‘Planned IPO is on track’: Sachin Bansal's Navi announces to raise Rs 600 Cr from NCDs
Sachin Bansal-led Navi Technologies (Navi) on Wednesday announced it will raise up to Rs 600 crore through the issue of secured and redeemable Non-Convertible Debentures (NCDs).
The issue opens on Monday, May 23, 2022, and is scheduled to close on Friday, June 10, 2022, with an option of early closure or extension.
The company said the NCDs will be of face value of Rs 1,000 each for an amount aggregating up to Rs 300 crore, with a green-shoe option to retain an oversubscription of up to Rs 300 crore. Navi Finserv Limited (NFS) is a wholly-owned subsidiary of.
Investors will get an opportunity to participate in secured NCDs under various series for a tenure of 18 months and 27 months with an effective yield of up to 9.80 percent and a minimum application size of Rs 10,000, added the statement.
“We have been working hard in silence since the last few years and building our business. This issue will take us to the next level of growth. We are a growing company and hence will raise a mix of both debt and equity,” Sachin Bansal, Chairman of Navi Technologies said during the announcement.
The IPO-bound financial services company, NFS, is the first fintech to announce an NCD issue.
Speaking about the NCD issue, Ankit Agarwal, Managing Director of NFS said, “The upcoming NCD issue aims to raise funds for onward lending and financing purposes, This will further diversify our borrowing profile and add more retail investors to our portfolio to complement our wide base of institutional partners. This is a secured instrument with A (stable) rating, a low application size and an effective yield of up to 9.8 percent."
Universal bank licence rejected
The company faced a minor setback as the Reserve Bank of India (RBI) declined the banking licence for Chaitanya India Fin Credit Private Limited, a microfinance entity of Navi, as it was “not found suitable under Guidelines for ‘on tap’ Licensing of Universal Banks”.
“We are going to evaluate RBI’s written response and chart out our next course of action. A lot of options are there in front of us and there are many things to explore like reapplying. We will consider whether we want to appeal this and weigh our options,” said Sachin. The announcement from the RBI came when Bansal was addressing the press conference to announce the company's maiden issue of NCDs.
Chaitanya India Fin Credit Private Limited was among the six applications not found suitable for bank permit.
“It is not the end of the road,” Sachin added.
In June 2021, Bansal was issued a notice by the Enforcement Directorate (ED) for alleged violation of regulations under the Foreign Exchange Management Act (FEMA). The ongoing litigation could be one of the possible reasons behind the rejection. A report by news agency Reuters last year said that the ED has sought an explanation as to why the company and its founders should not be charged a penalty of more than Rs 10,000 crore for alleged FEMA violations. Bansal later moved the Madras High Court challenging and seeking a quashing of the Notice and the complaint filed by the ED.
His petition is currently pending before the HC and no steps have been taken by the ED following the notice.
IPO plans on track
Navi filed its draft red herring prospectus (DRHP) in March 2022, to raise Rs 3,350 crore through an IPO. The entire fundraise will be a fresh issue, meaning Bansal, who has already invested around Rs 4,000 crore into Navi to date, will not be diluting his stake in the IPO. He owns a stake of 97.77 per cent.
It has appointed ICICI Securities, BofA Securities and Axis Capital to manage its public issue and plans to utilise the funds for its two subsidiaries— Navi Finserv Pvt. Ltd (Rs 2,370 crore) and Navi General Insurance (Rs 150 crore).
“We are a very young company with big ambitions. It is almost like a record being created where a business of our age is being able to create a public issue of debt of this size, which is generally associated with large organisations,” said Sachin.
Navi is a digital lending app which provides loans, including personal and home, up to Rs 20 lakh instantly through a completely paperless process, besides other financial services and products like retail health insurance and mutual funds. Its disbursal is based on its own paperless credit underwriting mechanism.
Bengaluru-based Navi, which was set up in 2018 and turned profitable in 2020-21, posted a consolidated profit of Rs 71 crore with a total income of Rs 780 crore and expenditure of Rs 673 crore.