Mumbai, May 30: Kotak Mahindra Prime Ltd today said it would raise Rs 7,000 crore by issuing non-convertible redeemable debentures on a private placement basis.

“The total amount can be raised over the year and we will not do so at a time,” said Pankaj Desai, director, Kotak Mahindra Prime.

“We raise debt through term loans and by issuing debentures to banks and financial institutions with a tenure of even one day,” he added.

The board had cleared the proposal at a meeting held earlier this month, which is subject to necessary approvals, the company informed the Bombay Stock Exchange.

Kotak Mahindra Prime, formerly known as Kotak Mahindra Primus Ltd, finances retail and wholesale trade of passenger and multi-utility vehicles in India.

The auto loan segment had witnessed a shake out with many players, including major foreign banks, deciding to exit.

“The segment had become intensely competitive and with lending rates dropping to below 8 per cent, margins were severely under pressure. It made the segment unattractive for players who did not have large volumes to recover the spiralling costs,” Desai said.

Though the situation has not vastly improved, the lending rates have now eased above 10 per cent for a tenure of 3-5 years. However, the used-car segment still remains more attractive with lending rates hovering around 200-250 basis points higher than the same for new cars, he added.

ICICI Bank commands more than 40 per cent of the auto loan market, while HDFC Bank, Kotak Mahindra Prime and State Bank of India control the rest.

The total auto loan volume of the industry for financial year 2005-06 was Rs 4,300 crore. The total assets of Kotak Mahindra Prime is about Rs 3,000 crore.