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Motherson Sumi taps NCDs to bring down interest costs

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MUMBAI: As extra acquisition alternatives open up due to the influence of the Covid-19 pandemic, Motherson Sumi, India’s largest auto-component firm, is sprucing up its funds.

It’s elevating capital from the Indian monetary markets to pre-pay present debt and bring down the price of borrowing, a prime government mentioned.

The corporate on Thursday introduced that it raised Rs 2,130 crore at a coupon price of 6.65% by means of a difficulty of non-convertible debentures (NCDs). The unique concern dimension was Rs 1,500 crore, nevertheless it used the green-shoe possibility to retain extra funds after the problem obtained oversubscribed.

“That is purely for refinancing (our present debt). We’re not going to enhance the leverage, we’re simply going to change the leverage to cut back our price of borrowing,” Motherson Group head of technique and M&A Kunal Malani mentioned.

Malani mentioned the corporate benchmarked the Indian capital markets with this concern and would faucet into it sooner or later when it will want capital for acquisitions and different functions. “Now if there’s some want for capital, let’s say an inorganic progress alternative arises, it turns into a capital pool that you could discover,” he mentioned. “However nothing is deliberate proper now.”

As many as 24 buyers subscribed to the NCD concern, which was rated AAA-negative by India Rankings & Analysis.

The funding price is 2-Three proportion factors cheaper than the debt that can be repaid, the corporate mentioned. “For instance, this debt can be lower than half the price of our excellent US-dollar bonds,” Malani mentioned.

Yields on company bonds have come down due to cheaper sources of capital being out there with banks, after the Reserve Financial institution of India rolled out a stimulus bundle in March, specialists mentioned. The banking regulator provided banks up to Rs 1 lakh crore on the coverage repo price for a three-year interval, to invest in investment-grade company bonds.

“Indian charges for the primary time have come to a stage that’s extra cheap than borrowing offshore. Hopefully, we are going to do many extra transactions on this market,” Malani mentioned.

As of the tip of June, Motherson Sumi had web standalone debt of Rs 1,460 crore, its monetary statements confirmed. Web consolidated debt was Rs 9,083 crore.

The inventory of Motherson Sumi Techniques gained 0.58% to shut at Rs 112.Three on the BSE on Friday, outperforming the benchmark Sensex that remained nearly flat.

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