Shriram Finance Ltd. is in advanced talks to borrow approximately $1.25 billion in a social loan, making this the largest offshore credit ever offered by an Indian shadow lender.

The non-bank financial company will provide a multitranche contract in currencies including the dollar, euro, and dirham, according to persons who asked not to be identified. The tenors will be between three and five years, they stated.

The loan adds to this year's surge in offshore debt sales by Indian shadow lenders, following the country's central bank tightening guidelines in November 2023, making it increasingly difficult for the sector to acquire local currency bank loans. Markets have so far accepted the increased debt supply, which provides investors with comparatively higher returns and diversifies their portfolios away from high-yielding Chinese debt.

Indian shadow banks play an important role in the fast-growing economy by providing capital access to individuals and businesses who cannot access traditional sources. In providing loan to neglected sectors, lenders have exposure to a wide range of projects, from infrastructure to small companies owned by low-income borrowers.

Several Indian shadow banks, notably Annapurna Finance Pvt Ltd and Credila Financial Services Ltd., have lately entered the offshore lending market, with the majority of them being first-time borrowers. Shriram sold a $468.4 million loan and two dollar bonds worth $1.25 billion earlier this year.

Shriram's most recent loan transaction includes a $250 million chunk from International Finance Corp. and the remainder from banks, some of which will be syndicated, according to reports.

According to Bloomberg-compiled data, if Shriram draws out the entire loan amount, it will exceed the $1.2 billion deal made by state-owned shadow lender India Infrastructure Finance Co. in 2009.