Piramal Capital Secures $300 Million in Maiden Overseas Bond Issuance

Piramal Capital has raised USD 300 million in its first overseas bond issuance to diversify its liability portfolio. The funds aim to support small businesses and affordable housing. Despite higher borrowing costs, the company plans another issuance in FY25, with a target to increase overseas bonds' share in liabilities to 13% within two years.

Non-bank lender Piramal Capital has successfully raised USD 300 million in its first overseas bond issuance as part of its strategy to diversify liabilities, a senior official announced on Wednesday.

The funds will be allocated towards on-lending to key segments such as small businesses and affordable housing, which classify as 'sustainable finance' and comply with bond instrument requirements. Although borrowing costs for overseas bonds are higher than domestic alternatives, the company intends to pursue another similar funding round in FY25, according to Managing Director and Chief Executive Officer Jairam Sridharan.

Sridharan noted that Piramal Capital currently sources 57% of its liabilities from banks and mentioned regulatory encouragement for Non-Banking Financial Companies (NBFCs) to reduce this dependency. He also highlighted the challenges banks face with deposit accretion, potentially affecting credit supply.

While the overseas bond market offers depth and size, Sridharan pointed out that compliance requirements are stringent. However, this issuance provides a new funding avenue for Piramal Capital.

Post-issuance, the proportion of overseas bonds in the company's liabilities increased to 4%, with an aim to reach 13% within the next two years. This will have a minor effect on the net interest margin, but the company plans to shift its asset composition to mitigate the impact on profitability.

Earlier this week, Piramal Capital launched its sustainability bonds aiming to raise USD 300 million, receiving subscriptions worth USD 1.4 billion. The final pricing was secured at 7.95%.

The lender plans to issue another smaller bond before the fiscal year ends, Sridharan added. Despite this activity, Piramal's stock dipped 0.50% to Rs 926.85 on the BSE as of 1410 hours on Wednesday, against a 0.72% correction on the benchmark index.

(With inputs from agencies.)