SMFG taking major stake in Indian nonbank, full acquisition eyed

07, Jul. 2021

Mumbai, India (Photo by Ashim D’Silva on Unsplash)
Mumbai, India (Photo by Ashim D’Silva on Unsplash)

TOKYO, NNA - Sumitomo Mitsui Financial Group Inc. is taking Fullerton India Credit Co., an Indian nonbanking finance company, under its wing in a deal that will enable the Japanese megabank group to expand further into emerging economies.

SMFG said it will acquire a 74.9 percent stake in the Mumbai-based nonbank for US$2 billion under an agreement with its parent, Fullerton Financial Holdings Pte. Ltd., with an eye on making it a wholly owned subsidiary in the near future.

SMFG aims to obtain governmental approval by yearend on the deal, which is its first acquisition of a majority stake in an Indian financial entity and gives it a foothold for lending to individuals and small and mid-sized businesses in the populous country.

Fullerton Financial Holdings is a wholly owned portfolio company of Singapore-based investment firm Temasek.

Fullerton India Credit was founded in 1994 and has a strong nationwide distribution network with more than 650 branches. It offers unsecured loans and loans against property mainly to small and mid-sized companies, self-employed people and mass-market customers, according to SMFG.

For the financial year to March 2021, Fullerton India Credit posted an operating income of 47.6 billion yen, down 12 percent from the previous year. It logged an 18.2 billion yen net loss, compared with an 11.4 billion yen net profit the preceding year.

The latest agreement marks a fresh stage of the expansion plans in the local market for SMFG, which is putting more weight on retail financing after boosting corporate lending the past decade.

Sumitomo Mitsui Banking Corp., SMFG's key lending arm, has been a major player in that strategy after opening a branch in New Delhi in 2013 and smaller representative offices in Mumbai in 2017 and in Chennai 2020.

"We acknowledge a need to enhance our services directed at individuals if we want to pursue further growth in India," an SMFG spokesperson said of the deal -- a step toward full ownership of Fullerton India Credit.

India allows 100 percent foreign ownership of nonbanks.

Elsewhere in Asia, SMFG is rapidly expanding its business in promising emerging economies. Earlier this year, it struck deals to invest in Vietnamese nonbank lender FE Credit and Rizal Commercial Banking Corp. of the Philippines. (NNA/Kyodo)