Manappuram to take NCD route to raise Rs 1,000 crore

MUMBAI: Manappuram General Finance and Leasing will raise up to Rs 1,000 crore through retail non-convertible debenture issue by the second week of July, sources told ET.

The non-convertible debentures (NCDs) will likely have a coupon size of 12% with 3-5 years tenure, an investment banker with knowledge of the company's fund raising plans said. The gold finance company is in talks with Morgan Stanley , Axis Bank and AK Capital to manage the issue, sources said.

"The Rs 1,000-crore issue would comprise Rs 500-crore greenshoe option and the proceeds would be used to fund the company's growth plans," the investment banker said.

"Gold loan business has been witnessing good growth of over 100%. This requires more funds and we are looking at diversification through retail issuance. Retail bonds would play a major role in this condition and provide better asset liability match for us," Manappuram General Finance MD I Unnikrishnan said.

The company has appointed credit rating agency CARE to rate the issue, sources said. "It would help the company to reduce its dependence on bank loans to pursue growth. Depending on the success of the issue, the company would hit the same fund raising route every year," said the investment banker.

The search for cheaper capital amid rising interest rates is prompting companies and financial institutions to raise money through non-convertible debentures. NCDs are a type of debt instrument that are issued for fixed maturity and cannot be converted to equity. Typical redemption periods range from 3-5 years.

NCDs can be issued to retail as well as institutional investors such as banks, insurance companies, corporate treasuries and provident fund trusts. Manappuram's long-term rating from CARE is AA-. In the current scenario, triple A-rated corporate NCD issuances bear a rate of 9.60-9.95%.

Source: EconomicTimes