The retail bonds – likely to be for three- to five-years tenure – may bear interest rates between 8.75% and 9.5%, market sources said.
The bonds will be issued in tranches with the first installment of around Rs 500 crore to be issued this quarter.
The cost of raising capital by issuing non-convertible debentures may be 50-75 basis points higher than the cost of bank loans, managing director Udaya Kumar Hebbar told
“It is patient capital. Despite the slightly higher cost, being long-term funds compared to bank loans, it will give stability to our liability profile and therefore the cost inefficiencies even out in the long run,” he said.
The lender’s weighted average cost of borrowing was 9.1% at the end of September, 20 basis points lower than what it was a year back. The marginal cost of borrowing for the September quarter was, however, 20 bps higher at 8.8%.
Bank loans account for about 60-65% of its total borrowing. “We would like to reduce the weightage of bank loans to about 45% in the next two-three years,” he said.
The NBFC-MFI is comfortably placed on equity capital and it has no plan to raise equity capital in the next four-to-five quarters.
Its capital adequacy ratio was at 25% at the end of September with tier 1 capital ratio being at 24.3%.
The lender is targeting 24-25% growth in advances in FY23 to about Rs 20,500 crore, in line with the revival of the grassroots sector. It had a consolidated gross loan portfolio of Rs 16,599 crore at the end of March.
The portfolio shrank in the first half to Rs 16,539 crore at the end of September after writing-off Rs 354 crore from its books due to ageing bad loans beyond 270 days.
As part of borrowing plans, the company has recently signed an agreement with the US International Development Finance Corporation (DFC) for raising a $35 million loan for seven years. This reflects the increased confidence shown by international investors in the long-term growth prospects of India’s microfinance sector.