Shriram Finance's HFC sale capital accretive, says S&P Global Ratings

Help to maintain 20 per cent year-on-year credit growth

Global rating agency S&P Global Ratings today said Shriram Finance Limited's (SFL) sale of its stake in its housing finance subsidiary will increase capital available to maintain strong growth in financing commercial vehicles and small businesses.

The transaction is not expected to have a material impact on SFL's credit profile, given Shriram Housing Finance Limited’s small contribution to the group. As of the end of March 2024, it contributed less than one per cent to the group's equity and four to five per cent to the group's revenues and assets, the rating agency said in a statement.

SFL plans to sell its 84.8 per cent stake in Shriram Housing Finance Limited to Warburg Pincus for Rs 3,900 crore ($470 million). This sale will further strengthen the capital position of SFL (BB/Stable/B). SFL’s regulatory Tier-I ratio was 19.6 per cent as of 31 March 2024, well above the minimum requirement.

With a comfortable capital base, the company should be able to maintain credit growth of about 20 per cent, without raising fresh equity. "We estimate SFL's S&P Global Ratings risk-adjusted capital ratio will stay broadly stable at more than 13 per cent over 2025 and 2026, compared with our estimate of 13.5 per cent as of the end of March 2024," the rating agency added.