Shriram Finance in talks to borrow $1.2 bn in offshore loan for sector

By Ameya Karve and Divya Patil 

Shriram Finance Ltd. is in advanced talks to borrow about $1.25 billion in a social loan, according to people with knowledge of the matter, a transaction that would be the biggest ever offshore facility by an Indian shadow lender. 

The non-bank financial company will offer a multitranche deal split across currencies such as the dollar, euro and dirham, the people said asking not to be identified. The tenors will range from three to five years, they said.

 

The loan adds to this year’s rush of offshore debt sales by Indian shadow lenders after the nation’s central bank tightened rules in November 2023 that made it increasingly difficult for the sector to obtain local currency bank loans. Markets have so far sufficiently absorbed the new debt supply as it offers investors comparatively elevated yields and diversifies their portfolios away from high-yielding Chinese debt.

 

Indian shadow banks play a significant role in the fast-growing economy, providing capital access to individuals and companies that are unable to tap traditional sources. In providing credit to sectors that have been underserved, the lenders have exposures in a wide range of projects from infrastructure to low-income borrowers’ small businesses.    

 

Several Indian shadow banks, including Annapurna Finance Pvt to Credila Financial Services Ltd., have tapped the offshore loan market recently, most of them being first-time borrowers. Shriram has already sold a $468.4 million loan and two dollar bonds totaling $1.25 billion earlier this year.

 

Shriram’s latest loan transaction consists of a $250 million portion from International Finance Corp. and the remaining funding from banks, part of which would be syndicated, the people said. DBS Group Holdings Ltd., First Abu Dhabi Bank PJSC, HSBC Holdings Plc, Mitsubishi UFJ Financial Group Inc., SMBC Nikko Securities Inc. and Standard Chartered Plc are among the lenders that are participating in the deal.

 

If Shriram draws out the total loan amount, it will top state-owned shadow lender India Infrastructure Finance Co.’s $1.2 billion deal in 2009, according to Bloomberg-compiled data.