For Indias non-banking finance companies (NBFC), shorter-maturity commercial papers were akin to T-bills, making up a fifth of the cash they typically borrowed.
After the ILFS default, that share is being drastically reduced, perhaps to less than a tenth, as these financiers seek to match their liability commitments with cash flows from assets.Piramal Enterprises, IIFL, Edelweiss, and Dewan Housing Finance (DHFL) are among the leading NBFCs seeking to identify sources of long-term financing that would be linked to their asset profiles, de-risking cash flows.
That would mean significantly lower borrowings through commercial papers (CP).
Our share of CP borrowing should significantly come down by the year-endThere is a concerted effort to reduce CP borrowings across the industry, said Prabodh Agrawal, group CFO, IIFL.
People are looking to replace short-term borrowing with long tenor liabilities.
We are looking to tap long-term sources of borrowing, like term loans, long-term bond sales, refinancing, or portfolio sales.IIFLs share of commercial paper borrowing was at 24 per cent in the September quarter.
That share should halve by December-end, said an industry source.Piramal Enterprises is aiming to keep its CP exposure at 10 per cent of the total borrowing book.
It was about 20 per cent a few months ago.
The company has renewed 70 per cent of its CPS that were due recently.
But it plans to raise more money via bond sales and bank loans.In the immediate term, we are looking at raising ECBs and then also bonds, Ajay Piramal, Chairman, Piramal Enterprises, told ET.
There are many new banks which should be giving us lines, and the existing banks should be also giving us lines.
DHFL aims to reduce its CP borrowings to almost zero by December from 6 per cent now, said a source.
It has already cut the borrowing from high teens over a period of time.
Bank term loans, bonds with longer maturities, refinancing facilities, and portfolio sales to banks are now the preferred routes to meet fund requirements.Edelweiss group is targeting to bring down CP borrowings to 4-5 per cent by December-end from about 15 per cent now.
Both Edelweiss and IIFL have demonstrated healthy cash positions as they bought back around 2,750 crore of CPs before maturities.Even though bank borrowings are expensive, they will help earn investor confidence and such borrowings should address the asset-liability mismatch, said a top NBFC executive, who did not want to be identified.