Temasek arm set to start new home loan company in India2 min read . Updated: 29 May 2015, 12:57 AM IST
Fullterton India will set up a home finance firm to lend to people in the so-called affordable housing segment
Fullerton India Credit Co. Ltd, the non-banking financial company owned by Singapore’s state-run investment firm Temasek Holdings Pte Ltd, will set up a new home finance company to lend to people in the so-called affordable housing segment, buoyed by its recent success in retail lending in India.
“So far, we have kept away from housing finance because competition was tough and we could not compete with the banks on pricing. But now, with the network we have built, we think we can compete on pricing and also take advantage of the high returns this sector offers," Shantanu Mitra, managing director and chief executive said on Thursday.
Fullerton India has already applied to the National Housing Bank for a licence to set up a new subsidiary with an initial investment of ₹ 100 crore.
“These are the new opportunities coming up through which we can utilize our distribution network at a time when the macroeconomic environment in India is improving," Mitra said.
Fullerton plans to lend to individuals wanting to buy homes in both the rural as well as urban areas. “We will do a ticket size of ₹ 25-40 lakh in urban areas, while in rural areas the ticket size could be ₹ 5-10 lakh," Mitra said, adding that the company will focus on smaller towns where it has a branch network.
Fullerton India currently has 443 branches across India.
Figures released on Friday showed that the company’s net profit in the year ended 31 March increased 60% to ₹ 301 crore from a year earlier.
The company’s loan book in India consists of loans against property, loans to small companies and entrepreneurs, personal loans and rural loans.
Profit has increased 100-fold from just ₹ 3 crore in fiscal year 2010-11 to ₹ 301 crore in 2014-15 as the company cleaned up its books, tightened credit standards and reduced non-performing assets (NPAs).
NPAs have dropped to 2% of total loans from a peak of 11.25% in fiscal year 2010, when Fullerton suffered a ₹ 717.09 crore loss, largely because bad loans that had to be written off.
Interest income increased 24% to ₹ 1,507 crore in the year ended March 2015 from ₹ 1,212 crore in the year ended March 2014. Net NPAs increased slightly to 1.41% from 1.34%.
Mitra said that besides home loans, Fullerton India will also focus on lending to medium and small units particularly in the rural areas. “There are something like 60 million units in India employing about 100 million people and contributing 8% of the GDP (gross domestic product). The credit needs of this segment is fulfilled by only 10%. So it’s a large opportunity for us," Mitra said.
This segment constitutes about 30% of Fullerton India’s ₹ 8,669 crore loan book, and Mitra said the plan is to increase its share to 40-45% of the loan book in the next couple of years.
Overall, the company’s loan book grew 39% to ₹ 8,669 crore during the year and loan disbursements increased 40% to ₹ 6,831 crore from ₹ 4,868 crore in the year ended 31 March 2014.
It will add about 40 more branches across the country in the next one year, Mitra said. However, the total branches are lower than the 800 branches the company had in 2009.
Temasek had last infused ₹ 150 crore into the company in September 2012. Mitra said the company does not need a capital infusion any time soon with its capital adequacy ratio at 19.6%.