37767 - Shriram TFC NCD

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Summary of Investment Information

Project Number

37767

Company Name

SHRIRAM FINANCE LIMITED

Date SPI Disclosed

Mar 31, 2016

Country

India

Region

South Asia

Projected Board Date

Apr 30, 2016

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Jul 28, 2021

Department

Global Industry, Financial Markets

Industry

Financial Markets

Previous Events

Approved : Jun 15, 2016
Signed : Jun 24, 2016
Invested : Jul 5, 2016

Sector

Commercial Banking - SME Finance

Project Description

The proposed project consists of a senior debt investment in Shriram Transport Finance Company Limited (“STFCL” or the “Company”) a leading non-banking finance company primarily focused on financing pre-owned commercial vehicle financing across India. STFCL incorporated in 1979, is the flagship company of the Shriram Group, and caters to more than 1.2 million clients who are typically first time users or driver turned owners. The Company has an outstanding asset under management of INR665billion as of 31st December 2015; 50% of which is in rural and semi-urban areas across all states in India.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	98.09
Equity

IFC's loan to the financial institution described in this SII is targeted for on-lending to the following sector(s):

Product Type	Use of Proceeds
Straight Senior Loan	Loans to SME Borrowers

IFC's Definitions of Targeted Sectors can be found here.

Development Impact

((i) Access to finance for micro-small and medium enterprises ("MSME"): STFCL has more than 80% of its clientele from the MSME sector and is expected to add another 600,000 MSME customers in the next five years which is expected to create estimated direct jobs of around 1.5 million.

(ii) Rural and Low Income States ("LIS") thrust: As STFCL increases its reach and penetration into underserved areas, the proportion of its assets in rural areas and LIS is expected to increase from 50% to 70% and from 21% to 30% respectively.

(i) Long term partner: Providing long term debt to STFCL, the flagship of the Shriram Group, will help to leverage the capital of the group, a strong potential strategic partner, to effectively expand its reach the Base of the Pyramid.

(ii) Funding diversification: STFCL has had limited access to the wholesale debt markets. IFC''s funding will enable STFCL to tap a new funding source, and will attract other (than banks) debt capital market investors.

(iii) Advisory: IFC is proposing to engage with STFCL and the World Bank, to initiate a road safety program for driver training and safety awareness/education program under the World Bank''s Global Road Safety Facility ("GRSF").

Indicator	Metrics	Comments	Calendar Year 2022	Calendar Year 2023	Calendar Year 2024
CORE - E and S Management Systems (Y/N)	Compliance/Enhancement		Not Available	Not Available	Not Available

E&S Category Rationale / Risks and Mitigation

The Company is primarily engaged in the business of financing of pre-own commercial vehicles of small road transport operators generally belonging to the vulnerable part of the Indian society. The target segment includes light commercial vehicles of 5 to 12 years old. The Company has two subsidiaries, namely Shriram Equipment Finance Company specializing in financing cranes, tractors, and other construction and agriculture vehicles; and Shiram AutoMall India specializing in selling new and pre-own commercial vehicles. Given the nature of the Company’s operations the level of E&S risks is considered as medium-low. This investment has been categorized, therefore, as FI-2 according to IFC Sustainability Policy. The E&S requirements will include application of IFC’s Exclusion List and relevant E&S laws and regulations of India, in particular those related to a) air emission standards for pre-owned vehicles b) waste management and c) labor and working conditions, including life and fire safety in publicly accessible premises of the Company.

?The main E&S risk of this proposed investment derive from Shiram’s lending and financing activities as well as its labor and working condition practices across the organization as well as its capacity and procedures in place to manage these risks. The company has a sound Environmental Policy approved by its Board of Directors as well as a standard procedures for verification of any relevant authorization /certificates for safety as well as fitness and emission of the financed vehicles. The company also offers to its clients financial products to improve safety and to meet government regulated air emissions. The labor and working conditions are subject to a comprehensive human resources policy that was, in general, found in compliance with the objectives of IFC Performance Standard 2 on Labor and Working Conditions.

Contacts

For Inquiries About the Project, Contact

Mr. Swaminathan
Senior Vice President Finance
SHRIRAM TRANSPORT FINANCE CO. LTD.Corporate Office: Wockhardt Towers,3rd Floor, West Wing, G Block,Bandra-Kurla Complex, Bandra (East),Mumbai - 400051. Tel. No.: +91 22 4095 9595 Fax: +91 22 4095 9596/97

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This Summary of Investment Information (SII) is prepared by IFC to disclose a factual summary of the main elements of the potential investment. It also includes findings and recommendations related to environmental and social considerations regarding this potential investment. The purpose of the SII is to enhance the transparency of IFC’s activities. For any project documentation or data included or attached herein, whether prepared by the project sponsor or otherwise, authorization has been given for public release by the project sponsor. IFC considers that this SII is of adequate quality for release to the public, but has not necessarily independently verified all of the project information therein. It is distributed in advance of IFC Board of Directors’ consideration and may be periodically updated thereafter. Board dates are estimates only and this document should not be construed as presuming the outcome of the Board Directors’ decision. The following SII is disclosed in accordance with IFC's Access to Information Policy (AIP) that went into effect on January 1, 2012.

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Task Title & Description	Anticipated Completion Date
Formalize procedures	05/30/2016
Develop a L&FS Policy	08/28/2016

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