Shriram Finance close to biggest ECB deal in NBFC space

Shriram Finance, India's second-largest NBFC, is in the final stages of raising $1.27 billion in a multi-tranche, multi-currency loan expected to be the biggest such external commercial borrowing (ECB) deal involving a local non-bank lender, according to people aware of the development.

The loan has maturities ranging from three to five years, with large lenders like the UK's HSBC, Japan's MUFG and SMBC, IFC from the World Bank Group, Singapore's DBS Bank, France's BNP Paribas, Standard Chartered Bank and First Abu Dhabi Bank involved in the series of transactions.

"The three-year loan is the largest in this deal at about $900 million. It is a triple currency loan with $600 million in dollars and the rest almost equally split between dirhams and euros," said a person familiar with the details of the transactions. "Separately, MUFG has also lent $275 million in a three-and-a-half-year loan, while IFC has lent about $10 million for a five-year loan, both being bilateral deals."


Individual overseas banks and multilateral institutions could not immediately be reached for their comments.

Change in RBI norms
Non-banking financial companies (NBFCs) have diversified their funding this fiscal after tightening of regulations by the Reserve Bank of India (RBI).

Foreign currency borrowings give such lenders a good option to diversify funding sources at good rates and longer tenures at a time when bank funding has dried up after the RBI raised concerns on rising bank exposure to the sector.

The three-year $900-million loan has been priced at 200 basis points (bps) above the three-month secured overnight financing rate (SOFR), which is currently trading at 4.76%, implying an interest rate of about 6.76%. One basis point is 0.01 percentage point.

The $900-million loan is likely to be syndicated among other international banks, sometime in January or February, the person cited above said.

Executive vice chairman Umesh Revankar confirmed that Shriram Finance is in the final stages of raising these loans.

Separately, Japan's largest bank MUFG has lent $275 million at 205 bps above the three-month SOFR rate, implying an interest rate of 6.81%. MUFG's loan is the largest in this deal by a single lender.

IFC has priced its loan at 210 bps over SOFR which comes to about 6.86%, a second person aware of the deal said.

"This loan deal is a record in terms of size from India by any NBFC. From Shriram's perspective, it helps diversify its sources of funds," said the second person. "The money will be used for its lending business."

Shriram Finance, which is known for commercial vehicle (CV) financing, is now diversifying its loan book to include lending to MSMEs. CVs and passenger vehicles together made up 67% of the company's Rs 2.33 lakh crore portfolio as of September.