Tata Capital Housing Finance turns to retail funding with maiden NCD issue

Tata Group logo (Image: Reuters)

The housing finance arm of Tata Capital has decided to raise funds from retail participants for the first time, with 40 percent of the Rs 2,000 crore non-convertible debentures (NCDs) issue reserved for individual investors.

"Predominantly, we've been wholesale funded business but now we're trying to diversify and include retail participation in the issuances going ahead," said Kiran Joshi, head treasury, Tata Capital.

"Depending on our funding requirements, we may go for second tranche, but it is more of a possibility rather than a plan as of now," Joshi added.

To lure retail participants, Tata Capital Housing Finance is offering coupon rate at 10 basis points higher to individuals, as compared to other categories of investors. The coupon rates range between 7.92-8.70 percent, depending upon maturities.

The issue opens on January 7 and is scheduled to close on January 17. The housing finance company aims to raise bonds across tenors of three, five, eight and 10 years. These include monthly and annual interest payments. The bonds have been rated 'AAA' by CRISIL as well as ICRA ratings agency.

Tata Capital Housing Finance focuses on affordable housing, home equity and construction finance segments. As on March 2019, the HFC's total lending book stood at Rs 11,101 crore. It's gross non-performing assets (NPAs) ratio and net NPA ratio stood at 1.45 percent and 0.53 percent respectively.

Edelweiss Financial Services and AK Capital are the lead managers to the issue.

Until last year, HFCs and non-banking finance companies (NBFCs) in India relied on wholesale funding sources like banks and mutual funds. However, these channels dried up or became dearer in the aftermath of IL&FS defaults. While HFCs and NBFCs are turning to alternative funding options, they are also using this as an opportunity to correct any asset-liability mismatch in their books.

"Typically, our tenors while borrowing through private placement bonds were 2-3 years. We will try to elongate the tenor so that it is commensurate with the kind of book we have. So, our effort is also to increase the tenor with this issue," said Joshi.

With  number of NBFCs and HFCs taking the retail route, individuals can expect more options to invest going forward.

"NBFCs have decided that depending only on wholesale funding may not be the way forward. Also, all do not have the licence to take deposits. So, this is one way they can tap into retail participation," he added.