You are here: Home » Companies » News
Business Standard

SIDBI plans to raise Rs 50 billion via bonds for refinancing activity

Rating agency Icra has assigned "AAA" rating for the proposed bond offering

Abhijit Lele  |  Mumbai 

bond, debt fund
Illustration by Ajay Mohanty

(SIDBI) has planned to raise up to Rs 50 billion through bonds in the backdrop of a rise in its refinancing activity.

Rating agency has assigned “AAA” rating for the proposed bond offering.

It is an apex financial institution (FI) for the micro, small and medium enterprises (MSME) sector backed by the Government of India. The government has 15.4 per cent stake in Public sector banks (PSBs), insurance and other FIs collectively hold more than 50 per cent stake in The (RBI) has allowed to borrow up to a leverage (debt/net-owned funds) of 12 times till July 2019 - 10 times that financial institutions such as SIDBI are allowed according to RBI regulations. Against this, SIDBI's leverage stood at 6.38 times as in March 2018 and is expected to increase further to 8-8.2 times by March 2019.

Despite the increasing leverage, its exposure to various banks, which attract low-risk weights, results in strong capital adequacy levels with Capital Adequacy Ratio of 26.73 per cent in September 2018 as (28.42 per cent in March 2018), said.

A rapid increase in refinancing activity in FY19 has led to higher business volumes and some moderation in the capital adequacy levels in September 2018.

It has a strong resource profile supported by MSME fund allocations. It has access to cheaper MSME fund deposits, which are provided by banks against their shortfalls in meeting priority sector lending targets. As of March 31, 2018, the total borrowings under the MSME fund programme stood at Rs 350 billion, which comprised 41 per cent of its overall borrowings for FY18.

For FY19, expects MSME fund deposits to account for a significant percentage of SIDBI's incremental borrowings. This is expected to lead to an overall competitive cost of funds for SIDBI.

Its liquidity position is in line with prudent norms. SIDBI also has MSME fund allocations of Rs 75 billion, which can be called at a short notice and will help meet funding gaps. Further, with sovereign backing, SIDBI has the flexibility to raise domestic and overseas funds to meet the funding shortfall.

First Published: Wed, December 26 2018. 23:32 IST
RECOMMENDED FOR YOU