Reliance, Kotak Lead Slew Of Rs 500cr Nbfc Bond Issues

In a bid to reduce their dependence on fixed deposits and extend the tenure of their liabilities, non-banking finance companies (NBFCs) are following prime manufacturing corporates into the bond market.

GE Capital is already in the market with a range of instruments. Others lining up to place debt privately include Reliance Capital, Ashok Leyland Finance, Kotak Mahindra Primus, Anagram Finance and Lloyds Finance. And the total amount to be raised by them is estimated at Rs 500 crore.

The only financial services company to have completed its placement is the Karnataka State Financial Corporation, which has raised Rs 80 crore for five years at an interest rate of 16 per cent.

 

The interest rates offered by the non-banking finance companies are likely to be 100-150 basis points higher than those being offered by manufacturing companies. This is because traditionally, banks have not been very keen to finance NBFCs and are only likely to buy NBFC debt at yields of between 16 and 17 per cent.

Reliance Capital, according to merchant bankers, is planning to offer 16 per cent for its Rs 200-crore five-year issue. Ashok Leyland Finance, which will hit the market in the next two weeks, is also planning to offer 16 per cent coupon on its Rs 60-crore issue. Besides, Anagram Finance proposes to raise Rs 50 crore via debt by the end of the month.

Lloyds Finance is mulling over a Rs 75-crore five-year bond placement at a coupon of between 16 and 17 per cent, while Kotak Mahindra Primus is placing 18-month debentures at a coupon rate of 14.75 per cent. If these NBFCs are successful, then more are expected to enter the debt market to broadbase the composition and tenure of their liabilities. However, in order not to put off their retail depositors who are earning 16 per cent on one-year fixed deposits, NBFCs are expected to keep the minimum subscriptions at a high level of Rs 1 lakh.