Indian shadow banks' IPO boom falters on mounting credit stress

India's once-burgeoning pipeline for new stock sales by shadow banks is stalling as strains across the sector prompt lenders to scrap or delay listings.

- Rajesh Mascarenhas & Siddhi Nayak

TPG Inc.-backed SK Finance and Belstar Microfinance are the latest firms to shelve plans for initial public offerings, according to people familiar with the matter. SK Finance had sought to revive its IPO last month at a smaller size and lower valuation, Bloomberg News reported earlier.

Shadow lenders are losing appeal with investors even though India's IPO market has rebounded recently. The pulled sales threaten to blemish what could be a record year for IPOs, based on some analysts' estimates, topping last year's $21 billion tally.

"Weak economic activity, uncertainty of tariffs and job continuity have led to lenders tightening their underwriting standards," said Anil Gupta, senior vice president and co-group head for financial sector ratings at Icra, a credit rating firm.

Other shadow lenders that have delayed IPOs include Norwest Venture Partners-backed Veritas Finance Ltd. and British International Investment-backed Aye Finance, the people said. Both firms won approval from the regulator in April, and are now awaiting more favorable market conditions, the people said. Hero FinCorp, the lending arm of Hero MotoCorp., hasn't yet decided when to proceed with a sale, they added.