Lending caps on NBFCs may offer big opportunities to small players

Asia's Tech News Daily

Lending caps, NBFCs, opportunities, banking, financing

New lending caps on NBFCs against funding initial share sales may throw up big opportunities for small players in last-mile financing. Many smaller NBFCs are likely to enter the estimated Rs 80,000-crore short-term funding market, hitherto the preserve of large entities such as Bajaj Finance, IIFL, and JM Financial.

To be sure, the IPO financing market might shrink after the Rs 1-crore limit per borrower kicks in on April 1.

Long-term wealthy investors bidding for less than Rs 50 lakh in an IPO can now have higher allocations in the absence of astronomical bids, dealers said.

“The new regulation is more inclusive where small lenders will find good opportunities to lend investors seeking to subscribe to shares,” said Tushar Bopche, Co-founder of BrainStation India, a start-up incubator involved in the financial markets.

“Genuine high networth individuals will get a better opportunity to apply for IPOs, creating long-term wealth,” he said. “This is not currently available due to concentrated IPO funding.”

NBFCs cannot lend more than Rs 1 crore to investors seeking to buy stocks in initial share sales from April 1 next year, the Reserve Bank of India (RBI) said on Friday.

Until now, wealthy investors borrowed money from large NBFCs that generally charge higher rates depending on the demand for money. NBFCs in turn borrow through commercial papers, or shorter duration debt securities ranging from seven to ten days.

An NBFC can either sell CPs or use internal resources for IPO funding.

“IPO funding is a high-risk leveraging business as you can earn high margins as well,” said Raman Agarwal, Area Chair – NBFCs, Council for International Economic Understanding (CIEU). “Smaller NBFCs with a dedicated focus and expertise on capital markets are likely to get in after the new regulations capping large funding kick in. The objective is to mitigate potential risks.”

Before the first day of listing, these investors strike informal deals with potential long-term buyers and give effect to transactions on the listing day. This coupled with huge subscription bids are said to be resulting in abnormal listing gains.

“Both buyers and sellers set the price levels subject to different conditions. They settle it on the exchange platform – often on the first day,” said a dealer involved in such transactions.

Resource raising could pose a challenge for those smaller entities as funding costs would be higher than at top rated NBFCs selling CPS.

“While some of the larger NBFCs are more active in IPO financing, smaller NBFCs may enter this space depending on how they manage challenges on fund mobilisation,” said Karthik Srinivasan – group head of financial sector ratings at ICRA. “Operational risks could increase in case NBFCs increase the number of borrowers to whom they provide IPO financing.”

Internet Explorer Channel Network
Asia's Tech News Daily
News Related

OTHER NEWS

Former Lloyds boss breaks Covid rules in Switzerland

Antonio Horta-Osorio credit suisse lloyds quarantine covid rules The former boss of Lloyds Bank has admitted breaking Covid rules after returning to Switzerland from the UK last week. Antonio Horta-Osorio, ... Read more »

SMCP ownership battle heats up amid illegal stake transfer claim

Claudie Pierlot store at a shopping mall in Hong Kong PARIS (Reuters) – An ownership battle at SMCP heated up on Wednesday as major shareholders claimed a 16% stake in ... Read more »

Goldman Sachs must again face crisis-era securities fraud class action

FILE PHOTO: The Goldman Sachs company logo is on the floor of the NYSE in New York By Jonathan Stempel NEW YORK (Reuters) – Goldman Sachs Group Inc must again ... Read more »

U.S. Senator asks FTC to probe Facebook's ad practices

1 / 2U.S. Senator asks FTC to probe Facebook’s ad practicesFILE PHOTO: A smartphone with Meta logo and a 3D printed Facebook logo is placed on a laptop keyboard in ... Read more »

Another Powell pivot raises questions about the Fed's policy credibility

Jerome Powell, chairman of the U.S. Federal Reserve, speaks in the Eisenhower Executive Office Building in Washington, D.C., U.S., on Monday, Nov. 22, 2021.Samuel Corum | Bloomberg | Getty Images ... Read more »

Jefferies resumes remote work, cancels travel and parties over fresh COVID fears

Jefferies has had more than 40 new COVID-19 cases in December including 10 on Tuesday, Dec. 7, 2021, Reuters reported. SOPA Images/LightRocket via Getty Images Jefferies Financial Group on Wednesday ... Read more »

