Mahindra Finance Aims To Raise Rs 2,000 Crore Through NCDs

Mahindra & Mahindra Financial Services Ltd., part of the Mahindra Group, aims to raise Rs 2,000 crore through the issue of unsecured redeemable non-convertible debentures to fund future lending and settle current liabilities.

The bond issue, which opens for subscription on July 10 and closes July 28, will have a base issue size of Rs 250 crore, M&M Financial said in a media statement. The company has reserved the option to retain oversubscription of up to Rs 1,750 crore.

This is the second public issue of bonds being offered by Mahindra Finance. In May last year, the company raised Rs 1,000 crore through bonds that bore a similar structure.

The bond issue will be split between four categories of investors – qualified institutional buyers (QIB), corporates, high networth individuals (HNI), and retail individuals. The amount raised will be split in the ratio of 20 percent for QIBs, 10 percent for corporates, and 35 percent each for the remaining two categories.

Further, the bonds will be offered in three tenures – seven, 10 and 15 years. For QIBs and corporates the coupons on offer are 7.75 percent, 7.90 percent, and 7.95 percent respectively. For the remaining two categories, the rates offered are higher at 7.85 percent, 8 percent, and 8.05 percent respectively, payable annually.

Finally, the bonds that have a tenor of 15 percent will have a call option of 10 years, meaning the company will have the right to repay the bond early.

The bonds have been rated AAA, with a stable outlook by India Ratings & Research, the highest possible credit rating, which carries the lowest risk.

Debt Raising Strategy

The company's balance sheet currently stands at around Rs 46,000 crore, with liabilities standing at Rs 36,000 crore, said Dinesh Prajapati, senior Vice President, treasuries and corporate affairs at Mahindra Finance.

The company's growth has traditionally been over 20 percent, but has fallen to around 15 percent on account of the broad based slowdown in lending, he said. At this rate of growth, the non-banking finance company needs to raise incremental liabilities of around Rs 5,000 crore this year, Prajapati said.

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