Shriram Finance Secures $500 Million in Global Investor Funding for Sustainable Growth

Shriram Finance, a diversified non-banking finance company (NBFC) based in Chennai, has successfully raised $500 million through the issuance of fixed-rate, senior secured social USD notes at a coupon of 6.15 percent. This marks the company's first USD bond issuance in the current fiscal year (FY25) and its ninth overall USD issuance.

Unlocking Sustainable Financing for Inclusive Growth

Diversifying Funding Sources for Sustainable Expansion

Shriram Finance's latest USD bond issuance is a strategic move to diversify its funding sources and support its ongoing expansion plans. The company has been actively tapping into the overseas bond market to complement its domestic debt capital market activities, reflecting its commitment to maintaining a balanced and resilient funding structure.The $500 million raised through this issuance will be used for onward lending to sustainable income-generating segments, such as vehicle finance, aligning with the company's social finance framework. This framework promotes financial inclusion by providing affordable financing to first-time buyers and small road transport operators on pre-owned commercial vehicles.

Navigating the Global Debt Market Landscape

The USD social bonds, rated 'BB' by Fitch Ratings and S&P Ratings, were well-received by global investors, showcasing their confidence in Shriram Finance's financials, strategic vision, and dedication to fostering sustainable and inclusive growth.While the coupon rate of 6.15 percent per annum was considered reasonable, the company's top executive noted that the total cost of raising funds through a dollar bond, including hedging costs, is currently 25 basis points higher than the rate at which the company raises funds in the domestic capital market. This reflects the ongoing challenges in the global debt market, where high hedging costs continue to impact the overall cost of overseas borrowing.

Optimizing Funding Strategies for Competitive Advantage

Shriram Finance's average cost of funds in the domestic debt capital market is typically around 9 to 9.25 percent. The company remains committed to exploring the overseas bond market further, as it seeks to diversify its borrowing sources and capitalize on favorable market conditions.The successful execution of this $500 million USD bond issuance, following the $750 million social bond transaction in January 2024, underscores Shriram Finance's ability to navigate the global financial landscape and secure competitive funding to support its growth aspirations.As the company continues to expand its operations and deepen its commitment to sustainable and inclusive financing, its strategic approach to funding diversification will be crucial in maintaining a strong competitive edge and delivering long-term value to its stakeholders.