The agency is in talks to raise short-term offshore loans from at least two banks, including Standard Chartered and HSBC, sources close to the matter said.
The move would likely save the company up to 2 percentage points on the cost of borrowing consistently for currency hedges.
“The issuer has reached out to foreign banks and other stakeholders as it seeks to meet offshore bond obligations by citing improved credit standards,” a source quoted above told ET.
IIFL Finance has not commented on the matter. Standard Chartered and HSBC declined to comment.
The current balance of these bonds is $ 325 million. They offered a coupon of 5.87%. Adding the cost of currency cover, the total cost to the borrower is about 11%.
These bonds are maturing in April 2023.
If the company now borrows a foreign currency to repay the bond obligation in advance, the cost of adjusting the exchange rate will be about 8.50-9%.
Loans can be either through bilateral agreements or in the form of syndication.
Although the company has sufficient rupee liquidity, central bank regulations do not allow a non-banking finance company to purchase offshore bonds using Indian rupee.
The buyback plan is expected to be delivered in July or August. The final terms are still under discussion.
The company’s outlook has been revised from ‘negative’ in 2019 to ‘stable’ in October last year. Also in March 2021 the outlook was revised to ‘stable’.
“In the future, ICRA expects the group’s profitability to be supported by the normalization of credit costs,” ICRA said in a note. “Correction of outlook also contributes to the improvement of the company’s funding profile.”
In FY22, IIFL Finance’s net profit rose 56% to ₹ 1,188 crore from ₹ 760 crore a year ago. With the rise in overall interest rates, the money spent, however, has expanded by 4% to ₹ 1,616 crore.