Non-bank lender Shriram Transport Finance Company Ltd is raising $200 million (Rs 1,420 crore) from International Finance Corporation and other investors by securitising its assets.
IFC, the World Bank's private-sector investment arm, said in a disclosure that it plans to invest half the total amount itself and mobilise the remaining from other institutional investors.
The proceeds will help Mumbai-based Shriram Transport meet its funding requirements and allow it to continue growing its reach to micro, small and medium enterprises, IFC said.
The transaction comes as a boost to Shriram Transport, especially because non-banking financial companies in India have been battling concerns of a liquidity crunch since September last year. The concerns were triggered after Infrastructure Leasing & Financial Services Ltd (IL&FS), one of India's biggest NBFCs, defaulted on its debt.
The IL&FS crisis had prompted the government and the Reserve Bank of India to take steps to support financing needs of non-bank lenders. In November, the RBI eased rules for NBFCs to sell or securitise their loan books.
IFC said securitisation is still nascent in India with banks as the main investor base and limited interest from institutional investors. Through the deal with Shriram Transport, IFC aims to show the attractiveness of the asset securitisation market for institutional investors and mobilise interest in developing an active private-sector institutional investor base.
IFC has backed Shriram Transport previously as well. The World Bank arm had invested $150 million in Shriram Transport in the form of senior debt in 2016.
Shriram Transport is the flagship company of Shriram Group. The company has over the years expanded its products from financing commercial vehicles to passenger vehicles, tractors, three wheelers and multi-utility vehicles. It also provides ancillary services. The company has 1,348 branches across India.
As of December 31, 2018, Shriram Capital Ltd owned a 26.08% in Shriram Transport while Piramal Enterprises Ltd held 9.96% and Sanlam Life Insurance Ltd 2.98%. It also counts Singapore sovereign wealth fund GIC and the Abu Dhabi Investment Authority as investors.