Mumbai: L&T Finance Ltd (LTF), the fully owned unit of Indian engineering conglomerate Larsen and Toubro (L&T), said it plans to raise up to Rs1,000 crore via a retail bond sale that opens on Tuesday. The funds will be used to lend and invest, and for other operations, including capital expenditure, working capital requirements.
No inorganic growth: L&T’s chief financial officer Y.M. Deosthalee. Kedar Bhat / Mint
“Currently there is no plan of inorganic growth in L&T Finance,” L&T chief financial officer Y.M. Deosthalee said at a press conference on Monday.
LTF, which plans to enter the general insurance business, will sell five-year bonds with an annualized yield of 9.85%, seven-year (88-month) bonds with an annualized yield of 9.95% and 10-year bonds with an annualized yield of 10.50%. The bonds are rated “AA-plus” by Credit Analysis and Research Ltd (CARE) and “LAA-plus” by Icra Ltd, indicating high credit quality.
The issue, which aims to raise at least Rs500 crore and has a greenshoe option to retain extra bids worth another Rs500 crore, is scheduled to close on 4 September.
Of this amount, 35% is allocated for retail investors, 30% for non-institutional investors, and another 35% for qualified institutional buyers, which includes 10% allocated to pension, provident and superannuation funds.
The firm said it has chosen the retail route to broaden its investor base, and bankers said a private placement of the bonds would have been about 25-40 basis points cheaper.
Another commercial vehicles financier, Shriram Transport Finance Co. Ltd, last week closed its Rs1,000 crore retail bond sale, which bankers say was oversubscribed at least 4.5 times within a day of opening.
Shriram Transport, also rated “AA-plus” by CARE and “AA” by Fitch, had sold tenors ranging from three-five years, with a maximum yield on redemption of 11.5%.
Bankers say the lower yield on the LTF bonds is due to the strong reputation of its top-rated parent, with further comfort provided by the oversubscription of the Shriram issue. “That issue showed that there is solid demand for these debentures in the public space if the yield is competitive,” said a banker.
SBI Capital Markets Ltd, JM Financial Consultants Pvt. Ltd and Standard Chartered Bank are lead managers to the LTF retail issue.