Billionaire Ajay Piramal’s NBFC plans $1 billion foreign debt

Billionaire Ajay Piramal’s Indian non-banking financial company (NBFC) is looking to raise as much as $1 billion in foreign currency loans this year to meet strong demand for retail credit in the world’s fastest-growing major economy.

Mumbai-based Piramal Finance will mainly tap foreign banks and multilateral agencies for the loan, with tenors ranging from three to five years, Chief Executive Officer Jairam Sridharan said in an interview.

Piramal Finance’s plans to raise offshore funds come at a time when the rupee has dropped to record lows against the dollar, raising hedging costs for importers and borrowers of foreign currency loans. Still, the company aims to borrow across tranches after evaluating total costs including hedging, Sridharan said.

Indian firms often borrow money from overseas markets to take advantage of lower interest rates, longer tenures and a broader pool of lenders. External commercial borrowings of local companies rose to $4.63 billion in February from $2.82 billion a year earlier, according to data from the Reserve Bank of India.

Piramal Finance raised offshore debt the past year but Sridharan said the global bond market did not look “conducive” now due to “geopolitical uncertainties.” He said the company is also seeking to diversify its sources of funding and may explore currencies other than the dollar.

Piramal Finance's diversified borrowing mix

Piramal Finance will use the foreign currency borrowing to expand its domestic consumer loan book. “Rising aspirations across retail and small business segments are opening up sizable opportunities, especially in areas where traditional banks have limited reach or flexibility,” said Sridharan.

The Piramal entity, which offers mortgages, loans against property and used car loans, among others, is one of India’s fastest-growing shadow lenders in the retail space. Its assets under management have doubled to ₹1 lakh crore ($10.5 billion) in the last five years and are expected to expand by 50% over the next two years, according to the firm.

RBI has moved to strengthen the financial industry in recent years with measures aimed at boosting credit flow and encouraging lending and financing. Shadow lenders have often stepped in to fill gaps in funding by traditional banks and were thrust in the limelight last year Mitsubishi UFJ Financial Group Inc. announced plans to invest $4.4 billion in Shriram Finance for a minority stake.

Assets under management of non-banking financial companies are expected to advance 18% to 19% in the year to March 2027 after likely growing at the same pace in the last financial year, driven by consumption demand, according to a report by ratings provider Crisil.