Three NBFCs looking to raise funds through dollar bond issue, say bankers

Three Indian non-banking finance companies (NBFC) are looking to raise funds through a dollar bond issue over the next few days, bankers said on Friday.
 

Manappuram Finance, Muthoot Finance and state-run REC are aiming to issue benchmark-sized bonds, which means the issuance will be around $500 million each, the three bankers said.
 

An increasing number of non-bank firms are seeking to raise funds via overseas borrowings, including bonds and loans, which is likely an outcome of the Reserve Bank of India's (RBI) push to diversify their borrowing sources, they said.
 

Funding costs for NBFCs have risen after the central bank last year asked banks to set aside higher capital on loans for these firms.
 

"Liquidity conditions in India have been tight; in the financial sector lenders are chasing deposits to match the higher credit growth rate," said Pramod Shenoi, head of Asia-Pacific Research at CreditSights.
 

The fight for liquidity has prompted issuers, particularly bank and non-bank companies, to consider the dollar bond market, Shenoi added.
 

Gold financier Manappuram Finance has mandated Barclays and Citigroup for its dollar bonds, which will have a weighted average life of about four years.
 

Investor meetings for the firm's proposed Regulation-S bonds will take place in Asia and Europe starting Monday, the bankers said.
 

Muthoot Finance, another gold financier, has appointed Deutsche Bank and Standard Chartered Bank as joint global coordinators to arrange investor calls. The firm is planning to price its dollar bonds with a door-to-door tenor of around four years in the coming weeks.
 

The all-in cost for the NBFCs' dollar bond issuance is around 8 per cent-9 per cent in rupee terms, which is not expensive compared to their domestic funding cost, a senior banker said on condition of anonymity as he is not authorised to speak to the media.
 

Power financier REC, too, is in early talks with lenders for its benchmark-sized offering and may issue bonds by June but has not appointed bankers yet, the bankers cited above said.
 

The company made its debut in the yen bond market and raised 61.1 billion yen ($390.1 million) in a three-part deal in January.

Manappuram Finance, Muthoot Finance and REC did not immediately respond to Reuters' request for comment.