Capital firm Vivriti aims to acquire Rs 9,000 crores for financing growth and refinancing endeavors.
In a significant development for the Indian mid-market, Vivriti Capital, a leading Non-Banking Financial Company (NBFC), is set to benefit from the recent monetary easing measures by the Reserve Bank of India (RBI). The RBI's moves, including a 50 basis points reduction in the repo rate to 5.5% and a 100 basis points cut in the cash reserve ratio (CRR), have positively impacted Vivriti Capital's liability profile, improving their margins on the liability side [1][2][3].
Vivriti Capital's Managing Director, Vineet Sukumar, has highlighted that unlike previous rate cuts that lacked sufficient liquidity, the recent combined rate and CRR cuts have facilitated a genuine reduction in borrowing costs. While government securities have quickly reflected this change, transmission to AAA-, AA-, and A-rated bonds (Vivriti is rated A+) will take more time, dependent on sustained market liquidity [1].
Sukumar also emphasised that while liability costs are expected to decrease somewhat, deposit rates will not fall drastically in the short term due to pressures on banks' deposit bases and the shifting of money towards equity markets. This means Vivriti will see some moderation in borrowing costs but not a full pass-through immediately [1].
In light of these developments, Vivriti Capital plans to borrow approximately ₹9,000 crore this fiscal year. This capital raising aligns with the need to support expanded disbursements and manage liabilities efficiently amid evolving market conditions [1]. Interestingly, around 5-7% of the company's borrowings are currently through external commercial borrowings (ECBs). The company is set to borrow between $90 million and $120 million through ECBs this year, as banks pivot away from retail to commercial banking after a gap of 15 years [4].
Part of the borrowed funds will be used to replenish existing borrowings, and the remaining will be channelled towards growth initiatives. The cost of dollar debt has decreased, driving the ECB market. The cost in dollars for ECBs is a combination of the risk-free rate in the US and the hedging cost between the dollar and the rupee [4].
The Indian mid-market requires ₹5.5 lakh crore over the next five years, and the sector is experiencing growth, with bank credit to mid-market growing at high teens [5]. Vivriti Capital's borrowing strategy, supported by the RBI's monetary easing, is a testament to the positive momentum in the sector. The company aims for a 30-35% growth in disbursements this year, contributing to the growth of the Indian mid-market.
In summary, the RBI’s monetary easing is supporting Vivriti Capital’s cost of borrowing, aiding their growth and refinancing strategy this fiscal year. The company's borrowing plans, the impact of the RBI's rate cuts, and the timeline for rate transmission are key factors shaping the Indian mid-market's financial landscape.
Sources: [1] Business Standard, 2023 [2] Mint, 2023 [3] Livemint, 2023 [4] Economic Times, 2023 [5] Financial Express, 2023
- The recent monetary easing measures by the Reserve Bank of India (RBI), such as reducing the repo rate and cash reserve ratio, have positively impacted Vivriti Capital's liability profile, improving their margins on the liability side.
- Vivriti Capital's Managing Director, Vineet Sukumar, has stated that while liability costs are expected to decrease somewhat, deposit rates will not fall drastically in the short term due to pressures on banks' deposit bases and the shifting of money towards equity markets.
- Part of the borrowed funds by Vivriti Capital will be used to replenish existing borrowings, and the remaining will be channelled towards growth initiatives, such as expanded disbursements in the Indian mid-market.
- The Indian mid-market requires ₹5.5 lakh crore over the next five years, and the sector is experiencing growth, with bank credit to mid-market growing at high teens. Vivriti Capital's borrowing strategy, supported by the RBI's monetary easing, is a testament to the positive momentum in the sector.
