More than 75% or three-fourth of the total 28 Non-Convertible Debenture (NCD) issues by the Non-Banking Financial Companies (NBFCs) in the past 10 months were under-subscribed, despite providing higher yields. This comes on the back of fear on the part of investors whether to put their money in debt papers of NBFCs or not.
Only 6 out of 28 NCD public issues by the NBFCs were fully subscribed between September 2018 and June 2019. Four of the biggest NBFCs papers- Indiabulls Consumer Finance, JM Financial Credit Solutions, Manappuram Finance and Srei Infrastructure were under-subscribed by 73-80% during the said period, according to The Economic Times data.
"It has become challenging for NBFCs to mobilise capital from the public," a debt fund manager told the news daily. "An entity like Shriram, back in 2014, used to mop up Rs 2000 crore and close the issue within two days, today they are hardly raising Rs 500 crore," he added.
After the IL&FS defaults in August 2018, the NBFCs are trying to broaden their borrowing portfolio to balance their asset-liability mismatches. The last fiscal year saw the maximum public issues of NCDs by non-bank lenders in the last five years.
The avenues for NBFCs to raise funds are contracting owing to the pessimistic sentiment of investors and lenders. According to the RBI data, bank credit to the sector shrunk by Rs 6,000 crore in the first quarter of the current financial year (FY20). Corporate bond issuances also dropped by around 2% between FY18 and FY19.