INSUBCONTINENT EXCLUSIVE:
Illustration: Ajay Mohanty4 min read Last Updated : Sep 18 2024 | 12:31 AM IST
A number of non-banking financial companies (NBFCs) have
tapped into the debt capital market ahead of the festival season to meet increasing credit demand as bank funding slows.
On Tuesday, Aptus
Value Housing Finance secured Rs 300 crore at an interest rate of 8.75 per cent through bonds maturing in five years
ICICI Home Finance Company turned to the market to raise Rs 275 crore at 7.94 per cent, alongside another Rs 300 crore at 7.95 per cent,
through bonds maturing in five and three years, respectively
Bids for ICICI Home Finance are expected to close on Thursday
interest rates and become more selective in their lending practices, driving companies towards alternative funding sources like commercial
increasingly turning to the market for long-term funds
bonds between August 1 and September 16, representing 74 per cent of the issuances, while AA+ rated NBFCs accounted for 8 per cent of the
total.
In August, total CP issuances rose to Rs 1.4 trillion, up from Rs 1.05 trillion in July.
Banks have shown increasing reluctance
to lend to NBFCs since the regulator increased the risk weight of such loans by 25 percentage points in November 2023
As on July 26, 2024, outstanding bank loans to NBFCs stood at Rs 15.29 trillion, down from Rs 15.48 trillion in March
Year-on-year growth in bank loans to NBFCs slowed to 12.7 per cent by July, compared to 19.9 per cent the previous year.
Borrowing rates
for NBFCs in the market have softened, reflecting a fall in benchmark bond yields
So, there is definitely interest in raising funds through the debt capital markets
However, large value fundraising remains challenging, with volumes skewed towards PSU or corporate house-backed NBFCs
on AAA-rated 10-year corporate bonds has fallen by 9 basis points since August, while that on five-year bonds has softened by 29 basis
Meanwhile, AA+ rated 10-year and five-year corporate bond yields have dropped by 3 basis points and 6 basis points, respectively, over the
same period.
According to PRIME Database, during this period, REC led the mobilisation with a Rs 6,820 crore mopup, followed by Power
Finance Corp at Rs 5,791 crore, LIC Housing Finance at Rs 5,760 crore, and National Bank for Agriculture and Rural Development (Nabard) with
The National Bank for Financing Infrastructure - Development issued bonds worth Rs 3,911 crore in August
