IIFL Finance, one of India’s largest retail non-banking finance companies said that it has bought back $50 million worth of overseas bonds at par, funded by loan from a global bank, which will reduce its cost of funds by approximately 225 basis points on this transaction.
IIFL Finance which had raised $400 million through its maiden overseas bonds issue in February 2020 at an effective issue price of $998.75 per $1000, to fund its business growth. The company had in the last two years bought back $26.3 million worth of bonds in various tranches, and launched a tender offer on March 21, 2022 to further buy back up to $50 million worth of bonds.
The minimum bid price for bondholders under the tender offer was $970 per $1000 of face value of bonds. However, most bids received were closer to the par value, and accordingly the company bought back the entire tender amount of $50 million at par.
The buyback was done under modified Dutch auction process, which is a reverse book building mechanism. All accepted bids (i.e. at par or lower) were received at a uniform price of $1000 per face value. After this buyback, $323.7 million of bonds remain outstanding.
Commenting on the successful buyback, Mr Rajesh Rajak, CFO, IIFL Finance said, “The abundant liquidity and the price at which we bought back reflect the confidence that bondholders have in us. Also, this reduces our cost of funds by approximately 225 basis points for the arrangement. After this successful buyback, we would seek to undertake more such buybacks to reduce the cost of funds further.”
As on December 2021, IIFL Finance’s free cash, equivalent and undrawn lines stood at Rs 9,145 crores, adequate to meet not only all the near-term liabilities, but also to fund the future growth momentum. IIFL Finance’s loan assets under management was Rs 46,780 crore at the end of December 2021, while the capital adequacy ratio stood at 25.4% and provision coverage ratio was at 133 percent. As on December 2021, about 94% of its loan book comprised of retail loans.