Shriram Finance, the country’s largest auto-focused, non-bank lender, has begun an initial round of discussions with climate focused private equity funds to raise capital for financing electric vehicles. Currently, the share of EVs in the INR 2.33 lakh crore worth of assets managed by the lender is small but this is set to grow amid the rapid electrification trend seen in the electric-two and electric-three wheelers, Umesh Revankar, vice chairman, Shriram Finance, told ET.
“We don’t have a separate drive for EV right now. But yes, we will be looking at something depending upon if we are able to attract some resources, which is cheaper. If there’s a green colored currency (climate focused fund) coming in at a lesser price, then we will be able to pass it on to the customer,” he said adding that Shriram Finance is already in discussions with a few and will pursue it once EV financing loan book reaches a certain size. “We will have a better negotiating power then,” said Revankar. EVs account for 1.5% of the company’s two-wheeler portfolio.
The company is considering raising capital for EV finance a few months after the Chennai-headquartered firm exited from the housing finance business vertical selling the entire 85% stake to the has decided to exit the housing finance vertical and has agreed to sell its entire 85% stake to the American private equity firm Warburg Pincus for a consideration of INR 4,630 crore after 13 years of operations. Shriram had said the company will use the proceeds from the sale to augment its core business.
He expects the EV lending portfolio to be INR 5000 crore over the next two to three years. The capital raising for EVs however, is not contingent on achieving the said target and can happen even before that, he clarified. Whether finance is spun off as a separate entity or stays within the same company will depend on the overall costs benefit analysis the company arrives at.
Meanwhile, touching upon the financing of used trucks, where it’s the market leader, Revankar said led by a strong demand and low supply, prices of the second-hand truck have seen a sharp uptick. Over the past two years, prices for all types of used commercial vehicles, whether BS IV or BS VI, have increased 25-30% due to insufficient supply. The subdued sales during 2019-22 have resulted in a shortage of supply in the used truck market, he pointed out.
Shriram Finance’s loan portfolio growth for commercial vehicles and construction equipment remained steady (+14.6% year-on-year) in a seasonally weak quarter. “The management has maintained their loan growth guidance of 15% amidst a slowdown witnessed in the new CV segment, according to a research note released after the June quarter earnings. The company posted a net profit of INR 2,030.64 crore during the quarter up 18.6% cent compared to INR 1,712.19 crore during the same period in 2023-24.
