Arka Fincap Ltd, a systemically important non-banking finance company (NBFC) from the Kirloskar group, announced a Rs 300 crore maiden non-convertible debentures (NCD) issue on Tuesday to fund growth as well as for liability diversification.
“This issue was planned as part of our liability diversification strategy and we have been raising money from each component of the institutional market. We have got bankers, we have got mutual funds, we have got family offices as we wanted to deepen and widen our reach in the market, and therefore we have done a large number of privately placed debenture issues. This is the first listed issue basically with an objective of retailisation,” said Vimal Bhandari, Executive Vice Chairman and CEO, Arka.
Many NBFCs are looking at non-convertible debentures (NCDs) as a strong alternative to bank funding to raise funds in the current times.
After the central bank raised risk weights on their funding to NBFCs, there is a high possibility that banks may go slow on funding to shadow banks.
Loan targets
The company’s internal aim is to grow asset book in the range of 25% to 30% year on year, he said.
When asked whether the NBFCs are raising funds through NCDs because banks are going slow on lending to NBFCs, Bhandari said, “While RBI’s point is absolutely well considered and taken into consideration and broadly there may be a net financial impact on the borrowing cost but we do not see any difficulty in raising money from the banking system unlike maybe some other NBFC.”
Despite several NCDs on offer, Amit Gupta, CFO of Arka, said there is a robust demand.
“The demand for NCDs has really increased and it also helps us in penetrating to the retail end of the customer. The whole idea of an NCD public issue is basically for the retail and the HNI who gets the benefit of participating in such offerings. So, there is a good demand and we foresee a good demand in the near future also,” said Gupta. The company sees strong demand in the SME and construction segments.
Arka is a 100% owned subsidiary of the Kirloskar group. The company’s current loan book is around Rs 4,000 crore, out of which the AUM for SME and MSME lending is around 45%. The company operates in 11 states with 26 branches. Also, the shadow bank’s loan book for the personal segment is around Rs 80 crore and insignificantly lower for unsecured lending. Earlier, the parent company Kirloskar had infused Rs 1,000 crore in the NBFC.
