Expansion Plans of Shriram Finance: A Major Fundraising Initiative
Shriram Finance, a prominent Non-Banking Financial Company (NBFC), has announced ambitious plans to raise a significant amount of one billion dollars (approximately ₹8,300 crore) from international sources within the next six months. This strategic move aims to bolster the company’s business expansion initiatives, catering to the growing demand for financial services in India.
Funding Details and Future Aspirations
According to YS Chakraborty, Managing Director and CEO of Shriram Finance, the company is looking to secure $300 million in the upcoming weeks, likely by October. The remaining funds, estimated between $50 million to $70 million, are expected to be raised within the ongoing financial year. This influx of capital will be instrumental in accelerating growth projects and enhancing service offerings.
Diverse Funding Sources
Shriram Finance’s fundraising strategy includes tapping into loans from various development financial institutions such as the Asian Development Bank, KfW, and the United States Development Finance Corporation (DFC). The timing of these fundraisers will be contingent on prevailing market conditions, ensuring that Shriram Finance secures the best possible terms for its capital.
Sustained Growth and Loan Disbursement Trends
The company has set an ambitious target for loan growth of 15% to 16% in the current financial year. As of June 2024, Shriram Finance reported its Asset Under Management (AUM) at ₹2.33 lakh crore. In the first quarter of the financial year 2024-25, the total disbursement reached ₹37,710 crore, showing a significant increase from ₹30,455 crore in the same period last year.
Impact of Regulatory Changes
In response to concerns over financial stability, the Reserve Bank of India (RBI) mandated that all lending financial institutions allocate a higher capital reserve for loans extended to NBFCs since November 2023. This regulatory change has made it more expensive for smaller NBFCs to raise funds from banks. However, Chakraborty noted that Shriram Finance has not faced significant funding pressures, thanks to its strong credit rating and a diversified borrowing strategy.
Focus on Commercial Vehicles and SMEs
Shriram Finance primarily focuses on providing loans for the purchase of commercial vehicles and lending to small and medium enterprises (SMEs). This sector is crucial for the Indian economy, and with increased funding, the company aims to support more businesses and enhance its market share.
Conclusion
Shriram Finance’s proactive approach to raising funds signifies its commitment to scaling operations and strengthening its foothold in the competitive NBFC landscape. With a clear focus on strategic growth and leveraging diverse funding sources, the company is well-positioned to meet the financial needs of its clients effectively.
