A controversial British loan provider, Wonga, is on its way to tap into India's expanding middle class in need of short-term finance by acquiring majority stake in a Chennai-based company.
Wonga is known in the UK as a 'pay-day lender' due to its strategy of offering high interest rate loans largely to customers in need of cash in between their monthly pay cheques.
As part of its first move into the developing world, Wonga has acquired a 75 per cent stake in Chennai-based Nahar Credits Private to kick off a new wave of expansion for the consumer finance company as it looks to diversify from its UK base.
The company, run by co-founder and chief executive Errol Damelin, paid around 3.2 million euros for the stake, according to the 'Sunday Telegraph'.
Nahar Credits is historically focused on commercial loans to small companies, a business which has now been closed.
But its existing licence permits lending to individuals, which will allow Wonga to move into the Indian market. Details of the previously undisclosed acquisition emerged in the company's annual accounts.
"The acquired company is authorised as a financial services company in India and will give the group the opportunity to commence operations their," said Wonga.
The company, which has offices in 10 different countries, is yet to decide on the timing for its Indian launch. India is the sixth country where it will offer consumer lending.
As well as the UK, which remains the mainstay of its business, Wonga now offers short-term loans in South Africa, Canada, Poland and Spain.
Despite criticism from some quarters that it potentially adds to the financial burden of individuals in dire need of urgent cash, Wonga has continued to expand and diversified along product lines - offering loans to small businesses and developing an online payment product for retailers.