International Finance Corporation (IFC), the private-sector lending arm of the World Bank, has agreed to invest $150 million in Shriram Transport Finance Company Ltd (STFCL) in the form of senior debt to help the firm provide more finance to micro, small and medium enterprises (MSMEs).
STFCL, the flagship company of the Shriram Group, is a non-banking finance company, primarily focused on financing pre-owned commercial vehicles across India. STFCL caters to more than 1.2 million clients who are typically first-time users or driver-turned owners.
The NBFC will use the money for financing commercial vehicles in low-income states.
The investment “will help leverage the capital of the group, a strong potential strategic partner, to effectively expand its reach the base of the pyramid," said IFC.
As on December 2015, the company has an outstanding asset under management of Rs 66,500 crore, around 50 per cent of which is in rural and semi-urban areas across India.
More than 80 per cent of its clients belong to the MSME sector. The firm is expected to add 600,000 more MSME customers in five years which is expected to create estimated direct jobs of around 1.5 million.
Currently, it has 770 branches and 776 rural centers, including 15 low-income and northeastern states of India.
The shareholders of Shriram Transport include Shriram Capital (26.05 per cent), Piramal Enterprises (9.96 per cent) and public (6.66 per cent) whilst the remaining is held by diversified foreign institutional investors and foreign portfolio investors (52.91 per cent) and corporate bodies, mutual funds and others (4.42 per cent). Investors in the firm also include Temasek, GIC and Abu Dhabi Investment Authority.