TVS Capital-backed mid-market NBFC Vivriti Capital plans to raise around ₹9,000 crore this fiscal to meet its debt obligations and support expansion. In an interview with Narayanan V, Founder & MD, Vivriti Capital, Vineet Sukumar discusses the company’s disbursement plans and the impact of RBI’s rate cuts on its asset-liability profile. Excerpts:
How have recent rate cuts impacted your liability profile?
The rate cuts in the past were not accompanied by a commensurate increase in liquidity in the financial system. This time, the 50-bps rate cut was accompanied by measures on liquidity like reduction in the cash reserve ratio. It was needed for banks to be able to genuinely pass on the benefit to borrowers. The market has been anticipating it for a while, and therefore we saw the G-Sec going up for a day or two after the rate correction. I think the rate transmission in the G-Sec world has happened. It will take some time before it happens to AAA-rated bonds, followed by AA and A. We are rated A+. It will require market liquidity to remain soft for sometime. So, first the capital market will correct and then banks will start cutting rates.
Having said that, I do not expect any total transmission since banks will find it difficult to cut deposit rates for a while given the pressure on deposits. The attractiveness of equity markets is rising and this will again lead to money leaving the banking system. So, liability rates will come down to some extent, but not beyond a point.
Did you pass on rate-cut benefits to customers?
It is a bit different on the assets side. Typically, NBFCs serve the markets which banks don’t. So, these markets are relatively more sticky in terms of rates. The mid-market lending where we operate is a relatively ill-liquid space. We provide term loans to mid corporates to grow. Very few lenders even give that kind of money. Therefore, on the assets side, we expect rates to remain unchanged for quite some time. Therefore, putting both liabilities and assets together, our margins on a like-to-like basis should expand over the next 12-24 months.
Can you break down your current borrowing mix? How it’s structured?
Currently, 59% of our borrowing is from banks. The remaining is from capital markets, external commercial borrowings (ECBs), etc. Our bank borrowings are either linked to marginal cost of funds-based lending (MCLR) or the repo rate. For loans linked to repo, rates have come down immediately, but those linked to MCLR will fall when banks reset the rates. The remainder, which is largely fixed-rate borrowings, will get repriced at maturity and when we borrow to replace that borrowing. I would say all of these will get repriced in the next 12 months.
What is your borrowing requirement for this fiscal, and how do you plan to raise it?
We will need around ₹9,000 crore of borrowing this year. A part of it will go towards replenishing existing borrowings and the remaining towards growth. Currently, 5–7% of our borrowings are through ECBs. We should do anywhere between $90 million and $120 million of borrowing through ECBs this year. The cost of dollar debt has come down and that is driving the ECB market. Cost in dollars is a combination of two things – the risk-free rate in the US and the hedging cost between the dollar and the rupee. When you add these two, those numbers have been quite reasonable for quite some time now. Even if the lender adds a margin to the risk-free rate plus hedging cost, the all-in cost is still quite reasonable for an Indian borrower. That’s why we have seen dollar bond issuances happening in a big way with banks tapping the market and ECB is also picking up in a significant way.
You disbursed over ₹15,000 crore in FY25. What growth are you targeting this year?
We aim for a 30-35% growth in disbursements this year and we believe that the markets are conducive enough to attain the same. The Indian mid-market is starting to grow quite well. For the first time in almost 10-15 years, bank credit to mid-market is growing at high teens. I think banks are pivoting away from retail to commercial banking after a gap of 15 years. I hope this trend continues because the space needs ₹5.5 lakh crore over the next five years, and everybody has to be a part of it.
