Mumbai: Non-banking finance company Shriram Finance is set to borrow $200 million through a external commercial borrowing (ECB) facility from a clutch of foreign banks as early as next week as it shores up its funding to feed credit demand.
The company has sought interest from foreign banks for what will be classified as a social loan because of Shriram’s lending profile which includes loans to small entrepreneurs and vulnerable social groups.
Vice chairman Umesh Revankar said the company has mandated HSBC, DBS and Barclays as anchor banks to raise the funds which could price next week. “This is a normal course for our business as we continue to diversify our funding. This loan will be about three- to three-and-a-half year tenure and will be priced close to our onshore cost of funds of a similar maturity which is around 9% after taking into account the hedging costs,” Revankar said.
The funds raised are likely to be used by the company for lending purposes. This is second time the company is raising foreign funds in 2024.
Earlier in January, Shriram carried out its largest ever fund-raising exercise in capital markets by raising $750 million through bonds, marking the non-banking financial company’s first US dollar bond sale in two years and a resumption of high-yield issuances by Indian corporates.
The NBFC’s bonds, with a 3.25 year tenure, were priced at 6.625%, lower than the initial guidance of 7%.
Revankar said the company had sought permission from the Reserve Bank of India (RBI) to increase its foreign funding limit after raising the $750 million which was the maximum it could raise according to norms. Now that the permission has come through it is seeking more funds from abroad.
Last July, the company raised $150 million through a similar three year loan which was priced at around 200 basis points above the Secured Overnight Financing Rate (SOFR), from HSBC, ET Had reported. One basis point is 0.01 percentage point.
The company continues to raise funds from India and abroad to match the growth in its assets. Shriram’s assets under management (AUM) increased 21% to ₹2.14 lakh crore at the end of December 2023, spurred by a 30-plus percentage point growth in loans in the passenger vehicle, MSME and gold loan segments, results released in January showed.
