Taking a cue from a couple of successful non-convertible debenture (NCD) issues for retail investors, quite a few corporate houses are planning to take this route.
Investment banking sources said Mahindra & Mahindra Financial Services, Future Capital Holdings and some Aditya Birla group companies were looking to raise funds via retail NCD issues.
South India-based non-banking financial institution (NBFC) Sundaram Finance is also planning to tap this route.
Tata Capital's Rs 500-crore NCD issue with a pre-tax coupon of 12 per cent had a greenshoe option of Rs 1,000 crore. The issue, which closed on Tuesday, was oversubscribed six times.
PROS AND CONS
ADVANTAGES
* Investors looking for safety, liquidity and reasonable returns
* For companies, it’s another source of funds other than banks
* Suits NBFCs or banks, who have repeated needs of capital
HURDLES
* This source is available only for companies with good rating
* Creation of debenture-redemption reserve as a hedge against default
* Banks will not be too keen on giving NoCs, unless it is for refinancing
Last month, the first tax-free bonds offering by IIFCL was oversubscribed about three times. The five-year bonds offered a coupon of 6.85 per cent and were also open to retail investors with a minimum ticket size of Rs 1 crore.
IIFCL is again in the market to raise around Rs 2,500 crore and has brought down the ticket size for retail investors to Rs 10 lakh. Experts said given that other investible instruments were looking quite uncertain because of the fall in the stock market and the high volatility in gold, retail investors were looking at assured returns products now.
Seshagiri Rao, chief financial officer, JSW Steel, said instead of crowding banks or raising money from the Life Insurance Corporation of India, NCDs provided companies another window. However, this funding source was only available to companies which could muster a good rating, he said.
Ramesh Iyer, managing director, Mahindra & Mahindra Financial Services said, "Though we are not planning any bond issue immediately, we will review our requirements as and when required.
Investment banking sources said Mahindra & Mahindra Financial Services, Future Capital Holdings and some Aditya Birla group companies were looking to raise funds via retail NCD issues.
South India-based non-banking financial institution (NBFC) Sundaram Finance is also planning to tap this route.
Tata Capital's Rs 500-crore NCD issue with a pre-tax coupon of 12 per cent had a greenshoe option of Rs 1,000 crore. The issue, which closed on Tuesday, was oversubscribed six times.
PROS AND CONS
ADVANTAGES
* Investors looking for safety, liquidity and reasonable returns
* For companies, it’s another source of funds other than banks
* Suits NBFCs or banks, who have repeated needs of capital
HURDLES
* This source is available only for companies with good rating
* Creation of debenture-redemption reserve as a hedge against default
* Banks will not be too keen on giving NoCs, unless it is for refinancing
Last month, the first tax-free bonds offering by IIFCL was oversubscribed about three times. The five-year bonds offered a coupon of 6.85 per cent and were also open to retail investors with a minimum ticket size of Rs 1 crore.
IIFCL is again in the market to raise around Rs 2,500 crore and has brought down the ticket size for retail investors to Rs 10 lakh. Experts said given that other investible instruments were looking quite uncertain because of the fall in the stock market and the high volatility in gold, retail investors were looking at assured returns products now.
Seshagiri Rao, chief financial officer, JSW Steel, said instead of crowding banks or raising money from the Life Insurance Corporation of India, NCDs provided companies another window. However, this funding source was only available to companies which could muster a good rating, he said.
Ramesh Iyer, managing director, Mahindra & Mahindra Financial Services said, "Though we are not planning any bond issue immediately, we will review our requirements as and when required.
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