JM Financial may launch around $100 million QIP today

Veteran dealmaker Nimesh Kampani founded financial services group JM Financial is likely to launch a qualified institutional placement (QIP) to raise around $100 million on June 9, people with knowledge of the matter told Moneycontrol.

“A strong set of investors have been tapped and the company is all set to launch its QIP today (June 9)," one of the persons cited above told Moneycontrol. Merchant banks -- ICICI Securities and IDFC Securities -- have been engaged as advisors for the QIP. Moneycontrol was the first to report the firm’s QIP plans on June 6.

"JM Financial has adequate liquidity for now but wants to strengthen its balance sheet during this uncertain period," the June 6 report had quoted a source as saying.

"Firms like JM Financial would want to be well prepared for any potential COVID-19 related stress in their loan portfolio," the report had added. JM Financial’s loan portfolio mainly comprises wholesale lending.

All the persons spoke to Moneycontrol on the condition of anonymity.

Moneycontrol could not immediately elicit responses from JM Financial, ICICI Securities and IDFC Securities.

In December 2019, the board of JM Financial had approved a fund raising resolution to raise Rs 850 crore via issuance of securities and had received shareholders nod in February. It had also approved an increase in the investments by foreign portfolio investors (FPIs) to 40 percent of the paid-up equity share capital of the company from 24 percent earlier.

During its Q4 FY20 conference call with analysts held on May 7, Vishal Kampani, MD, JM Financial Group, said , “Right now, we think we are in good shape, so there is no urgent need to raise any capital, but we will keep reviewing this as you will understand the situation is very dynamic.” During the interaction, Vishal Kampani said that he expected the COVID-19 issue to settle around January or February of 2021.”

“I think till December or at least till maybe February of next year one has to have cash. We have more but businesses should have cash to cover all their liabilities, interest payments and vendor payments as well as all their fixed costs,” he elaborated.

JM Financial has a diversified revenue stream comprising a mix of both fee and fund-based income. Its business verticals include investment banking, wealth management, securities business, mortgage lending, distressed credit and asset management. The firm has two non-banking house finance (NBFC) group companies, namely JM Financial Products and JM Financial Credit Solution, which provides funding to real estate developers.

Due to the tough operating environment and liquidity squeeze for NBFCs and housing finance companies (HFCs), brokerages expect many players in the segment to raise equity capital in a bid to inspire confidence, shore up their balance sheet and provide a cushion against higher provisions that are anticipated in FY21.

In a report dated April 13, ratings agency ICRA referred to the importance of asset liability management (ALM) for a firm like JM Financial. “Given the prominence of the lending business in the group’s revenue profile, its ability to manage its asset and liability profile, particularly considering the current operating environment, would remain critical. ICRA takes comfort from the group’s adequate liquid assets and its ability to raise funds from the market when required, as demonstrated in the past,” the report said.