5 NBFCs plan to tap overseas market for raising up to $2.5 billion

Five large non-banking finance companies (NBFCs), including Bajaj Finance and Piramal Capital Housing Finance, plan to raise up to $2.5 billion in maiden dollar-bond sales as they diversify financing base and cut reliance on local funds that had become difficult to obtain late last year.

Others proposing to tap the overseas bond market in FY20 are Shriram Transport Finance, Hero Fin-Corp and Mahindra Finance, three people familiar with the issuances told ET. “These issues are likely to hit the market in four to eight weeks,” said one of the persons.

Each of these NBFCs, with specific strength areas, is looking to raise $300-500 million. The bonds might have maturities ranging from three years to five years, broadly in line with their onward loan profiles, particularly in cases of advances toward the financing of trucks, tractors, or used cars.


The proceeds will be used for a combination of business expansion and refinancing of debt.

Some of these prospective issuers are in the process of obtaining ratings, while others have already begun roadshows in global financial hubs such as London, Hong Kong, Singapore and New York.

Bajaj Finance and Piramal Capital declined to comment. Mails to Shriram Transport and Hero Fin-Corp remained unanswered till the time of going to press. A text message sent to the treasury head of Mahindra Finance, Dinesh Prajapati, did not elicit a response.

Shriram Transport Finance would likely be the first company to offer its bonds – perhaps as early as next week. It is offering overseas securities of “144A” in which institutional investors across the US, Asia, Europe can invest. Fitch and S&P have rated its overseas borrowing BB+, which falls under the high-yield category. About a month ago, the company had raised $400 million via dollar bonds, known as Regulation S in market parlance. But US investors could not buy these bonds. Deutsche, HSBC, CLSA, Bank of America ML, JP Morgan, MUFG, Standard Chartered, Citi, and Barclays are some of investment bankers helping these NBFCs tap the offshore market. Individual bankers could not be contacted immediately.

“NBFCs want to ensure an additional credit source as they learnt it the hard way in the past six months, when they were struggling to obtain even agreed upon credit lines,” said a senior bank executive involved in the fund-raising exercise.

Moreover, the dollar-swap auction, introduced by the Reserve Bank of India (RBI) to increase rupee liquidity into the system, has resulted in lower currency hedging costs. Hence, issuers are said to be keen on covering the full currency risk against expected dollar proceeds.

“The RBI forex swap auction has brought down the cost of buying forward dollars sharply,” said Ananth Narayan, professor at SP Jain Institute of Management and Research (SPJIMR). “This, in turn, has made it possible to raise cheap funds by borrowing in foreign currency and swapping it into INR. Many market participants, including corporates, NBFCs and FPI investors into debt, are seeking to take advantage of this opportunity.”