Largest Rs. 10 b listed debenture issue by NDB oversubscribed

Friday, 13 December 2013 00:01 - - {{hitsCtrl.values.hits}}

By Cheranka Mendis Acknowledged as the largest listed corporate debenture in the country, NDB’s Rs. 10 billion debenture issue was oversubscribed yesterday, having reached the necessary outcome within 10 minutes of its opening. With four types of A+ debentures to choose from under three tenures – ranging from five, 10 and 12 years, the bank issued 50 million rated, unsecured, subordinated, redeemable debentures at Rs. 100 each with an option to issue a further 30 million debentures and another option of 20 million debentures in the event of over subscription of the first two options.

The five to 12 years noted in the debenture gave an excellent cross-section of opportunities for a multitude of investors to pick and choose from a spectrum. NDB Chief Executive Officer Rajendra Theagarajah yesterday asserted that the investors would be happy to match their aspirations with the bank’s own internal consumption demand. “NDB is very much here to do business,” Theagarajah said. “We have a very firm and optimistic view of the country and we look forward to leveraging on it.” Joining him to announce the oversubscription, NDB Investment Banking Cluster CEO Vajira Kulatilaka noted that the chief requirement in the capital market was to develop the yield growth, which, with the prospect now on board with the debenture, will support the capital markets. There is also the perfect matchmaking happening with loans in NDB going long-term, which will benefit from the event. For investors, there is now an opportunity to match their liabilities and assets especially with regard to insurance, EPFs and provident funds in the long term, which they could not previously enjoy. “The type of demand indicates that they really want these kinds of instruments in the market,” Kulatilaka said. NDB Bank CFO Faizan Ozman added: “The funds up to 12 years will help the bank’s Tier 2 capital. The bank is growing, and this will help us fund the liquidity mismatches and also the asset portfolio.” With this coming into the books, the total capital of the bank will probably move towards the 18% range this year, which will firmly entrench its foundations and contribute to asset growth in 2014/2015. Theagarajah explaining the purpose behind the tenure stated that even though the bank changed its business model a few years ago from a pure development bank to a licensed commercial bank, the positioning of the bank remained based on two pillars – to have development orientation as a strong performer on one side (which the is the long term pillar), while also maintaining a short term working capital and trade finance pillar, which gives a complete end-to-end requirements throughout the supply chain of financial services to Sri Lanka. “When businesses get mature they come into the commercial banking side and within the side, the project finance and development finance arms provide important long-term capital for which we have prided ourselves in the past four decades,” he said. “However, as the businesses mature, we need a different type of short-term capital. Hence without having to go to two or three different places for different types of financing, this bank is uniquely positioned to provide the full spectrum under one roof.” With these types of debentures now available even from the branch network, customers will have a choice, ranging from deposits to mutual find, Government security or now a commercial debenture in which to hold their money. “That is the excitement,” Theagarajah commented. “That we don’t lose the branches as deposit mobilising offerings but utilise them as full sale centres, which is increasingly making the NDB franchise popular.” People have now been alerted on these benefits and staff have been trained to look beyond just deposits. There is now demand to get a better yield for savings. “Instead of going to three or four different places, if there is one place that offers a cocktail, naturally the inclination is to go to that window.” This is what the bank has now created. The bank earlier issued a notice citing strengthening of Tier 2 capital base and maintaining capital adequacy requirements in line with the bank’s future expansion of operation and asset base, facilitating mobilising/raising medium term funds to match medium and long term goals and minimising interest rate risks and manage gap exposures of the bank’s assets and liabilities as the key objectives of the issue. He noted that while the five-year money would go into supporting the shorter end, five to 12 years will go into a combination of propelling economic activity. He listed the likes of long-term housing, projects in industry and finance, renewable power energy, agriculture, developing small and medium sector and tea among others. A major road show will be held today in Galle and Ambalangoda embracing the cinnamon industry, supported by the bank.

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