NBFCS eye funding, mergers

MUMBAI: India’s non-bank lenders, staring at ₹1.51 lakh crore debt repayments due in the next six months, are rushing to raise fresh equity and pursuing mergers with bigger peers to avert defaults, as the Covid-19 pandemic darkens the outlook for the sector that has struggled since the collapse of Infrastructure Leasing and Financial Services Ltd (IL&FS) nearly two years ago.

While the RBI’S TLTROS have eased the liquidity situation for some NBFCS, especially the better-rated ones, those with inferior asset quality may find it tough to survive without rescue.

For instance, Incred, an NBFC backed by global private equity firms, including Investcorp, is seeking a merger with the wholesale NBFC business of PE firm KKR. Srei Infrastructure Finance, a prominent Kolkatabased non-bank lender, is looking to merge with a bank. In a recent interview, Hemant Kanoria, chairman, Srei Infrastructure Finance, said it is open to merging with a bank if permitted by RBI.

Large NBFCS such as Shriram Transport Finance, Mahindra and Mahindra Financial Services and PNB Housing Finance are relatively better off, but may not be free of stress. Several companies in this segment are now looking to raise money from existing investors through rights issues. “In many instances, we are witnessing that there is very little or no interest from external investors in the fundraising exercise of many NBFCS, which is forcing them to raise money internally to meet debt obligations,” a top executive at a large wholesale NBFC said.

Rural market-focused Mahindra Finance said in a statement on July 27 that it will use the proceeds of its rights issue to prepay certain outstanding borrowings of the company, augment longterm capital and resources for meeting funding requirements for the company’s business activities and for corporate purposes.