Shriram Finance, one of India’s leading non-banking financial companies (NBFCs), is set to embark on an ambitious expansion of its green finance portfolio, aiming for a 20-fold increase over the next three years. This strategic move comes as the company seeks to diversify its loan book and leverage the growing demand for sustainable financing solutions.
Shriram Finance’s Green Ambitions
In a recent interview, Executive Vice Chairman Umesh Revankar revealed the company’s plans to add solar panels and other renewable energy sectors to its financing portfolio. This expansion is expected to significantly boost the company’s green finance book, which currently stands at approximately Rs 250-300 crore. The ultimate goal is to escalate this figure to Rs 5,000 crore (about $576 million) in the coming years.
This substantial increase will be driven by small-ticket loans primarily focusing on two-wheeler and three-wheeler electric vehicles (EVs). With the rapid evolution of the electric mobility sector in India, Shriram Finance sees enormous potential in financing electric vehicles, battery technologies, and other sustainable projects. Green finance is crucial for India’s transition to a low-carbon economy, but its adoption has been relatively slow. Some of the key barriers include limited awareness, high transaction costs, and restricted access to affordable green technologies. However, government initiatives such as tax incentives and subsidies for renewable energy projects are making sustainable investments more attractive for financial institutions. With rising fuel prices and stringent emission regulations, the demand for electric vehicles (EVs) and green energy solutions is growing exponentially. Shriram Finance aims to capitalize on this trend by offering affordable loans to individuals and businesses investing in clean energy and sustainable transportation.
Shriram Finance’s Broader Growth Strategy
Apart from its green finance ambitions, Shriram Finance has set an aggressive target to double its overall loan book and assets under management (AUM) by 2030. As of December 2023, the company’s total loans stood at Rs 2.51 trillion, while its AUM was Rs 2.54 trillion.
To achieve this rapid growth, the company is focusing on key lending segments, including medium and small enterprises (MSMEs), vehicle loans, and tractor financing. According to Revankar, Shriram Finance aims to increase its AUM by 15% annually over the next two financial years, driven by strong demand for commercial and passenger vehicle loans.
Key Highlights of the Growth Plan:
- Targeting 20% annual growth in small business lending
- Increasing financing for electric vehicles (EVs) and battery technologies
- Expanding loan offerings for solar energy and green infrastructure
- Tapping into MSME lending opportunities
Shriram Finance has been actively expanding its MSME lending segment, recognizing the vital role small businesses play in India’s economic growth. Currently, small business loans account for approximately 14% of the company’s AUM. By implementing customized lending solutions, the company aims to better understand small business repayment capabilities and improve collection efficiency. With India’s growing entrepreneurial ecosystem, the demand for flexible and accessible credit solutions is on the rise. Shriram Finance’s focus on small enterprises, transport businesses, and rural entrepreneurs will be a key driver of its sustained financial growth. To support its ambitious expansion, Shriram Finance is considering raising at least $750 million through dollar bonds in the next fiscal year. This move will depend on global market conditions and investor sentiment.
Tapping into international debt markets could provide the company with additional resources to fund its green financing initiatives and overall growth strategy. By diversifying its funding sources, Shriram Finance aims to maintain financial stability while expanding its loan book. Shriram Finance’s aggressive push into green finance marks a significant step towards sustainable economic growth in India. By scaling its green loan portfolio to Rs 5,000 crore, expanding MSME financing, and tapping global markets for funding, the company is positioning itself as a leader in India’s NBFC sector. As the demand for electric vehicles, renewable energy, and small business financing continues to rise, Shriram Finance’s strategic expansion could redefine the financial landscape. With a strong commitment to sustainability and financial inclusion, the company is on track to achieve its ambitious targets over the next decade.
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