Mumbai: Shriram Transport Finance’s need for diversion of liabilities in the revenue stream coinciding with investors’ keenness to own higher-yielding bonds with reasonable amount of comfort could make the company the first non-mortgage NBFC to sell US dollarNSE 0.63 % bonds. The biggest lender for truck purchases was strained recently by a sudden squeeze in the domestic bond markets.
The NBFC, with a focus on financing pre-owned commercial vehicle, is looking to raise $300 million through a dollar bond issue. Right now, Shriram Transport is in the middle of raising Rs 700 crore through a public issue of NCDs, which will close on January 31. “If we see good interest in the international market for bonds we can go to Reserve Bank of India for a special permission and go beyond $750 million,” said Umesh Revankar, CEO, Shriram Transport Finance. “The bond issue is for diversifying our borrowing profile. We would like our cost of international borrowing to be at par with domestic cost of 9.5 per cent, including the hedging cost.” NBFCs have the option of raising $750 million through external commercial borrowing. Shriram Transport is internationally rated BB+. With borrowing costs rising and a lag in passing it on, the company is focusing on deepening retail franchise through deposits and NCDs. Retail NCDs and deposit comprise 15 per cent of its borrowing book. In a year, Shriram Transport borrows Rs 40,000 crore. Bank borrowing and institutional borrowing is 60 per cent, securitisation 15 per cent while the share of masala bonds and ECB are lowest at 4 per cent of the book. The company has seen borrowing cost rise by 60 basis points to up to 9.5 per cent in the third quarter. Shriram Transport has lower reliance on commercial papers to 5 per cent of the overall borrowing. Credit growth for vehicle-financing NBFCs in the third quarter was muted due to liquidity squeeze, increased insurance costs and higher cost of funds.