Arka Fincap aims to raise Rs 300 crore via non-convertible debentures

Arka Fincap Limited, a middle layer Non-Banking Financial Company (NBFC) and a subsidiary of Kirloskar Oil Engines Limited, aims to raise up to Rs 300 crore through a public offering of non-convertible debentures (NCDs) starting from December 7. The issue is scheduled to close on December 20.

The NCDs are divided into three maturity options of two years, three years, and five years. The effective yield offered to NCD holders ranges from 9 per cent to 10 per cent per annum. The NCDs have been given the credit rating of ‘AA-‘ with a ‘positive’ outlook by CRISIL.

The base issue size is set at Rs 150 crore, and there is a green shoe option that allows for an additional Rs 150 crore, bringing the total fundraising to Rs 300 crore, the company said in a release.

A minimum of 75 per cent of the funds generated from this Tranche I Issue will be allocated for onward lending, financing, and the repayment of interest and principal of the company’s existing borrowings. The remaining portion is earmarked for general corporate purposes, the release said.

Amit Gupta, group chief financial officer at Arka Fincap, said that the Reserve Bank of India’s stringent regulations on unsecured lending will result in a modest increase of 5-10 basis points in the cost of borrowing for the company. Gupta said that this marginal cost adjustment will be passed on to the customers.

Due to surging unsecured loans like personal loans and those on credit cards, the RBI increased the risk weighting for such loans from 100 per cent to 125 per cent. The risk weighting for bank loans to higher-rated NBFCs too was increased by 25 percentage points.