Non-bank lender IIFL Finance on Wednesday raised $50 million in three-year external commercial borrowing (ECB) from Japan’s Mizuho Bank.
The loan, priced at 120 basis points over Tokyo overnight average rate (Tonar), will be used for onward retail lending. One basis point is 0.01 percentage point. Tonar is at a negative 0.1%. However, for calculation of the lending rate, zero is considered as the benchmark.
The blended cost of the ECB comes around 8.77%, payable semi-annually, a person familiar with the deal said. The annual cost comes around 8.96%. This includes hedging costs for three years.
The company’s average cost of funds is around 9%.
“This is the first time we are raising debt from a Japanese bank. This helps us in expanding our investor base. Besides, the withholding tax on the fundraising will be lower since the underlying benchmark (ie Tonar) is negative, thus supporting the overall pricing,” IIFL Group chief financial officer Kapish Jain said.
He said the company is looking to raise another $100-150 million of debt from overseas investors this fiscal.
Earlier in June, IIFL had raised $175 million from lenders including HSBC and overseas branches of Bank of Baroda (Gift City) and Union Bank of India (Sydney branch), paying 9.2% blended cost.
IIFL Finance recorded a 32% jump in consolidated assets under management to Rs 73066 crore. Its asset quality also improved with the gross non-performing assets ratio falling to 1.8% at the end of September from 2.4% a year back. Home loans and gold loans have equal weight in its business while the two constitute 65% of the AUM.
Microfinance accounts for 15% of its portfolio. The company has also decided to infuse Rs 200 crore in its microfinance subsidiary IIFL Samasta Finance through a rights issue of 7.48 crore shares.
IIFL FInance shares closed Wednesday 0.5% higher at Rs 599 on BSE while the Sensex closed 1.1% up to 66902 points.
