Shriram Transport to raise $150 million from IFC

Investment is likely to be in the form of senior debt

Shriram Transport Corporation, the NBFC arm of Shriram Group, plans to raise $150 million from International Finance Corporation (IFC).

The proposed investment involves upto $150 million equivalent in the form of senior debt of the Company, according to IFC disclosure.

World Bank's investment arm said that STFCL has had limited access to the wholesale debt markets. IFC's funding will enable STFCL to tap a new funding source, and will attract other (than banks) debt capital market investors.

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"Providing long term debt to STFCL, the flagship of the Shriram Group, will help to leverage the capital of the group, a strong potential strategic partner, to effectively expand its reach the Base of the Pyramid," said IFC.

The money will be utilised by the company for financing commercial vehicles in low income states.

Shriram Transport is part of Shriram Group, a diversified group established primarily as a chit fund business over three decades ago. The group had initially started with financing used commercial vehicles and now has businesses covering the entire financial sector. Over the last decade, Shriram Group has grown at a CAGR of over 40 per cent, and has over 2400 branches, more than 45,000 employees, and a strong customer base of 9.5 million.

The shareholders of Shriram Transport include Shriram Capital (26.05%), Piramal Enterprises Limited (9.96%) and public (6.66%) whilst the remaining is held by diversified Foreign Institutional Investors/Foreign Portfolio Investors (52.91%) and body corporates/mutual funds/others (4.42%).

The Company has an outstanding asset under management of Rs 66,500 crore as of December 31, 2015, around 50 per cent of which is in rural and semi-urban areas across all states in India. STFCL has more than 80 per cent of its clientele from the MSME sector and is expected to add another 600,000 MSME customers in the next five years which is expected to create estimated direct jobs of around 1.5 million.

The company currently has 770 branches and 776 rural centers including 15 low income and north eastern states of India. As STFCL increases its reach and penetration into underserved areas, the proportion of its assets in rural areas and Low Income States (LIS) is expected to increase to 70 per cent from 50 per cent and to 30 per cent from from 21 per cent respectively.