As banks become wary of extending loans to non-banking finance companies (NBFCs), top-rated private and government owned NBFCs have tapped the external commercial borrowing (ECB) market for raising funds, senior bankers say.
Earlier this week, Girish Kousgi, PNB Housing Finance MD, said the housing financier could raise $100 million-$125 million each in two tranches by FY25 end.
“We are planning for two more ECBs because it comes at a lower cost compared to bank borrowing. It (each issuance) would be around $100 to $125 million (in size). If we get good rate, we might do two more before March 2025,” he said.
Separately, NBFC major Shriram Finance has plans to raise up to $1.5 billion from the overseas market, whereas Muthoot Finance has received the Reserve Bank of India’s (RBI) approval to raise $1 billion through ECBs, after having raised $600 million earlier this year via the same route, MD George Alexander Muthoot said.
Power Finance Corp (PFC) has filed proposal in September 2024 with the RBI to raise $200 million in ECB via automatic routeand $1.06 billion ECB via approval route,whereas REC has proposed raising $500 million via ECB route.
Private NBFCs including HDB Financial and Cholamandalam Finance have proposed raising $250 million each via ECBs. Poonawala Fincorp,Tata Capital Housing Finance and Manappuram Finance have proposed to raise $115 million, $100 million and $100 million via ECBs, respectively. Piramal Finance, in October, said it had raised $150 million from international capital markets at 7.078 per cent yield.
“Highly rated NBFCs, with their large borrowing programs, strategically diversify their funding sources across loans, domestic bonds, ECBs, and offshore bonds to balance pricing and investor demand-supply dynamics. In contrast, lower-rated NBFCs often face challenges in accessing domestic bank loans and bonds at competitive rates, prompting them to explore ECB loans for better pricing — though this, too, is contingent on investor appetite,” said Venkatakrishnan Srinivasan, founder and managing partner at Rockfort Fincap LLP.
Diversification push
The fund raise comes at a time when the RBI has asked top rated NBFCs to maintain at least 25 per cent of their overall liabilities via capital market route, businessline reported in October. Per RBI data, outstanding bank loans to NBFCs, excluding HFCs, stood at ₹15.29 lakh crore as on September 20 as against ₹15.28 lakh crore on July 26, up only ₹150 crore in absolute terms.
According to CRISIL Ratings Senior Director Ajit Velonie, given the slowdown in bank lending to NBCs, it is imperative for them to continue to focus on resource profile diversification.
“Therefore, we do expect the share of alternate funding sources such as securitisation, CPs and bonds to rise within the overall resource mix of NBFCs. With this, we believe that that securitisation volumes should cross the Rs 2 lakh crore mark this fiscal. CP and bond issuances by NBCs should also trend up; the extent of increase will depend on factors such as relative interest rate movements of various instruments, and strategic realignment of resource mix by NBCs in light of the potential interest rate cut as well,” he said. ENDS
Pointers:
- PNB Housing Finance could raise $100 million-$125 million each in two tranches by FY25 end.
- Shriram Finance has plans to raise up to $1.5 billion from the overseas market in FY25, while Muthoot Finance got RBI approval to raise $1 billion through ECBs.
- PFC, REC propose to raise significant capital via ECBs to the RBI
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