1. Gold Loan NBFCs Plan Public Offer of NCDs
Gold loan NBFCS are going for public offer of debentures to overcome the cash crunch
following the recent RBI directive capping the minimum subscription for private placement of
debentures to Rs. 25 lakh and above for a single investor.
The order virtually prevents NBFCs from accepting deposits from retail investors.
At a time when gold loan business is showing a tepid growth with a fall in gold prices,
NBFCs have no option but to go for public offer of non-convertible debentures and to list them
on stock exchanges to raise money. They have to begin the process of converting their unlisted
debentures to listed ones as they mature.
“Retail investors are our core strength. We have to now educate them to go for listed
debentures. It involves opening depository participant accounts, which many are averse to,”
said K P Padmakumar, executive director of Muthoot Finance. The company now has around
Rs. 10,000 crore worth of debentures which are not listed. As they mature, the company has to
persuade the investors to opt for listed debentures. It had raised Rs. 1,500 crore through public
offers of debentures in tranches of Rs. 500 crore during the past few years. Muthoot Finanace
will go for public issue of debentures to raise another tranche of Rs. 500 crore in a few weeks.
Padmakumar said the company will supplement it with a private placement of debentures for
Rs. 25 lakh and in multiples of Rs. 10 lakh thereafter. This, however, is limited to 49 investors
and there should be at least six months’ gap before the next private placement. Manappuram
Finance has around 15% of investment in debentures. “About 8% of this amounting to nearly
Rs. 700 crore is unlisted. So, in the next two years, we will have to raise that amount through
alternate sources of funding like public issue of debentures,” said I Unnikrishnan, executive
director and deputy CEO of Manappuram Finance. Describing the new set of regulations on the
private placement of debentures by NBFCs as “harsh,” the Association of Kerala Non-Banking
Finance Companies has sought for at least a five year time frame to implement it.

2. Tough Times
RBI has capped the minimum subscription for private placement of debentures to 25 lakh and
above for a single investor
The regulator’s order virtually prevents gold loan NBFCs from accepting deposits from retail
investors
About 50-80% of the resources that NBFCs need are met through the private placement of
secured non-convertible dentures
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