Boris Johnson accused of wrecking pubs and restaurants with new Covid curbs

Boris Johnson Boris Johnson has been accused of wrecking the hospitality industry “to save his own skin” after announcing new Covid restrictions that threaten to wipe £8bn off its sales ... Read more »

Cybersecurity can pose a risk in more than one way for financial advisors

Financial advisors may want to view cybersecurity as a critical issue on more than one level. While protecting client data should be a priority, cyber attacks also could affect the ... Read more »

‘Don't throw us under the bus': Nightclubs blast Boris Johnson over Plan B Omicron restriction

People queue up for the Egg nightclub in London (PA) (PA Wire) Nightclubs have blasted the Prime Minister’s decision to introduce new restrictions on everyday life, saying new measures including ... Read more »

U.S. appeals court pauses antitrust orders against Apple App Store

FILE PHOTO: The Apple logo is displayed at company headquarters in California By Stephen Nellis (Reuters) – A U.S. appeals court on Wednesday paused the enforcement of an injunction against ... Read more »

Dyson says it will appeal after £150m damages claim rejected by EU court

Photograph: ACORN 1/Alamy Case follows earlier legal victory over energy efficiency stickers on vacuum cleaners that firm said misled buyers Dyson, the vacuum cleaner firm, has said it will appeal ... Read more »

NVE: Electricity prices last week were the highest in Norway in ten years

Last week, weekly electricity prices in Norway were the highest in ten years. In Southern Norway, the electricity price was NOK 1.6 per kilowatt-hour. The price amounted to NOK 1.4 ... Read more »

With millennials poised to inherit $68 trillion, financial advisors can take these steps to attract younger clients

Jamie Grill | The Image Bank | Getty Images Millennials stand to inherit a whopping $68 trillion from the baby boom generation. But they aren't necessarily taking cues from their ... Read more »

'Would be attractive to Moyes' - West Ham urged to raid rivals for ace who's 'got everything'

© Provided by This is Futbol Rodon West Ham United presenter Gonzo has been speaking on the Hammers Chat YouTube channel to discuss potential transfer targets for the January window.  ... Read more »

BioNTech says three month interval between second and third COVID-19 shots warranted

German drugmaker BioNTech SE’s executive on Wednesday said the interval between the second and third doses of its COVID-19 vaccine can be reduced to at least three months to enable ... Read more »

Reliance Capital asks creditors to submit claims

Reliance Capital on Wednesday asked the creditors of the company to submit their claims with proof by December 20 following initiation of corporate insolvency process against the firm. In an ... Read more »

Rs 7.4 crore spent for policing protest venues of farmers: Minister

The Centre spent Rs 7.38 cr to police protest sites of farmers at Delhi borders, minister of state for home Nityanand Rai told the Rajya Sabha on Wednesday. Replying to ... Read more »

Kiren Rijiju says many judges too oppose collegium system

New Delhi: Union law minister Kiren Rijiju told the Lok Sabha on Wednesday that many retired judges, the Supreme Court Bar Association and persons from other fields have conveyed to ... Read more »

India to host Central Asian foreign ministers on December 18-19

India is planning to host five Central Asian foreign ministers in Delhi on December 18-19 for the third edition of this format of dialogue, according to people familiar with the ... Read more »

Demands met, Samyukt Kisan Morcha now awaits official letter for calling off stir

The Samyukt Kisan Morcha (SKM) decided to call off the agitation after the government sent a revised proposal accepting the key demands of the protesting farmers unions on Wednesday, including ... Read more »

Better.com CEO Vishal Garg apologises after laying off 900 employees over Zoom

The CEO who last week laid off 900 employees in a single Zoom call has apologized after he attracted sharp criticism when the video was posted on social media. Vishal ... Read more »

'6% inflation is devastating' to everyday Americans, rising prices need to be curbed, expert says

Inflation is too high and the central bank needs to move quicker to get it under control by raising interest rates, said Gilbert Garcia, a managing partner at Garcia Hamilton ... Read more »

Big takeaway for Build Back Better: ‘lack of change' for wealthy Americans' taxes

Thomas Barwick | DigitalVision | Getty Images Financial advisors and their clients have waited for tax hikes as Congress hammered out provisions for the Build Back Better Act. But the ... Read more »

Cremation of CDS General Bipin Rawat, his wife to be held on Friday at Delhi Cantt

