are missing out on is access to savings and current account (CASA) money that banks draw upon to keep their credit rates low.

 

But with the market for credit so soft, these NBFCs would not care. All the major ones have triple-A ratings and at times are accessing the market for debt at rates equivalent to the Government of India paper. In 2023, RIL had raised Rs 20,000 crore for a 10-year paper, at yields just 40 basis points more than GOI paper. With the backing of their respective parent companies, the NBFCs could now do similar power play. For instance, they can finance their subsidiaries at the same cost as the government pays to finance the state-owned banks. Who needs a bank licence with all the attendant regulatory restrictions like priority lending to freeze the balance sheets!

 

Instead, with this sort of backing, it is quite possible that the groups will next line up debt-raising plans, and with panache. They will have the power of the leverage of their balance sheets to do so. Tata Capital, despite this big fund raise, would still rank as India’s fourth-biggest NBFC behind the leader Bajaj Finance with a market value of about $69 billion, followed by cousin Bajaj Finserv at $38 billion and then Jio Financial Services at $23 billion. HDB is valued at $7.7 billion.

 

When Governor Malhotra reads out his monetary policy on Wednesday, the equity-raising plans of these marquee NBFCs will give him an assurance that a monsoon-like surge in private sector credit growth could be approaching soon.