Non-Bank Lenders Rush to List on Bourses, IPO Pipeline Swells to Rs 30.7 Billion

Strategic Insights -

The Indian non-bank lending sector is poised for a significant influx of initial public offerings (IPOs) as companies seek to capitalize on an easing regulatory environment, lowering interest rates, and an improving credit cycle. Several non-bank finance companies (NBFCs) have already received approval from the Securities and Exchange Board of India (Sebi) for their listing plans, but were waiting for a more favorable market sentiment. Now, with the broadest equity gauges reaching their highest in nearly nine months, these companies are expected to speed up their listing plans.

Key Takeaways:

  • Non-bank lenders are expected to raise a total of Rs 30.7 billion through IPOs, with SK Finance, Avanse Financial, and Veritas Finance planning to raise Rs 13.5 billion collectively.
  • Tata Capital, a subsidiary of the Tata Group, is planning to raise Rs 17.2 billion, potentially making it one of the largest public issues this fiscal.
  • The central bank's reduction in risk weights for bank lending to NBFCs and the cumulative 100 basis points cut in the benchmark repo rate in 2025 should address the funding challenges faced by NBFCs.
  • The worst of the NBFC credit cycle is behind, with elevated credit costs easing, and analysts expect capital raising from NBFCs in the second and third quarter.

Statistics:

  • Rs 13.5 billion: The total amount of money that SK Finance, Avanse Financial, and Veritas Finance plan to raise through their IPOs.
  • Rs 17.2 billion: The amount of money that Tata Capital plans to raise through its IPO, potentially making it one of the largest public issues this fiscal.
  • Rs 30.7 billion: The total amount of money that non-bank lenders expect to raise through IPOs.
  • 100 basis points: The cut in the benchmark repo rate by the central bank in 2025.
  • 2024: The year in which NBFCs faced elevated credit costs.
  • 2025: The year in which the central bank reduced risk weights for bank lending to NBFCs.

Sources:

  • Ajay Saraf, executive director, ICICI Securities
  • Shreepal Doshi, lead analyst, NBFCs, Equirus Securities
  • Norwest Venture Partners
  • TPG Growth
  • Baring Private Equity India
  • Motilal Oswal's PE arm MO Alternate Investment Advisors
  • EQT
  • ChrysCapital
  • Kedaara Capital
  • British International Investment
  • Lok Capital
  • Growth Catalyst