NBFCs Raise $3.9 Billion Capital Buffer Post Covid-19

Non-banking financial companies have raised $3.9 billion through capital raise and asset sales in the post-Covid-19 period. In the midst of a difficult economic environment caused by the Covid-19 pandemic, India Inc has raised a massive Rs 3.46 lakh crore in the ensuring five months between April-August.

In the financial sector, several private sector banks have also raised capital. According to research by Credit Suisse, post-COVID capital raises from NBFCs now aggregate $3.4 billion. Indiabulls Housing Finance also raised $100 million last week. In addition, NBFCs have undertaken stake sales aggregating $500 million years to date to boost their capital buffers and raise liquidity. Their leverage ratios have reduced by 8-20 per cent on the back of this.

HDFC, Piramal, Mahindra and Mahindra Financial Services, L&T Finance Holdings, Edelweiss, PNB Housing Finance, Shriram Transport Finance and JM Financial are among the NBFCs that have raised funds in the post-Covid phase. Indiabulls Housing last week raised $100 million in equity through a QIP. It also raised Rs 5 billion through part sale of its stake in associate Oak North and indicated it will raise another Rs 10 billion shortly. Though, as the associate stake was already valued at Rs 290 billion, the sale will not add to its net worth, but aid its liquidity.

In addition, NBFCs have undertaken stake sales aggregating $500 million years to date, Edelweiss in its wealth management and Indiabulls in its associate to boost their capital buffers and raise liquidity. The research notes that bond market liquidity access even to stressed NBFCs has improved over the past three months on the back of RBI's LTRO and government partial credit guarantee scheme under which Rs 250 billion has been accessed, easing the near-term challenges.

However, there is funding cost differentiation though remains stark even in the commercial paper market as spreads among NBFCs are as high as 300-500 basis points. Guarantee-backed funding access is also for relatively shorter tenors, a maximum of 18 months, the research noted.