Non-bank financial institutions are likely to accelerate their initial public offerings (IPO) to capitalize on favourable regulatory conditions, reduced interest rates, improving credit cycles, and optimistic market sentiment that has driven equity indices to their peak levels in approximately nine months.Several NBFCs have already secured IPO approvals from the Securities and Exchange Board of India (Sebi). These organisations were previously waiting for more favourable market conditions and are now expected to expedite their listing procedures.According to banking professionals quoted in an ET report, SK Finance, which specialises in vehicle and business loans, education loan providers Avanse Financial and Credila Financial, and MSME lender Veritas Finance are projected to collectively raise ₹13,500 crore.Additionally, the ₹17,200 crore IPO from the $400-billion market cap conglomerate Tata Group’s financial arm, Tata Capital, is anticipated to be one of the largest public offerings this financial year.“Conditions are more favourable for NBFCs that have lined up for the capital markets because of the regulatory change of stance, ample liquidity in the banking system, and a favourable rate cycle,” said Ajay Saraf, executive director, ICICI Securities, one of the bankers appointed to manage the ₹2,200 crore SK Finance issue and the bumper Tata Capital sale, according to the financial daily’s report.Experts indicate that the central bank’s decisions to lower risk weights for NBFC lending this fiscal year, coupled with the total 100 basis points reduction in the benchmark repo rate during 2025, should help resolve the funding issues NBFCs encountered in 2024.A basis point represents 0.01 percentage point.“The worst of the NBFC credit cycle is also behind us. The elevated credit costs that we saw in 2024 are easing, so it is fair to expect that in the second and third quarter onwards we could see some capital raising from the NBFCs,” said Shreepal Doshi, lead analyst, NBFCs, Equirus Securities, according to the report.It is noteworthy that private equity funds support most NBFCs preparing for IPOs, with intentions to exit these investments either completely or partially. SK Finance’s investor portfolio includes Norwest Venture Partners, TPG Growth, Baring Private Equity India and Motilal Oswal’s PE division — MO Alternate Investment Advisors.Following HDFC’s promotion, Credila Financial is now primarily owned by EQT and ChrysCapital, whilst Veritas counts Kedaara Capital, Norwest Venture Partners, British International Investment (BII), Lok Capital and Growth Catalyst amongst its investors.(Disclaimer: Recommendations and views on the stock market and other asset classes given by experts are their own. These opinions do not represent the views of The Times of India)
