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April 27, 2024

Indian NBFC Trio Eyes Dollar Bond Issuance to Boost Funds, Amid Tight Liquidity

Amid tightening liquidity conditions and rising funding costs, three prominent Indian non-banking finance companies (NBFCs) – Manappuram Finance, Muthoot Finance, and state-run REC – are gearing up to raise funds through dollar bond issues in the coming days, according to bankers.

These NBFCs are aiming for benchmark-sized bonds, with each issuance expected to be around $500 million, said sources familiar with the matter. The move comes as more non-bank firms are turning to overseas borrowing avenues, including bonds and loans, a trend possibly influenced by the Reserve Bank of India’s (RBI) initiative to diversify their sources of borrowing.

According to Pramod Shenoi, Head of Asia-Pacific Research at CreditSights, “Liquidity conditions in India have been tight, with lenders in the financial sector chasing deposits to match the higher credit growth rate.” This heightened competition for liquidity has led both bank and non-bank companies to explore the dollar bond market.

Manappuram Finance, a major player in gold financing, has enlisted Barclays and Citigroup to handle its dollar bonds. These bonds are expected to have a weighted average life of around four years. Investor meetings for the proposed bonds, compliant with Regulation-S, will kick off in Asia and Europe from Monday onwards.

Similarly, Muthoot Finance, another prominent gold financier, has appointed Deutsche Bank and Standard Chartered Bank as joint global coordinators for investor calls. The firm plans to price its dollar bonds with a tenor of approximately four years in the coming weeks.

A senior banker, speaking on condition of anonymity, disclosed that the all-in cost for these NBFCs’ dollar bond issuances is estimated to be around 8-9% in rupee terms, which is relatively affordable compared to their domestic funding costs.

REC, a power financier, is also exploring options for its benchmark-sized offering and may issue bonds by June, although it has not yet appointed bankers for the process. The company recently entered the yen bond market, raising 61.1 billion yen ($390.1 million) in a three-part deal in January.

As of now, Manappuram Finance, Muthoot Finance, and REC have not responded to Reuters’ requests for comments on their bond issuance plans.

The move towards dollar bond issuance reflects these NBFCs’ efforts to secure funds in a challenging domestic environment. With liquidity tightening and funding costs rising, accessing international markets offers them a viable alternative to meet their capital requirements. As they navigate through global investor interest and market conditions, these issuances could provide a significant boost to their financial positions in the coming months.

Jhumpa Lahiri

Jhumpa Lahiri

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