The cremation of Chief of Defence Staff General Bipin Rawat and his wife is planned to be done on Friday in Delhi Cantonment, informed sources. Their mortal remains are expected ... Read more »

Unions plan for national rail strike as job cuts loom

Photograph: Amer Ghazzal/REX/Shutterstock ‘Attacks on pay and pensions’ also expected after Department of Transport tells industry to find savings of 10% Rail unions are drawing up plans for a national ... Read more »

14 million more malaria cases in 2020 worldwide; India sustained reduction in disease burden: WHO

Around 14 million more cases of malaria and 69,000 more deaths due to it were reported worldwide in 2020 than in 2019 and India was the only high-burden country to ... Read more »

Reconstruction of 50,000 houses in Nepal's Gorkha and Nuwakot districts under Indian-assistance completed: Jaishankar

External Affairs Minister S Jaishankar said on Wednesday that the reconstruction of 50,000 houses in Nepal’s Gorkha and Nuwakot districts under Indian-assistance has been completed as he applauded the spirit ... Read more »

Tax credit aimed at low- to middle-income workers was expanded amid Covid-19. Who stands to benefit most

Joe Amon | MediaNews Group | Denver Post | Getty Images A temporary expansion of a tax credit aimed at workers with low to moderate pay could be extended for ... Read more »

Monzo valuation jumps to $4.5 billion after fresh funding round

A Monzo logo is seen in this illustration LONDON (Reuters) -British digital bank Monzo has completed a fresh funding round valuing the company at $4.5 billion, in a vote of ... Read more »

IT-BPM industry to add 3.75 lakh jobs in FY22: Report

Representative Image With increased investments in the sector and rapid adoption of technology by enterprises in the country, the IT BPM industry is on a positive hiring trajectory and is ... Read more »

Elon Musk slams Biden's Build Back Better bill and its electric car incentives

Photograph: Mike Blake/Reuters Elon Musk criticized new incentives and infrastructure for electric vehicles in a huge spending bill backed by Joe Biden, saying he would “delete” the measures and even ... Read more »

Mumbai airport says working with testing labs to explore lowering rapid RT-PCR test charges

Representative image (Image: Reuters) Adani group-owned Mumbai airport on Wednesday said it is working with testing labs and other partners to explore the possibility of further lowering the charges for ... Read more »

NSE-BSE bulk deals: Hamlin Watsa sell shares in IIFL Finance

MUMBAI: Hamlin Watsa Investment Counsel today sold 5.8 million shares of IIFL Finance at Rs. 312.7 apiece through a bulk deal on the National Stock Exchange. In another transaction, Axis ... Read more »

Sandeep Kumar Sultania ceases to be chief financial officer of Srei Infrastructure Finance

Srei Infrastructure Finance on Wednesday said Sandeep Kumar Sultania has ceased to be the company’s chief financial officer (CFO). “Sandeep Kumar Sultania has ceased to be the chief financial officer ... Read more »

Top tips to prep your portfolio for 2022

Investors saw it all in 2021. Next year promises a little more upside, according to two top strategists. “Aside from the latest variant, and Covid in general, the underlying economy ... Read more »

FTSE cools on Omicron fears

Traders had a subdued day after 48 hours of expectations rising that the Omicron variant of Covid-19 may not be as concerning as first thought. But rising case numbers and ... Read more »

Nagaland firing: Condition of survivors serious; kin 'asked not to talk to media'

The two survivors of the firing by army para-commandoes in a botched up ambush in Nagaland on December 4 and their relatives were asked by the “Nagaland authorities” not to ... Read more »

Scoop Up Big Gains With 4 Stocks Enjoying Rising Cash Flows

Making profits is undoubtedly a company’s primary goal, but having a healthy cash flow is imperative to its existence, development and success. And why not? Even a company generating profits ... Read more »

Are Options Traders Betting on a Big Move in Globalstar (GSAT) Stock?

Investors in Globalstar, Inc. GSAT need to pay close attention to the stock based on moves in the options market lately. That is because the Dec 23, 2021 $1.50 Call ... Read more »

Coronavirus Stimulus Checks to Workers: Your Job May Get You Some COVID Relief Cash

More federal stimulus checks are unlikely to come, but there are a few groups that are getting targeted payments from their state or local government. One such group is workers ... Read more »
On free-english-test.com you will find lots of free English exam practice materials to help you improve your English skills: grammar, listening, reading, writing, ielts, toeic