Billionaire Ajay Piramal's Shadow Bank Plans $1 Billion Foreign Debt

Mumbai-based Piramal Finance Ltd. 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.

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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 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 trillion rupees ($10.5 billion) in the last five years and are expected to expand by 50% over the next two years, according to the firm.

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India's central bank 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 Ltd. 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.