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HSBC Triples Syndicated Loan to Shriram Finance to $400 Million

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HSBC Triples Syndicated Loan to Shriram Finance as International Financiers Show Interest in Indian NBFC Sector

British lender HSBC has significantly increased a syndicated overseas loan to retail non-banking financial company Shriram Finance, demonstrating international financiers’ strong appetite for lending to India’s domestic NBFC sector. The loan size has been nearly tripled from the original $150 million to $404 million, with the deal set to be finalized in the coming days.

HSBC, the exclusive arranger for the dollar loan, highlighted the significance of the transaction for both the borrower and the sector. Ajay Sharma, head of commercial banking at HSBC India, stated: “It is a testimony of both the faith reposed by international banks in the credit story of Shriram and the growing appetite of international investors for the Indian BFSI sector, particularly in the retail social finance side.”

The syndicated loan, which involved the participation of 16 banks, is one of the most widely syndicated financing deals for a non-banking financial company (NBFC). The loan has a tenor of three years and the pricing will be set at 200 basis points above the Secured Overnight Financing Rate (SOFR), according to HSBC officials.

Furthermore, the syndication of the loan attracted interest from banks in various regions, including Taiwan, Qatar, Middle Eastern countries, China, and other Asian nations. The success of the transaction exemplifies HSBC’s commitment to diversifying its funding sources and highlights the global banks’ acceptance of Shriram Finance’s credit across multiple jurisdictions.

The loan is certified by Netherlands-based Sustainalytics and qualifies as an Environmental, Social, and Governance (ESG)-compliant form of lending. It aligns with the Reserve Bank of India’s norms on external commercial borrowing.

Loan syndication is a process where multiple banks and financial institutions collaborate to finance lending to a borrower.

This development follows the announcement in June when HSBC and Shriram Finance unveiled the social loan worth $150 million. At the time, HSBC conducted roadshows across Singapore, Taiwan, and the Middle East to generate interest in the loan. The launch of the social loan coincided with the 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 factors behind the rating upgrade, with Shriram Finance’s rating upgraded from ‘BB-‘ to ‘BB’.

HSBC’s involvement in supporting micro-borrowers and micro-enterprises run by women in India was also highlighted. In March 2022, HSBC India and the Asian Development Bank jointly announced the creation of a $100 million partial guarantee for this purpose. Additionally, in August 2022, HSBC and CreditAccess Grameen entered into an arrangement for a syndicated social loan worth $90 million.

Overall, this significant increase in the syndicated loan to Shriram Finance underscores the strong interest of international financiers in India’s domestic NBFC sector. The deal highlights HSBC’s commitment to diversifying funding sources and Shriram Finance’s creditworthiness on a global scale.

More detail via Economic Times here… ( Image via Economic Times )

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