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The Hinduja Group has initiated a substantial fundraising endeavour amounting to INR 7300 crore through the issuance of non-convertible debentures (NCDs), marking a critical milestone in their acquisition bid for Reliance Capital. 360 One, a prominent wealth and asset management firm, has been tasked with arranging INR 5000 crore worth of NCDs, underscoring their pivotal role in the financial services sector. Barclays will arrange the remaining INR 2300 crore. The NCDs, offering an attractive 16% per annum interest rate over a four-year period, aim to attract diverse investors and bolster financial flexibility amid the complex acquisition landscape.
The Hinduja Group's acquisition of Reliance Capital has taken a major step forward with the announcement of a INR 7300 crore fundraising plan. This significant sum will be raised through the sale of non-convertible debentures (NCDs), a debt financing instrument. Advertisement
The Hinduja Group has entrusted 360 One, a leading Indian wealth and asset management firm, with arranging the sale of INR 5000 crore worth of NCDs. This is a major vote of confidence in 360 One, which boasts a strong track record in the Indian financial services industry.
Formerly known as IIFL Wealth Management, 360 One was established in 2008 and has since grown into a comprehensive wealth and asset management firm with over USD 56.3 billion in assets under management (AUM) as of FY24. The company caters to a broad client base, including high net-worth individuals (HNWIs) and ultra-high net-worth individuals (UHNIs), providing them with a range of financial products and services like wealth management, investment advisory, and estate planning.
Interestingly, 360 One isn't solely focused on traditional wealth management. The company has actively expanded its offerings into alternative investments, including private equity and private debt. This expertise aligns well with the Hinduja Group's needs, as the Reliance Capital acquisition is a complex transaction involving a debt-laden company.
The remaining INR 2300 crore of the INR 7300 crore fundraising plan will be arranged by Barclays, a global investment bank with a long history of facilitating large-scale financial transactions.
The NCDs offered by the Hinduja Group will have a maturity period of four years and carry a high interest rate of 16% per annum. This translates to an attractive potential return for investors, who will receive a total of INR 13,200 crore after four years, including both the principal amount and the accumulated interest.
To further entice investors, the Hinduja Group is seeking credit ratings from reputable agencies like Crisil, Icra, and CARE. Additionally, they aim to list the NCDs on a stock exchange, increasing their visibility and liquidity. Ideally, the NCDs will achieve an investment grade rating of BBB-, signifying a moderate level of credit risk.
The use of NCDs as a fundraising tool has been gaining traction in India. In recent years, several companies across diverse sectors have utilised NCDs to raise capital. For instance, Tata Motors raised INR 1000 crore through NCDs in FY23, while L&T Infrastructure Development Funds Ltd. raised INR 2500 crore in FY22. This trend highlights the growing acceptance of NCDs as a viable alternative to traditional bank loans, especially for companies seeking flexible financing options.
The Hinduja Group emerged victorious in the bid to acquire Reliance Capital, a debt-laden financial services company. However, completing this acquisition requires significant capital. Last week, the National Company Law Tribunal (NCLT) deferred a request by the Hinduja Group to extend the deadline for finalising the acquisition process. This NCD sale represents a crucial step towards securing the necessary funds and completing the deal within the revised time frame.
The success of the NCD sale will be instrumental in the Hinduja Group's ability to complete the Reliance Capital acquisition. The Hinduja Group's decision to raise funds through NCDs is a move leveraging 360 One's expertise in alternative investments. The high interest rate offered on the NCDs could attract a diverse pool of investors, and the credit ratings and listing would enhance investor confidence. However, the success of the NCD sale depends on market conditions and investor risk appetite.
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