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Shriram Transportation and Hero Fincorp Plan to Raise $600 mn Overseas

MUMBAI: Shriram Transport NSE 0.88% Finance and Hero FinCorp (HFCL) plan to raise up to $ 600 million through an external syndicated loan to boost demand in the logistics space, three people familiar with the matter.

One of the people mentioned above said: "The participation process is underway as the terms are not finalized yet."

Loans can be made in maturity periods of three or five years. The price will be set after adding the spread to the London Interbank Offer Rate (LIBOR).

"We are restoring normalcy to business by quickly returning to lending," Managing Director of Shriram Transport. "We are looking to raise long-term funds with a five-year maturity. This will put us in a good position as we enter a busy business season."

The company, which mainly lends purchases of used trucks, increased its assets under management (AUM) by 6.75 percent in the June quarter of this fiscal year to Rs 1.19 lakh crore.

Hero FinCorp has not commented on this. Sources said the company could raise between $100-200 million.

A group of banks, including HSBC, Citi, Axis Bank, Deutsche, and Standard Chartered Bank, are likely to be involved in the fundraising process.

Individual banks cannot be contacted immediately.

Many non-bank companies are trying to take advantage of foreign markets to raise funds.

Shriram Transport will likely raise around $ 400 million with a five-year maturity.

US-based six-month LIBOR, a world-renowned metric, now generates estimated returns of 0.16 percent. Shriram loans can be priced between 4 and 4.50 percent. The scale has been at 2.90 percent for almost three years.

The drop in global interest rates has created an opportunity for creditworthy companies to raise money at historically low rates.

Globally, interest rates remain benign but are showing signs of escalation as the US Federal Reserve hints at a reduction in available liquidity.

"Non-bank financial firms are also returning to the market, albeit slowly," Emkay Research said in a note.

A few weeks ago, Moody's changed Hero FinCorp's outlook to "stable" from "negative" after a change in the sovereign rating outlook.

On a consolidated basis, HFCL, a commercial and non-bank retail lender, reported a net profit of Rs. Rs 52 crore based on total assets total of Rs. Rs 31,276 crore in fiscal year 2021 for a net profit of Rs. 278 crore based on total assets of Rs. Rs 28,092 crore in fiscal 2020, showing ICRA ratings data.

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