Simultaneously, the NBFC is seeking to mop up an offshore loan to fund the buy-back programme, which in turn would help save up to 200 basis points in capital costs.
A basis point is 0.01%.
HSBC is helping the lender manage the buyback programme while extending a short term overseas loan. “The company can buy back up to $50 million worth of bonds,” said a person familiar with the matter.
HSBC could not be contacted immediately for comments.
“We have floated a tender for the buyback programme,” Rajesh Rajak, CFO at IIFL FINANCE told ET, confirming the matter.
“Through the ECB borrowing we aim to save as much as 200 basis points,” he said.
Two years ago, the company had a credit rating of AA, but with a negative outlook. Rating companies have now changed the outlook to ‘stable’, an event that helps reduce funding costs. In international parlance, it is rated B+ (Stable), a lower grade in the high-yield category.
Fitch, meanwhile, expects a robust sequential recovery in fundraising.
In 2020, the NBFC sold $400 million worth of bonds to global investors. The outstanding securities are at $373.7 million now. The bonds offered investors 5.87%.
This is the first tranche of the buyback. “If we see good liquidity, we will do more buybacks of a similar size,” Rajak said.
IIFL Finance offshore bonds are now available for $970 per $1000 under the buyback programme, which is about $20 higher than the secondary market levels.
As on December 2021,IIFL Finance’s free cash or equivalents coupled with undrawn lines were at Rs 9,145 crore (nearly $1.5 billion), which the company says should meet all debt obligations while supporting the growth momentum.
Loan assets under management were at Rs 46,780 crore at the end of the December quarter. The capital adequacy ratio, or a gauge for capital strength, stood at 25.4 percent, with provision coverage ratio at 133 percent.
The company has four main business lines – home loan (Rs 16,495 crore), gold loan (Rs 14,606 crore), business loan (Rs 7,014 crore) and microfinance credit (Rs 5,178 crore).
The company is in the process of exiting its wholesale lending business and now about 94 percent of its loan book is retail based, up from 85 percent about two years ago.