Hero fincorp has become the first Indian company to raise a secured overnight financing rate (SOFR)-linked syndicated loan, said people aware of the matter.
The Hero MotoCorp-backed non-bank lending firm raised $350 million (about Rs 2,631 crore) at 168 basis points over SOFR, a new worldwide benchmark that replaced the London Interbank Offered Rate (LIBOR) on January 1.
The Reserve Bank of India had instructed banks to stop writing LIBOR contracts by December 31, in line with the global phase-out of that benchmark rate.
Thursday's SOFR was 0.05 percent. The loan is underwritten by Axis Bank and HSBC, the sources said. Neither Hero FinCorp nor Axis Bank responded to ET's queries. HSBC did not respond.
A syndicated loan is different from a regular loan because it is underwritten by a few banks and then sold to other banks. We have marketed to 200 international banks. These loans are thought to strengthen a borrower's standing in the global banking system.
Hero FinCorp is the first Indian company to raise a syndicated loan related to the new SOFR rate. These loans may become more popular among a broad range of borrowers, say, market participants.
According to the UK's Financial Conduct Authority, LIBOR will cease to be a representative rate on December 31.
Hero FinCorp, founded 30 years ago to fund Hero Honda's dealers, is now an independent non-bank lending firm.
The company's loan book is at Rs 20,000 crore, divided evenly between retail and corporate.
The capital adequacy ratio was 19% in March 2021, significantly over regulatory standards.
Hero FinCorp reported Rs 4,333 crore in revenue for 2020-21. It made roughly Rs 50 crore in profit. The company's 100% subsidiary housing financing business lost money.
Hero MotoCorp and its promoter family, the Delhi-based Munjals, retain 70-75 percent ownership in Hero FinCorp. Other investors include ChrysCapital, Apis Partners, Credit Suisse, and Hero MotoCorp dealers.
The business recently finalized a Rs 2,000 crore equity fundraising round led by Apollo Global Management. Hero MotoCorp and its family members contributed over Rs 1100 crore. The funding was initially announced on January 25.