Japan’s Sumitomo Mitsui Financial Group (SMFG) has bought 74.9% stake in non-bank lender Fullerton India Credit Company Ltd from Fullerton Financial Holdings Pte Ltd, which is a wholly-owned subsidiary of Singapore’s Temasek.
SMFG will pay $2 billion for a 74.9% stake as the Japanese bank intends to expand its business in Asia, the company said in a statement on Wednesday.
Fullerton India Credit, a non-banking financial company (NBFC), has now become a consolidated subsidiary of SMFG, the company said. SMFG will eventually buy the residual 25.1% stake in Fullerton India Credit over a period of time from Angelica Investments.
The acquisition marks the entry into South Asian country by the Japanese lender which access to Fullerton’s pan-India footprint across 25 states, 600 towns and over 58,000 villages through 698 branches.
Fullerton India’s acquisition bolsters SMFG’s push into Asian consumers and micro, small, medium enterprises (MSME) lending, the company said.
In August, SMFG had sought the Competition Commission of India (CCI)’s nod to acquire Fullerton India Credit Company.
As part of the transaction, Fullerton India Credit’s board will be reconstituted to comprise Nobuyuki Kawabata, Rajeev Veeravalli Kannan, Hong Ping Yeo, Anindo Mukherjee, Shantanu Mitra, Shirish Moreshwar Apte, Dr Milan Robert Shuster and Sudha Pillai.
Fullerton India’s management team will continue to operate under the leadership of Mitra, managing director and chief executive officer of Fullerton India Credit, SMFG said. Mitra was appointed as the chief in February this year.
The transaction marks the largest acquisition of an Indian private financial services company in the last two years and the largest-ever inbound-control acquisition by a Japanese enterprise entering the Indian market, the company said.
The deal is also a step towards fully divesting Fullerton India Credit Company, which began its operations in 2007 under Fullerton Financial Holdings.
"The foundation of a country’s development is not just the growth of its corporates but also that of its citizens - Fullerton India will play an important role to promote inclusive growth in line with our long-term strategy for India," said Mr. Jun Ohta, president and Group chief executive officer, SMFG.
"We believe that SMFG’s experience in building high qualityfranchises and digital platforms in emerging markets is valuable to the next leg of Fullerton India’s journey," said Hong Ping Yeo, chief executive officer, Fullerton Financial Holdings. "FFH will partner with SMFG as a significant minority shareholder and work with SMFG to ensure a smooth and successful transition," Yeo added.
SMFG is betting on the demand recovery for credit in India with businesses reopening. The latest data by the Reserve Bank of India (RBI) showed that housing loans and vehicle loans grew over 8% on year in October.
"With the rapid deployment of vaccines and steady decline in COVID infection rates, we are witnessing a strong revival of economic activity in India. There is a steady pick up in credit demand and healthy loan growth. In addition, portfolio quality is also demonstrating encouraging signs of improvement," said Shantanu Mitra, managing director and chief executive officer, Fullerton India Credit.
In 2016, Fullerton India had launched home financing unit Fullerton India Home Finance Company Ltd, which operates under the Grihashakti brand. In November last year, VCCircle exclusively reported that its parent had received interest from private equity firms to buy the housing arm.