Aditya Birla Capital Ltd (ABCL) is proceeding with plans to raise up to $300 million through external commercial borrowings (ECBs) in the current financial year even as non-banking financial companies continue to battle a liquidity squeeze.
ABCL CEO Ajay Srinivasan said the financial institution remains unaffected by the ongoing liquidity crisis and has a strong fundraising opportunity. The holding company ABCL has already secured board approval to raise up to ₹3,500 crore through both equity and debt this year.
“We are looking to raise around $250-300 million for the non-banking finance company (NBFC) and $100 million for the housing finance company (HFC)," Srinivasan told Mint.
ABCL’s plans follow close on the heels of the credit rating downgrade of housing finance companies which has raised fears of another liquidity crisis. This was just as the NBFCs were starting to recover since the Infrastructure Leasing & Financial Services (IL&FS) crisis broke out last September.
ABCL raised about ₹11,000 crore of long-term funds in the second half of FY19 despite liquidity headwinds across the industry.
The company is aiming at a 20-25% growth in the NBFC loan book and 40-45% growth in the housing finance book this financial year, Srinivasan said. He said the cost of funds has risen by 40 basis points in the last seven months when the sector got hit by the liquidity crisis. However, it has been able to keep margins at 4.9%.
“We had the ability to pass on the higher cost of funds. But the change in mix in NBFC to SME and retail and in HFC to affordable housing has allowed us to increase margin," said Srinivasan. “We don’t expect the cost of funds to go up further," he added.
ABCL reported a 52% year-on-year increase in consolidated net profit in the March quarter at ₹258 crore.
ABCL has underlying businesses including NBFC, housing finance, life insurance, health insurance, and asset management.
The lending book comprising its NBFC and housing finance businesses grew 23% year-on-year in the quarter to ₹63,119 crore from ₹51,379 crore a year earlier.
ABCL has an exposure of ₹220 crore towards stressed IL&FS and has made a provision of ₹59 crore during the quarter against this asset which has been classified as Stage 3.
The company’s gross non-performing assets or gross Stage 3 assets under IndAS for the NBFC book stood at 1.05% in the March quarter compared to 0.91% in the previous year. For the housing finance book, gross Stage 3 assets stood at 0.67%.