Shriram Finance, a retail non-banking finance company (NBFC) in India, is planning to raise up to INR200bn ($2.44bn) in the next financial year starting in April to fund its growth.
The firm is targeting a 15% increase in its assets under management (AUM) in fiscal 2024 to around INR1.9tn to INR2tn, according to Umesh Revankar, the executive vice-chairman of Shriram Finance.
The company will primarily look to external commercial borrowings (ECBs) to achieve this, with loans of between three and five years. The RBI permits borrowers to raise up to $750m worth of ECBs each financial year under the automatic route.
Shriram Finance, which reported a net interest margin (NIM) of 8.52% in the October-December quarter, aims to keep its NIM between 8.3% to 8.5% for fiscal 2024. The company’s total AUM was INR1.77tn as of 31 December.
Shriram Finance is in discussions with various development finance institutions such as the Asian Development Bank, the US International Development Finance Corporation, and the Asian Infrastructure Investment Bank. Additionally, the company plans to raise funds from local banks and the domestic capital market. However, the firm will exercise caution in its approach due to rising interest rates and high inflation.
Shriram Finance primarily serves small road transport operators and small business owners, providing financing for passenger commercial vehicles and tractors. The company’s managing director, Umesh Revankar, stated that if the cost of borrowing increases, the lending rate would also rise accordingly. Therefore, the company plans to monitor the situation closely and take appropriate measures to ensure financial stability.
Despite the challenging economic environment, Shriram Finance remains committed to serving its clients and contributing to India’s growth. The company will continue to explore innovative financing solutions and leverage its extensive network to support small businesses and communities. With a prudent approach to risk management and a focus on customer needs, Shriram Finance is well-positioned for long-term success.
Going forward, the company is also focusing on retaining its retail deposit growth of around 20% year on year. However, the cost of deposit mobilization would go up by 30-40 basis points for the next couple of quarters, said Revankar. Despite this, the shadow lender does not currently see any liquidity shortage, as banks remain open to lending to NBFCs.