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Shriram City Union may raise up to $1 billion through dollar bond sale

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Shriram City Union Finance Ltd is planning to sell dollar bonds in a medium-term note (MTN) programme, two people aware of the development said, a year after a similar issue by group company Shriram Transport Finance Ltd.

“Shriram City Union Finance is planning to raise up to $1 billion through the proposed MTN programme. The idea is to tap the dollar bond markets in a staggered approach to raise funds for growing its books and diversifying its sources of capital,” said the first person cited above, requesting anonymity. Citigroup is advising Shriram City Union Finance.

An MTN programme allows an issuer to make multiple bond issuances over a period of time, without having to seek regulatory approvals for each issue.

Emails sent to Shriram City Union Finance did not elicit a response. Citigroup declined to comment.

Last year, Shriram Transport Finance had set up a $2 billion MTN. Since then, the commercial vehicle financier has tapped the dollar bond markets several times, starting in February 2019, when it raised $400 million in its debut dollar bond offering. Recently, the lender raised around $500 million in January.

Another non-bank lender that has set up an MTN programme is gold loan financier Manappuram Finance Ltd with a $750 million dollar bond offering. In January, it raised $300 million through a bond offering.

Shriram City Union Finance’s dollar bond plans make it yet another non-bank lender looking to tap the offshore markets to raise debt, a trend that started after the NBFC space was hit by a liquidity crunch following defaults at Infrastructure Leasing & Financial Services (IL&FS) group in September 2018.

Attractive yields and global liquidity have driven investor interest in Indian companies, including NBFCs.

In 2019, Indian companies raised more than $20 billion of debt through offshore bonds in 2019, the highest both in value and volume terms in the last six years. The year saw 47 Indian companies raise $21.3 billion through offshore bonds, compared to a muted 2018, which witnessed only 12 companies tapping the offshore debt markets to raise $5.2 billion, according to data from financial markets tracker Refinitiv.

In January 2019 too, several lenders tapped the overseas bond market to raise funds. This includes Shriram Transport Finance, which raised $500 million via dollar bonds, marking the first international public social bond issuance from the country.

Funds raised through social bonds are used to lend to businesses which have social impact—microfinance, education, green businesses.

Export-Import Bank of India (Exim Bank) also raised $1 billion by issuing 10-year bonds, while Manappuram Finance raised $300 million through three-year dollar bonds.

State-run Power Finance Corp. Ltd (PFC), which lends to firms in the power sector, also raised its third dollar bond issue, worth $750 million.

Shriram City Union Finance offers financing for two, three and four wheelers including both new and pre-owned passenger and commercial vehicles, personal loans, small business loans and loans against gold.

In the quarter ended 30 September, the lender disbursed loans worth 5,201 crore, while assets under management stood at 29,722 crore. The lender has four million customers served through its 957 branches.

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