Finkurve Financial Services Plans ₹75 Crore NCD Issuance

Finkurve Financial Services Ltd announced that its Board has approved raising up to ₹75 crore through Non-Convertible Debentures (NCDs). These NCDs will carry a coupon rate of 11.33% per annum, payable quarterly, with a tenure of 27 months.

Board Approves NCD Plan

The Board of Directors of Finkurve Financial Services Limited has given the go-ahead for a significant fundraising initiative. The company plans to issue Non-Convertible Debentures (NCDs) to raise a total of up to ₹75.00 crore. This includes a base issue size of ₹50.00 crore, with an option to raise an additional ₹25.00 crore through the Green Shoe option.

The NCDs will offer a fixed coupon rate of 11.33% per annum, with interest payments scheduled quarterly. The tenure for these NCDs is set at 27 months. The instruments are intended to be issued on a private placement basis, utilizing an Electronic Bidding Platform. The proposed allotment date is May 14, 2026, with maturity scheduled for August 13, 2028.

Purpose of the Fundraising

This NCD issuance is designed to bolster Finkurve's capital base, providing essential funds for its lending operations and future expansion plans. For Non-Banking Financial Companies (NBFCs), accessing debt markets effectively helps in managing balance sheets and maintaining regulatory capital adequacy. This move signals the company's confidence in its growth prospects and its ability to meet debt obligations.

About Finkurve Financial Services

Finkurve Financial Services operates as a Non-Banking Financial Company (NBFC), primarily focused on offering business loans, personal loans, and property loans. The company has a history of using debt instruments, including previous Non-Convertible Debenture issuances, to support its funding needs and drive business growth. For the fiscal year ending March 31, 2024, Finkurve Financial Services reported a net profit, indicating operational profitability.

Impact of the New Capital

Following the NCD allotment, Finkurve's liquidity position is expected to see a significant improvement. The company's leverage may increase, necessitating careful management of its debt-to-equity ratio. The enhanced capital availability could enable Finkurve to pursue new lending opportunities or expand its existing loan portfolio.

Potential Risks

The NCD offering includes a penalty clause: a 2% annual increase on the coupon rate if interest or principal payments are delayed by more than three months past the due date. There is also an inherent risk from potentially rising interest rates, which could increase Finkurve's borrowing costs for future debt or refinancing. The company must ensure that these funds are deployed effectively to generate returns that adequately cover borrowing costs and boost profitability.

Market Context: Peer Funding

Leading NBFCs in India, such as Cholamandalam Investment and Finance Company, Poonawalla Fincorp, and Shriram Finance, also regularly tap debt markets, including NCDs, for capital. These peers use various debt instruments to fund asset growth, with coupon rates often varying based on their credit ratings and market conditions. The 11.33% rate offered by Finkurve is notable and falls within the typical range for NBFC NCDs, reflecting current market dynamics and company specifics.

Key Financial Metrics

As of March 31, 2024, Finkurve Financial Services' total debt stood at approximately ₹200 crore. The company reported an Interest Coverage Ratio of 1.3x for the fiscal year 2024.

Looking Ahead

Investors will monitor the successful completion of the ₹75 crore NCD allotment, scheduled for May 14, 2026. Subsequent listing of these NCDs on the BSE Limited platform will also be observed. Key areas to track include how Finkurve deploys the raised capital and its impact on loan book growth and asset quality. Keeping an eye on the company's debt servicing metrics, such as interest coverage and timely payments, will be crucial for assessing its financial health.