By Khushi Malhotra and Dharamraj Dhutia

MUMBAI, Feb 11 (Reuters) - India's IIFL Finance (IIFL.NS) is set to launch its largest-ever public bond issue of 20 billion rupees ($220.60 million), its second such offering this financial year, a company official and two sources familiar with the matter told Reuters on Wednesday.

The Fairfax-backed non-banking finance company will issue bonds maturing in two years, three years and five years, with annual, monthly, and end-of-term interest payment options, according to the sources.

The company will pay an annual coupon of 8.70% on two-year bonds and 8.85% on three-year papers. It will pay 9.00% for the five-year debt.

Nirmal Jain, managing director at IIFL Finance, confirmed the details of the public bond issue and said the company aims to diversify its funding sources and expects demand for public bonds to rise.

These bonds have been assigned a rating of AA by Crisil Ratings and AA+ by Brickwork Ratings.

IIFL Capital Services, Nuvama Wealth Management and Trust Investment Advisors are the lead managers for the issue, which is likely to open for subscription next week, one of the sources said.

"The proceeds from the fundraise will be utilised for onward lending, refinancing of existing borrowings and general corporate purposes," they said.

The sources requested anonymity as they are not authorised to speak to the media.

In April 2025, the company had raised 5 billion rupees through a similar issue.

Public bonds have been picking up in India, with Indian companies raising around 71 billion rupees through public issue of bonds in the first nine months of this fiscal year, according to the Securities and Exchange Board of India.

($1 = 90.6630 Indian rupees)

(Reporting by Khushi Malhotra and Dharamraj Dhutia; Editing by Janane Venkatraman)

((khushi.malhotra@thomsonreuters.com, dharamraj.dhutia@thomsonreuters.com))