Non-banking finance companies (NBFCs) are slowing their fund-raising plans in the second half of the financial year, generally considered a high-business season for these entities. Sluggish growth in business and high interest rates are the key reasons for this.
“We raise funds in accordance with disbursals that we make. This year, asset growth is a bit slower than what it had been in the past. In the first half, we raised about Rs 2,000 crore. In the same period last year, we had raised more because asset growth was stronger,” said N Sivaraman, president and whole-time director of L&T Finance Holdings.
The company is eyeing growth of about 20 per cent in its book size this financial year, which is almost half of what it recorded in the first quarter this year. As on March 31, the total book size stood at Rs 25,671 crore, a growth of 40.7 per cent over the previous year. Though it recorded 37 per cent growth in its lending business in the first quarter, its loan book grew only Rs 513 crore in the first quarter reflecting only two per cent sequential growth.
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Similarly, Shriram Transport Finance Co had plans to come up with another public issue of non-convertible debentures (NCDs) in the second half of the financial year. But the plans have been kept on hold, as of now. “We will take a call once Reserve Bank of India (RBI) decides on interest rates. We have to see where the interest rates move if RBI reduces the key policy rates,” said Umesh Revankar, managing director and chief executive officer of the company. Earlier this financial year, the company had raised Rs 600 crore by way of public issue of NCDs.
RBI had cut the repo rate, the rate at which banks borrow from RBI, by 50 basis points in April to eight per cent. This had helped bring down the cost of borrowing for companies like Shriram . However, the timing of a further cut in the repo rate is uncertain.
Another Kolkata-based NBFC, Magma Fincorp, mainly into automobile lending, apart from SME lending, is seeing a slowdown in the auto business. V Lakshmi Narasimhan, chief financial officer, said, “We are expecting a 40 per cent increase in disbursals but the growth of the commercial vehicles (CV) and construction equipment segments is expected to remain negative this fiscal.”
“Auto loans and tractor loans are expected to have single-digit growth,” he added.
Magma’s loan book also grew only by Rs 690 crore in the first quarter, showing about six per cent growth sequentially.
But there are few NBFCs which are bullish on growth and are raising funds. “Our plans have not got impacted because our loan book grew by 35 per cent in the first quarter of the current fiscal to Rs 4,347 crore and we have raised Rs 4,000 crore in that period,” said Ramesh Iyer, managing director, M&M Financial Services. According to Iyer, the company is not seeing any slowdown, thanks to their presence in semi-urban and rural areas. “The other reason is our increased branch network and presence across multi-product categories,” he said.
