Mumbai: British lender HSBC has nearly tripled the size of a syndicated overseas loan to retail non-banking financial company Shriram Finance to $400 million, with international financiers showing firm appetite for lending to the domestic NBFC sector amid a volatile global interest rate outlook.
Senior management of HSBC, the sole arranger for the dollar loan, told ET that the facility had been upscaled from the original size of $150 million to $404 million. The deal will be concluded in the next few days.
“This deal has several firsts and will surely be counted as a landmark transaction for both the borrower and the sector. It is a testimony of both the faith reposed by international banks in the credit story of Shriram and the growing appetite of international investors for the Indian BFSI sector, particularly in the retail social finance side,” said Ajay Sharma, head of commercial banking at HSBC India.
The loan, which saw syndication from 16 banks, is one of the most widely syndicated financing deals for an NBFC.
The pricing of the loan, which has a tenor of three years, would be 200 basis points above the Secured Overnight Financing Rate (SOFR), HSBC’s officials said.
The syndication of the loan, which was helped by its social classification, saw participation from banks across Taiwan, Qatar, other countries in the Middle East, China, and other Asian countries.
“This highly successful transaction is in line with our continued focus on diversification of funding sources, and truly demonstrates how widely acceptable Shriram’s credit is with global banks across multiple jurisdictions,” said Parag Sharma, joint managing director and CFO, Shriram Finance.
The social loan is certified by Netherlands-based Sustainalytics and qualifies as an Environmental, Social and Governance (ESG) compliant form of lending. The loan would qualify as external commercial borrowing in line with Reserve Bank of India norms.
Loan syndication refers to a process through which several banks and financial institutions join hands to finance lending to a borrower.
In June, HSBC and Shriram Finance had originally announced the social loan worth $150 million and at the time, the UK-based lender had conducted roadshows across Singapore, Taiwan and the Middle East for the loan.
The launch of the social loan came in the backdrop of an upgrade of four Indian financial sector entities, including Shriram Finance, by global rating agency Standard & Poor’s. The rating agency cited structural operational improvements and strong economic prospects as reasons behind the rating upgrade. Shriram Finance’s rating was upgraded from ‘BB-‘ to ‘BB’
In March 2022, the Asian Development Bank and HSBC India jointly announced the creation of a $100 million partial guarantee to support micro-borrowers and micro-enterprises run by women in India.
In August 2022, HSBC and CreditAccess Grameen entered into an arrangement for a syndicated social loan worth $90 million.
