Shriram Housing Finance, a mortgage lender and part of the Shriram Group, has successfully raised $50 million in its maiden external commercial borrowing (ECB) as it seeks to diversify its funding sources. The funds obtained through the ECB will be primarily used for financing affordable housing projects.
The company secured the funds from Canara Bank’s London branch, with an interest rate set at 200 basis points over the Secured Overnight Financing Rate (SOFR). The borrowing term is for three years, and the overall cost, including the one-year hedging cost, is approximately 8.4%. This falls in line with Shriram Housing Finance’s average borrowing cost of 8.5%.
Managing Director Ravi Subramanian highlighted the importance of establishing multiple avenues for fundraising as the company continues to grow. He expressed the company’s intention to raise an additional $150 million through similar means this year, citing the interest of global investors in the potential of India’s affordable housing finance sector.
Shriram Housing Finance has already financed 136,000 housing units, and as of June, its gross loan book stood at Rs 9,000 crore. The company has witnessed rapid growth in the affordable housing space, with its loan portfolio increasing at a compound annual growth rate (CAGR) of 44% over the past four years.
The company aims to achieve an asset under management (AUM) of Rs 10,000 crore by September and is further targeting expansion to Rs 13,000 crore by March next year. It primarily operates in western and southern states, with the average loan size amounting to Rs 16.6 lakh.
In addition to the ECB, Shriram Housing Finance relies on borrowing from banks, the debt capital market, refinancing from the National Housing Bank, and securitization through issuing pass-through certificates as fundraising methods.
To support its growth and expansion plans, the company is also exploring the possibility of raising approximately $100 million in equity by the end of the fiscal year. Shriram Finance, the parent company holding an 85% stake in the housing subsidiary, is considering options such as capital infusion, diluting a portion of its holding by 10-20%, or even opting for an initial public offering.
By adhering to these strategies, Shriram Housing Finance aims to enhance its financial capacity and continue providing necessary funds for affordable housing projects. The company’s dedication to expanding its funding sources showcases its commitment to meeting the increasing demand for affordable housing in India, while also attracting interest from global investors eager to contribute to this sector’s growth.
