Shriram Finance sees Rs 5,000 crore AUM for green finance in 4 years

Bengaluru: Shriram Finance Limited, launched a new vertical to focus on green finance, under which it is targeting Rs 5,000 crore in asset under management (AUM) in three to four years.

All of Shriram Finance’s green funding initiatives will be under this vertical. It has begun funding electric cars and two-wheelers, as well as rooftop solar installations on a small scale. It will also finance battery charging stations, renewable energy products, and energy efficient machinery, the company announced in Bengaluru on Friday.

The company plans to build an EV lending portfolio across India, with initial focus on Karnataka, Kerala, National Capital Region (NCR) and Maharashtra.

Till now, the vertical has been raising resources under social loans in the domestic and international market. However, it plans to start raising funds through green bonds in about three to six months, as the cost of lending is much cheaper with such bonds.

YS Chakravarti, Managing Director and Chief Executive Officer, Shriram Finance, told DH that in terms of comparing public and private sector investments to meet India’s 2070 net-zero goals, “The government's contribution mostly would be in the form of subsidies and incentives to the sectors. Investments would largely be private.”

“The only way the government can outstrip a private sector investment in green financing would be if government organisations push this. For example, the majority of mines are owned by the government. The National Mineral Development Corporation is pushing contractors to start from 10% to non-fossil fuel vehicles. Similarly, ONGC, oil marketing companies, and refineries can put pressure on faster adaptation. But the resources available in this public sector are not all profitable. Initially, investments will be more from a private sector perspective,” Chakravati said.

“As a country, we may be behind the (net-zero) target,” he said.

Chakravarti said that rather than government incentives, streamlining the tax structure would be a better option.

The ratio of clean energy to India’s other initiatives is 3:7, he stated. In terms of sources of green funding, he pointed to development financial institutions and private equities.

While the small-scale sector is so far not able to access green funding, this will be easier with green finance companies, as per him.