Denso ties up Rs. 400 crore green loan from Sumitomo Mitsui Banking Corporation

Denso and SMBC have entered an agreement for the green loan, also commonly referred to as a sustainability linked loan for the working capital requirements of three Indian Denso Corporation subsidiaries.

The loan is designed to provide an incentive to Denso to achieve self-imposed sustainability targets.

The auto components company that has been present in India since the 1980’s, has set itself a target to achieve net zero carbon emissions at factories of the three Indian subsidiaries by 2025. It will do this by using renewable energy to run the factories and also by reducing the overall energy bill.

Yasuaki Matsunaga, chairman and managing director, Denso International India said all automotive companies would qualify as Denso’s ‘main customers’ and the largest would be Maruti Suzuki.

SMBC will monitor the progress of the auto company in achieving those sustainability targets. If the targets are achieved as per the pre-agreed milestones then the cost of the loan could fall, and a lower interest rate would apply to the loan.

This arrangement will also help SMBC meet its goal of providing more sustainability linked funding to companies.

Toshitake Funaki, CEO of SMBC India said this is SMBC India’s first ESG loan and sustainability linked financing is a very important agenda for SMBC and its clients. “We are evaluating the approach to sustainable financing not just for Japanese clients, but Indian clients as well,” he added. Funaki said instances of subsidiaries of Japanese entities borrowing directly from overseas branches have been rare but such cases have been growing globally.

Denso’s three subsidiaries, Denso Haryana Pvt ltd, Denso India Pvt Ltd and Denso Kirloskar Industries Pvt Ltd, manufacture automobile parts and components, such as electrical automotive components, alternators, starters, powertrain products (such as fuel pumps, injectors, and so on), small motors, radiators for cars, and air conditioners for cars and buses.