Shriram Finance eyes $150 million social loan, HSBC lead arranger

The pricing of the loan, which has a tenor of three years, would be around 200 basis points above the Secured Overnight Financing Rate (SOFR), the UK-based bank told ET.

One basis point is 0.01 percentage point.

The loan will have a greenshoe option, also of three years, and will likely be scaled up.

“Given the upbeat tone on Indian financial institutions currently, Shriram’s recent credit rating upgrade and the social loan structure of this transaction, we believe this is a very well-timed transaction and will be received positively by the bank loan market,” Chetan Joshi, managing director and head of debt finance, India, HSBC, said.

HSBC will be conducting roadshows to lenders across Singapore, Taiwan and the Middle East for the loan.The social loan is certified by Netherlands-based Sustainanalytics and qualifies as an Environmental, Social and Governance (ESG) compliant form of lending. The loan would qualify as external commercial borrowing in line with Reserve Bank of India norms.Social loans, which are credit disbursements to fund projects aimed at social causes, are still relatively nascent in the Indian NBFC space.

“Our ability to execute these international capital market access transactions is a testimony of the faith that both bankers and rating agencies have placed on us,” Parag Sharma, joint managing director and CFO at Shriram Finance, said.

The launch of the social loan comes in the backdrop of a recent upgrade of four Indian financial sector entities, including Shriram Finance, by global rating agency Standard & Poor’s. The rating agency cited structural operational improvements and strong economic prospects as reasons behind the rating upgrade. Shriram Finance’s rating was upgraded from ‘BB-‘ to ‘BB’

In December 2022, Shriram Finance Limited received funding worth $100 million for a five-year term from the Asian Development Bank to support and expand lending to new energy-efficient vehicle ownerships in India.

In the previous calendar year, Shriram Finance had raised funds worth $250 million from the US Development Finance Corporation and $475 million through global bond markets.