Ajay Piramal's Shadow Bank Eyes $1 Billion Foreign Debt Financing

India's Fastest-Growing Shadow Lender Seeks $1 Billion in Foreign Loans

Billionaire Ajay Piramal's Indian shadow lender, Piramal Finance Ltd., is planning 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. The Mumbai-based company will primarily tap foreign banks and multilateral agencies for the loan, with tenors ranging from three to five years.

This move comes 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. Despite this, Piramal Finance aims to borrow across tranches after evaluating total costs including hedging. Indian firms often borrow money from overseas markets to take advantage of lower interest rates, longer tenures, and a broader pool of lenders.

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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 in the past year but is now seeking to diversify its sources of funding and may explore currencies other than the dollar due to geopolitical uncertainties in the global bond market.

The foreign currency borrowing will be used to expand Piramal Finance's domestic consumer loan book, which is expected to grow significantly due to rising aspirations across retail and small business segments. The company offers mortgages, loans against property, and used car loans, among others, and is one of India's fastest-growing shadow lenders in the retail space.

Piramal Finance's 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. 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 when Mitsubishi UFJ Financial Group Inc. announced plans to invest $4.4 billion in Shriram Finance Ltd. for a minority stake.

The sector is expected to continue growing, with assets under management of non-banking financial companies expected to advance 18% to 19% in the year to March 2027, driven by consumption demand, according to a report by ratings provider Crisil.

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