Shriram Finance aims to raise $2.44 bn in FY24 to fund growth: Official

India's Shriram Finance is looking to raise as much as 200 billion rupees ($2.44 billion) to fund its growth in the next financial year starting April, a senior company official told Reuters on Monday.

The retail non-banking finance company (NBFC) aims to grow its assets under management (AUM) by 15% in fiscal 2024 to around 1.9 trillion rupees to 2 trillion rupees, Umesh Revankar, executive vice chairman of Shriram Finance, said.

The company's total AUM was 1.77 trillion rupees as of Dec. 31.

"We will mostly be looking at ECB loans rather than dollar bonds. Right now, the (dollar) bond market is very volatile," Revankar said, adding, "We are looking to utilise our entire $750 million ECB limit next year."

The loans will be anything between three to five years, he said.

ECBs, or external commercial borrowings, are commercial loans raised by domestic borrowers from recognised foreign entities. The Reserve Bank of India (RBI) permits borrowers to raise up to $750 million worth of ECBs each financial year under the automatic route.

The company will also raise funds from local banks and the domestic capital market among others, alongside the ECB borrowings, he added.

Shriram Finance was established after a three-way merger between Shriram Transport Finance Company with promoter Shriram Capital and diversified finance company Shriram City Union Finance. The merger was completed in November.

Last year, the NBFC secured funding of $250 million from the US International Development Finance Corporation (US DFC) and $100 million from the Asian Development Bank (ADB).

It is currently in talks with various development finance institutions, including ADB, US DFC and Asian Infrastructure Investment Bank, to secure the ECB funding, said Revankar.

Shriram Finance caters to small road transport operators and small business owners, financing passenger commercial vehicles and tractors, among others.

But given rising interest rates and high inflation, it will be more cautious in its approach, said Revankar.

"We would like to keep our margins," he said. "If the cost of borrowing goes up, then definitely our lending rate also will go up."

The NBFC, which reported a net interest margin (NIM) of 8.52% in the October-December quarter, aims to keep it between 8.3% to 8.5% for fiscal 2024.

Going forward, it is also focusing on retaining its retail deposit growth of around 20% year on year. However, the cost of deposit mobilisation would go up by 30-40 basis points for the next couple of quarters, said Revankar.

The shadow lender does not see any liquidity shortage right now given that banks are open to lending to NBFCs.

($1 = 81.8850 Indian rupees)