MUMBAI: Shriram Finance is exploring new avenues of global funding by opting for an international asset-backed securities (ABS) model for the first time in order to raise up to $500 million (about Rs 4,160 crore) in mid-January 2024. The issuance is likely to be priced at under 9%.
The non-banking financial company (NBFC) plans to securitise part of its loan portfolio and then sell it to international investors, with major global banks set to meet investors in Hong Kong and Singapore this week to arrange the transaction, said people with knowledge of the matter.
The banks involved in the transaction are JP Morgan, HSBC, Barclays and Deutsche Bank, they said. Queries emailed to Shriram Finance, JP Morgan, HSBC, Barclays and Deutsche Bank did not elicit a response by Tuesday press time.
“The Shriram deal has a layered structure; it is not merely a standalone dollar funding instrument. It is similar to the pass-through certificate model and the funding instrument is backed by the collateral of Shriram loans. It would likely be rated ‘BBB-‘ by Fitch,” said one of the persons, who did not wish to be identified.
The funds are likely to be raised under the Reserve Bank of India’s external commercial borrowing framework (ECB), which allows non-bank finance companies to raise up to $750 million from overseas every year.
“For the issuer, the benefit would be an improvement in rating metrics with the appropriate level of credit enhancement. The current rating for Shriram Finance is ‘BB’.”
Given the additional cost element in opting for an elaborate ABS funding model, Shriram Finance would be looking for the pricing of the transaction to reflect the benefits of improved ratings, the people said.
“The company is exploring the market and it is too early to comment on the pricing of the issue,” said another person in the know, adding that the NBFC is likely to expect a landed cost of not more than 9%.
