Shriram Finance expects rating upgrade after merger

Commercial vehicle financing major Shriram Transport Finance Company and two-wheeler and MSME financier Shriram City Union Finance have been merged to form Shriram Finance Limited (Shriram Finance).

The merged entity will be a diversified player with a robust net worth of `40,900 crore and Assets under Management of `1,71,000 crore, catering to over 6.7 million customers across India.

The growth strategy for the company will be focused on driving the self-employed and the MSME economy.

Shriram Finance would explore newer geographies and launch new products such as invoice funding/receivable funding and some loan against property products.

Speaking about the expansion plans of Shriram Finance, its executive vice-chairman Umesh Revankar said, “We want to build in untapped markets and products. We want a presence in the central North and East. The merged entity will have 2875 branches. We have another 800 rural centres which would be converted into branches.”

According to Revankar, there is a case for Shriram Finance to get a credit rating upgrade to AAA as it would have a diversified portfolio that would enable finer pricing on borrowings. Before the merger, Shriram City Union Finance had a credit rating of AA, while Shriram Transport Finance was rated AA+.

Parag Sharma, joint managing director and chief financial officer of Shriram Finance said that around `30,000 crore of liabilities of Shriram City Union will get repriced with a higher rating. The overall borrowing cost will come down. There is a case now for a rating upgrade due to diversity in assets, said Sharma.

“Shriram City Union was one notch lower (than Shriram Transport) and following the merger, the portfolio will get upgraded from AA to AA+. To that extent, we get an advantage. As a diversified portfolio, you have a better chance of getting upgraded and we are working on that,” sais Revankar.

● The merged entity will be a diversified player with a robust net worth of `40,900 crore and Assets under Management of `1,71,000 crore, catering to over 6.7 million customers.

● The growth strategy for the company will be focused on driving the selfemployed and the MSME economy.