Shriram Finance plans to consolidate its green finance efforts into a new platform, Shriram Green Finance, and build a portfolio targeting assets under management (AUM) of Rs 5,000 crore over the next 3-4 years.
Currently, the green finance book stands at Rs 7 billion. The initiative will initially focus on key markets such as Delhi-NCR, Karnataka, Kerala and Maharashtra, said YS Chakravarti, managing director and chief executive officer of the company.
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How did Shriram Finance decide to vertically integrate and launch a green finance specialty?
Over the past two years, we have been financing electric vehicles (EVs), including two-wheeled cars, and rooftop solar power generation equipment.
Over time, it has been observed that alternative energy options on the market are increasingly expanding. Currently, there are many manufacturers on the market assembling motors, batteries and frames to launch new brands. Effectively assessing risk requires a deep understanding of components such as motors and batteries, including their lifespan and financing availability.
We recognized that we needed expertise in these areas to address this. The team focuses exclusively on green financial products, gaining technical insights on EVs, batteries, charging stations, and other components. This allows you to make informed financing decisions while reducing risk.
What are the current interest rates for green finance offered by Shriram Finance?
Shriram Finance’s green finance loan interest rates vary by asset class. Two-wheelers have the highest tolls ranging from 14 per cent to 19 per cent, due to smaller ticket size and higher acquisition and collection costs. Passenger cars typically fall in the 11% to 12% range, while rooftop solar panels fall in the 14% to 15% range.
What market potential do you see for green finance, especially for EVs, in India?
India’s EV market is expected to grow significantly over the next five years, with electric two-wheelers and electric three-wheelers playing a major role.
Are there any partnerships that Shriram Finance is considering to secure funding for its environmental initiatives?
Although there is no specific partnership with any particular company, Shriram Finance works with a wide range of national and international bankers. For example, IFC was the anchor investor in a recent $1.27 billion raise, with participation from Japanese, European and US banks including MUFG, SMC and SBMC. The company has strong ties with these institutions and plans to raise funds as needed.
Additionally, Shriram Finance is in talks with several players in India who are building charging infrastructure to explore potential financing opportunities.
