Mahindra and Mahindra Financial Services Ltd has hired several investment banks such as Kotak Mahindra Capital and Axis Capital to manage its proposed rights issue, said two people aware of the development, requesting anonymity.
The rights issue will see the non-bank lending arm of the Mahindra group raise up to ₹3,500 crore to bolster its balance sheet for contingencies and opportunities arising out of the covid-19-induced economic turbulence.
“Mahindra Finance has hired around eight to nine bankers to manage the rights offering, including Kotak and Axis. They will launch the offering next quarter," said the first person cited above. “Law firm Cyril Amarchand Mangaldas is advising on the legal aspects," the person said.
The rights issue will be launched in July, the second person said.
Mahindra Finance, Kotak Mahindra Capital, Axis Capital did not respond to emailed queries. Cyril Amarchand Mangaldas declined to comment.
The rights issue plan comes after Mahindra Finance posted a 62% drop in net profit for the March quarter at ₹221 crore. The company set aside additional provisions of ₹574 crore for covid-19 in Q4FY20.
The lender also reported that over 75% of its customers have opted for the first three-month moratorium on loan repayments announced by the RBI as a relief measure on 27 March. Several companies are looking to raise funds through the rights issue route, which allows a flexible price regime compared to other fundraising routes such as a qualified institutional placement or a preferential allotment of shares.
Companies such as Aditya Birla Fashion and Retail, Future Consumer, PVR Ltd have in the past few weeks announced plans to launch rights issues.
India’s most valued company Reliance Industries Ltd recently raised ₹53,125 crore through a rights issue, the biggest capital markets deal yet on the Indian stock exchanges.