Exclusive l JM Financial looks to raise around $100 million via QIP, in talks with I-Sec & IDFC securities

Veteran dealmaker Nimesh Kampani-founded financial services group JM Financial is in a fundraising mode and has initiated preliminary discussions with merchant bankers as it evaluates a qualified institutional placement, or QIP, people with knowledge of the matter told Moneycontrol.

“They are considering the QIP route and are looking to raise around $100 million or Rs 750 crore. They have adequate liquidity for now but want to strengthen their balance sheet during this uncertain period,” said one of the persons cited above.

“JM Financial is in talks with ICICI Securities (I-Sec) and IDFC Securities as advisors for the proposed QIP,” said a second person.

A third person confirmed the QIP plans and said it could be launched within the next few weeks. He said firms like JM would want to be well prepared for any potential COVID-19 related stress in their loan portfolio. JM Financial’s loan portfolio mainly comprises wholesale lending.

All the three persons spoke to Moneycontrol on the condition of anonymity.

ICICI Securities and IDFC Securities declined to comment. Moneycontrol is awaiting an email response from JM Financial and will update this article when it hears from them.

JM Financial: The COVID-19 strategy

In December 2019, the board of JM Financial had approved a fund raising resolution to raise Rs 850 crore via issuance of securities and had received the shareholders nod in February 2020. It had also approved an increase in the investments by the foreign portfolio investors (FPIs) from 24 percent to 40 percent of the paid-up equity share capital of the company.

During the Q4 FY20 conference call with analysts held on May 7, 2020, Vishal Kampani, MD, JM Financial Group said, “Right now, we think we are in good shape, so there is no urgent need to raise any capital, but we will keep reviewing this as you will understand the situation is very dynamic.” During the interaction, Kampani said that he expected the COVID-19 issue to settle around January or February of 2021.

“I think till December or at least till maybe February of next year one has to have cash. I think we have more but businesses should have cash to cover all their liabilities, interest payments and vendor payments as well as all their fixed costs,” he elaborated.

JM Financial has a diversified revenue stream comprising a mix of both fee and fund based income. Its business verticals include investment banking, wealth management, securities business, mortgage lending, distressed credit and asset management. The firm has two non-banking house finance (NBFC) group companies, namely JM Financial Products and JM Financial Credit Solution which provides funding to real estate developers.

The NBFC slowdown

Due to the tough operating environment and liquidity squeeze for NBFCs and housing finance companies (HCF’s) , brokerages expect many players in the segment  to raise equity capital in a bid to inspire confidence, shore up their balance sheet and provide a cushion against higher provisions that are anticipated in FY21.

In a report dated April 13, 2020, ratings agency ICRA referred to the importance of asset liability management (ALM) for a firm like JM Financial. “Given the prominence of the lending business in the group’s revenue profile, its ability to manage its asset and liability profile, particularly considering the current operating environment, would remain critical. ICRA takes comfort from the Group’s adequate liquid assets and its ability to raise funds from the market when required, as demonstrated in the past,” the report said.

The ICRA report also added that going forward, the group’s ability to scale up its operations, while keeping the asset quality under check, maintaining healthy profitability and capitalisation and managing its asset liability profile, would remain critical from a credit perspective.