IIFL Fin set to raise $500 m in maiden overseas bond sale

Mumbai: IIFL Finance, backed by UK-based CDC Group, is set to raise up to $500 million in its maiden overseas bond sale as it looks to widen its borrowing options after getting squeezed during the recent liquidity crisis.

“We will be raising anything between $300 and $500 million,” R Venkataraman, co-promoter and managing director of IIFL Group, told ET. “We want to diversify our sources of funds. There is huge interest for Indian papers in the overseas markets.”

The company is in talks with investment bankers including HSBC and Standard Chartered and the proposed bond sale is likely in four to six months, two people aware of the matter said. The banks could not be contacted immediately for comment.

The company is obtaining credit ratings and is expected to start roadshows in May, said a senior executive involved in the matter.

IIFL Finance is the non-banking arm of the Fairfax-backed IIFL Group. It had a loan book of over ?36,400 crore at the end of December 31, including those advanced towards affordable homes, small businesses, gold and income-generating activities.

“We operate mostly in underserved areas, where the demand for finance remains strong,” said the cofounder.

The proposed dollar bonds would be 20-25 basis points cheaper than domestic borrowings from banks, dealers said. At the same time, it will open a new avenue of raising resources.

The company’s borrowing costs increased by 50-75 basis points incrementally over the past six months amid a crisis of capital that hit para-banks, crimping their ability to raise money from the domestic markets. The scare of defaults has faded away over the past six months, allaying investor apprehensions. Consequently, all nonbanking finance companies are now diversifying their borrowing sources.

On April 4, ET reported that large non-banking finance companies Bajaj Finance, Mahindra Finance, Shriram Transport, Hero FinCorp and Piramal Capital Housing Finance planned to raise up to $2.5 billion in dollar bond sales as they aim to cut reliance on local funds that had become difficult to obtain late last year.

These companies never tapped the overseas dollar-bond market earlier as there were enough credit lines available in the domestic markets. For IIFL Finance, commercial paper constituted 24 per cent of total borrowings in the quarter ended September. They had halved it by the following quarter. The CPs are likely to be further replaced by NCDs in the domestic market.