Northern Arc Capital plans to raise Rs 10,000-11,000 crore this financial year, higher than the Rs 8,000 crore raised last year, as the non-banking financial company looks to grow its lending business, Managing Director and CEO Ashish Mehrotra said.
The company expects its lending business to grow by around 25% on a blended basis. The direct lending segment–consumer, MSME and rural– is expected to grow upward of 30% year-on-year. Mehrotra said growth would be measured as the firm does not want to risk underwriting errors by expanding the loan book by 40-50%.
The company has sizeable borrowing lines from domestic public and private sector banks and also accesses global multilateral lenders, which account for around 30% of its borrowings, he said.
“We have not raised too much via external commercial borrowing because the hedging cost was high. Should hedging costs stabilize that’s another good route for us,” he said. The company’s multilateral borrowings are largely 4-5 year facilities, providing it with longer-term funding, while domestic banks and capital markets remain other key sources of funds.
Mehrotra said the transmission of monetary policy has happened much faster through the NCD route, than through other borrowing channels. “If you look at the markets there are two big moving parts NCDs and the AIFs which are now sort of becoming a very powerful tool,” he said.
The company expects its margins to improve as it scales its fee-generating businesses. Mehrotra said the net interest margin (NIM) has expanded from 5.5% five years ago to 9.4% currently and, after accounting for fees, the NIM stands at around 10-10.1%. “As the balance sheet mix changes and the funds, placement and bonds businesses grow, we should see some more expansion in NIMs,” he said.