 "Nabfid opts for Rs 10,000 cr credit lines over bond issuance to raise money")
National Bank for Financing Infrastructure and Development (NaBFID) is opting for Rs 10,000-crore in loans instead of debentures to raise money ahead of the financial year-end demand, especially for monetisation of infrastructure assets.
With signals of easing rates in the next financial year (FY25), the government-owned infrastructure financier wants to avoid long-term fixed rate liability of bonds and debentures.
Loans carry annual reset, providing flexibility for asset-liability management, said a top executive of NaBFID.
CRISIL Ratings had assigned “AAA” rating for non-convertible debentures (NCDs) of NaBFID, aggregating Rs 10,000 crore. But the rating agency withdrew its rating since the NCDs were not issued.
The official said while the lender was using a range of instruments for raising liabilities, about 30 per cent of them would be in the form of loans.
In the next financial year, the financial institution would look at enhanced use of external commercial borrowings (ECBs) and lines of credit from multilateral agencies.
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The lines from multilateral banks like Asian Development Bank and World Bank come with long tenures, providing benefits for asset-liability management as infrastructure loans are for long periods. Also in some cases, the funding comes on soft terms, helping to reduce cost of funds.
Earlier, Rajkiran Rai, managing director of NaBFID, had said that the interest rates had peaked and may decline by 50-100 basis points (bps) over two years.
While NaBFID’s one-year lending rate was 8 per cent, the annual coupon on 10-year non-convertible securities is 7.43 per cent. This coupon rate is fixed over the maturity period (10 years).
The government-owned infrastructure funding institution raised about Rs 19,516 crore through debentures in the nine months ended December 2023.
Of this, Rs 10,000 crore had a tenor of 10 years and Rs 9,516 crore a tenor of 15 years. The total loan portfolio stood at Rs 21,360 crore as on December 31, 2023.
The Mumbai-based financial institution has taken derivatives cover for more than Rs 10,000 crore to hedge the institution against interest rate risks.
These risks emerge from fixed-rate, long-term liability debentures and annual reset for loans, which would increase uncertainty.