India's biggest shadow bank Bajaj Finance aims to borrow $500 million loan

By Saikat Das
 

India’s largest non-banking finance company by market value is planning to borrow up to $500 million offshore, people familiar with the matter said, the latest shadow financier to seek global funds after stricter regulations limited domestic options.
 

Bajaj Finance Ltd. is negotiating the terms of the facility with a group of at least four foreign banks, said the people, who asked not to be identified because the discussions are private. The debt’s tenor may range from three to five years, with the pricing linked to the Secured Overnight Financing Rate — a common benchmark for deals in Asia — they added.

The funds will be raised under the Reserve Bank of India’s external commercial borrowing route, which caps the interest rate at 500 basis points over the benchmark rate.

A spokesperson for Bajaj Finance declined to comment on the transaction.

A number of local shadow financiers are tapping global credit market after RBI asked banks to raise buffers for consumer loans to curb risky lending. The rule change has made it difficult for these lenders to raise bank loans, prompting them to seek alternatives in credit market.

Gold loan providers — Manappuram Finance Ltd. and Muthoot Finance Ltd. — and Piramal Capital & Housing Finance Ltd. are among shadow financiers who have borrowed abroad this year. HDB Financial Services Ltd., a unit of India’s largest lender by market value, is in the process of borrowing foreign capital. 

Bajaj Finance, a unit of one of India’s oldest conglomerates, gives loans to buy two- and three-wheelers manufactured by group company Bajaj Auto Ltd as well as consumer appliances. The top-rated company is also engaged in business of providing personal and mortgage loans.