Shriram Finance Raises $500M via Social Bond to Boost MSME Growth

On September 25, 2024, Shriram Finance Limited (SFL), one of India’s largest retail-focused non-banking finance companies, successfully raised $500 million through a fixed-rate senior secured bond with a 3.5-year maturity at a 6.15% interest rate. 

This marks SFL’s biggest bond deal to date and is the company’s ninth USD bond issuance since the easing of external commercial borrowing (ECB) regulations.

Thanks to strong demand from high-quality, long-term investors, SFL was able to lower the pricing by 35 basis points. The bond saw significant interest, with the order book being 2.4 times oversubscribed, attracting over 125 investors. Geographically, 47% of the investment came from Asia-Pacific (APAC), 27% from Europe, the Middle East, and Africa (EMEA), and 26% from the U.S. The majority of investors were asset and fund managers (83%), followed by private banks (11%) and banks (6%).

The bond issuance is part of SFL’s Social Bond program, which follows the Social Finance Framework aligned with the International Capital Market Association (ICMA) Social Bond Principles. The funds will be used to support employment generation, particularly through MSME financing. SFL’s framework aligns with the United Nations’ Sustainable Development Goals, specifically focusing on eradicating poverty, promoting decent work, fostering innovation and infrastructure, and reducing inequalities. The framework has been reviewed and approved by S&P and CareEdge.

SFL offers various financial services and products, including:

• Loans for small road transport operators (SRTOs) and first-time borrowers (FTBs) at favourable interest rates, especially focusing on those from underserved communities across India.
• Tailored financial solutions for micro, small, and medium enterprises (MSMEs) that either have a limited asset base or lack the required income proof to qualify for traditional bank loans.
• Affordable financing options, such as personal loans and gold loans, are aimed at individuals who are unbanked or underserved, with a particular focus on women.

Mr Umesh Revankar, Executive Vice Chairman of Shriram Finance Limited, while describing the successful issuance, stated, “We are delighted to announce the successful placement of our USD 500mn Social Bond, reinforcing our commitment to advancing initiatives through our Social Finance Framework. This opportunistic issuance, executed under favourable market conditions, received an overwhelming response from global investors. As our 9th successful public USD bond issuance, following the USD 750 million transaction in January 2024, this reflects strong investor confidence in our financials, strategic vision, and dedication to fostering sustainable and inclusive growth.”

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.