NBFCs look to tap foreign markets with MTN programme

MUMBAI: Encouraged by the success of ‘masala’ bonds, non-banking finance companies (NBFCs) such as Mahindra & Mahindra Financial, IndiaBulls Housing Finance, Shriram Transport Finance and Dewan Housing Finance Corp Ltd (DHFL) are setting up medium-term note (MTN) programmes to tap the overseas markets regularly.

Indiabulls Housing Finance last week filed documents to start a $1.5 billion medium-term note programme, which will allow it to issue rupee or dollar bonds outside of the US on an ongoing basis. Barclays, Citibank, Credit Suisse, HSBC, MUFG and Yes Bank were appointed as the bankers to the issue.

“Filing for the MTN programme gives us the flexibility to tap the market whenever we want,” said Harshil Survankar, head markets at Indiabulls Housing Finance. “Besides the rupee bonds abroad, we can also tap dollar bonds especially after the upgrade for the sovereign ratings provided the pricing suits us.”

In September 2016, Indiabulls Housing had raised Rs 1,300 crore through rupee bonds listed aboard, the NBFC now wants to make it a regular feature whenever the market is optimum. A special external commercial borrowing window for affordable housing will also be used to borrow funds from abroad under the MTN, Survankar said.

Companies like DHFL, which have not issued a rupee bond abroad so far, are also looking to issue their debut bond sale abroad within a MTN programme, which will allow the company to tap the market more regularly.

“We already have a board approval for an MTN programme and we will soon move to file the documents,” said a senior executive from DHFL. “Once we file the document for the MTN, it will be easier for us to tap the market more regularly. We will mostly look at raising rupee funds from abroad because our assets are mostly in the local currency.”

Bankers said NBFCs looking at MTN programmes indicate the demand for Indian paper abroad. “Most of the NBFCs are frequent issuers in the domestic markets,” said Ashwini Kapila, managing director at Barclays. “The proposed approvals will open up a new funding market for these companies, thereby not only freeing up domestic investor limits but also initiating engagement with offshore debt investors, which is a positive in the medium to long term for these companies and the efforts to deepen the debt markets for Indian issuers.”