International Finance Corporation (IFC), the multilateral lending arm of the World Bank, is investing $150 million in Shriram Transport Finance Company (STFCL) to help the company provide increased finance to micro, small and medium enterprises (MSME).
The proposed investment consists of a senior debt investment in STFCL, a leading non-banking finance company primarily focused on financing pre-owned commercial vehicles across India. Incorporated in 1979, STFCL 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 Rs 66,500 crore as of December 31, 2015; around 50% of which is in rural and semi-urban areas across all states in India.
According to an IFC document, providing long term debt to STFCL will help to leverage the capital of the group, a strong potential strategic partner, to effectively expand its reach the base of the pyramid.
STFCL has had the 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.
IFC is proposing to engage with STFCL and the World Bank, to initiate a road safety programme for driver training and safety awareness/education programme under the World Bank’s Global Road Safety Facility.