Cos bank on NCDs for funds

MUMBAI: With banks and institutional lenders continuing to be choosy about whom they lend to, a few companies are considering non-convertible debenture (NCD) issues to raise long-term capital. NCDs appeal to both the issuer as well as those who subscribe.

For the company, it is a cheaper option to raise capital without a direct linkage to their balance sheet, while the investor gets a rate of interest that is 100-200 basis points higher than prevailing market rates.

Home finance behemoth HDFC, Shriram Transport Finance Company, Srei Finance, Dewan Housing Finance Corporation, L&T Finance and some Tata Group companies are planning to raise capital through NCD issues. Though none of the issuers spoke about their issues on record, most of them are planning to hit the fund-raising route closer to Budget.

���It will be easier to attract investors closer to the budget as there is widespread talk that government may announce a cut in small savings rates,��� said the company secretary of a term lender that is planning an NCD issue.

Although the amount to be raised by these companies is not very clear, market buzz is that Srei Finance, Dewan Housing Finance and Shriram Transport Finance are aiming for Rs 1,000 crore issues. HDFC has already announced plans to raise Rs 4,000 crore through an NCD issue. Almost all term lenders are raising debts to recapitalise and strengthen their disbursal base.