Sumitomo Mitsui to buy $2-bn stake in Fullerton
PremiumThe bank will purchase 74.9% stake from Temasek-led Fullerton Financial
Japan’s Sumitomo Mitsui Financial Group Inc. (SMFG) has agreed to buy a 74.9% stake in Fullerton India Credit Company Ltd (FICC), adding to a growing number of deals in the non-bank lending space. Sumitomo will buy the stake from Singapore’s Temasek-owned Fullerton Financial Holdings Pte Ltd.
The transaction, which is subject to regulatory approvals, will mark the entry of a Japanese bank into the Indian market for retail and business loans to small and mid-sized enterprises. The plan is for Sumitomo to eventually buy 100% of Fullerton India, according to a statement issued by Sumitomo and Fullerton Financial. Both firms did not give a time frame for Sumitomo to acquire the additional 25.1% stake.
Both firms also did not disclose financial details of the transaction. A person aware of the deal, however, pegged it at $2 billion, making it one of the biggest in India’s non-bank lending sector.
“India is one of our focus markets where we believe in its high growth potential and want to build a deeper presence. As a long-term investor, we believe that FICC platform’s innate strengths of multi-product focus, pan-India distribution, and strong management will enable us to build a comprehensive financial service offering in India," said Jun Ohta, president and group chief executive, SMFG.
“SMFG is one of the largest financial service groups in Japan offering a diverse range of services. We intend to leverage our expertise in Japan market as well as capabilities of our franchises across key emerging Asian markets," Ohta said.
Fullerton India—a diversified non-banking financial company—began operations in 2007 and has presence across 600 towns and over 58,000 villages via 629 branches. It has more than 13,000 employees offering lending products to 2.3 million retail and small business borrowers. The company’s secured lending portfolio comprises mortgage loans to retail customers and small and medium enterprises, commercial vehicle loans and secured rural loans such as two-wheeler loans and mortgage loans. The unsecured portfolio comprises personal loans to salaried and self-employed individuals, and group and individual loans in rural areas.
The non-banking lending sector has been witness to some major deals in the past few years. These include Piramal Capital and Housing Finance Ltd’s recent acquisition of bankrupt mortgage financier Dewan Housing Finance Corp. Ltd (DHFL) for ₹37,250 crore, Pune-based businessman Adar Poonawala taking a controlling stake in Magma Fincorp for ₹3,456 crore in February and US private equity giant Blackstone’s ₹2,200 crore purchase of Aadhar Housing Finance in 2019. In 2017, IndusInd Bank acquired Bharat Financial Inclusion Ltd in an all-stock deal that valued the NBFC at about ₹15,500 crore.
“This investment brings together SMFG’s Asian push towards consumer and MSME lending, with Fullerton India’s expertise in serving mass-market consumers and MSME customers in India. The transaction reaffirms the strength of Fullerton India’s platform underpinned by best-in-class corporate governance, risk management, prudent liquidity management, agile technology, and advanced analytics," according to the statement.
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