Shoppers examine jewellery on display at a stall in Ahmedabad, Gujarat. (Photograph: Dhiraj Singh/Bloomberg)

Manappuram’s Rs 1,000-Crore NCD Issue Opens Amid Liquidity Worries In Market

Manappuram Finance Ltd.’s debt issue to raise Rs 1,000 crore opened today amid concerns about non-bank lenders’ ability to borrow from the market.

Manappuram, which lends against gold, is raising capital through non-convertible debentures, according to a company statement. The base size of the issue, which closes on Nov. 22, is Rs 200 crore and allows an oversubscription of another Rs 800 crore. The allotment will be on a first-come-first-served basis.

“We are offering a decent yield ranging from 9.5 percent to 10.4 percent,” VP Nandakumar, managing director and chief executive officer of the company, said in a press conference today. “Because of this, we are very confident that even in a difficult situation like this with the IL&FS issue, we will easily sail through.”

Concerns stemming from defaults by Infrastructure Leasing & Financial Services Ltd. and its subsidiaries led to outflows from mutual funds, triggering a credit crunch as market funding to non-bank lenders dried out. Even banks are nervous about lending to NBFCs. The Reserve Bank of India took measures to restart the flow of credit and State Bank of India said it will step up loan purchases from NBFCs.

Manappuram, however, expects borrowing costs to rise by about 50 basis points before the situation cools down, according to Nandakumar.

Moody’s Investors Service, in a report, had said that the liquidity tightness is expected to sharply increase financing costs or cause difficulty in rolling over liabilities for NBFCs because they rely heavily on market borrowing to fund asset growth.

The non-bank lender’s NCD issue is rated as AA/Stable by CARE Ratings and AA+ Stable by Brickwork Ratings India Pvt. Ltd. AK Capital Services and Edelweiss Financial Services are the book runners for the issue.