IndoStar Capital to exit corporate lending business, expects retail loans to pick up in 6 months
September 17, 2020 2:00 AM
The decision to wind down the corporate lending and structured finance business, which it originally started out with, comes in the wake of the IL&FS crisis that hit the sector in 2018.
It will only focus on retail loans once it has whittled down its corporate book to zero.
By Malini Bhupta
IndoStar Capital Finance, a non-banking finance company, is exiting the corporate lending business after facing difficulty in raising funds. Currently, the financier has a loan book of Rs 10,000 crore. It will only focus on retail loans once it has whittled down its corporate book to zero. The decision to wind down the corporate lending and structured finance business, which it originally started out with, comes in the wake of the IL&FS crisis that hit the sector in 2018. R Sridhar, executive vice-chairman and CEO, IndoStar Capital, told FE, “Post the IL&FS crisis, as with all NBFCs, we could not raise institutional funds for financing real estate developers and structured corporate finance.”
The shadow bank has already brought down its corporate book portfolio from Rs 6,000 crore in FY18 to below Rs 3,000 crore this financial year. The plan is to bring this down to zero over the next 12 to 18 months. The corporate loan business had contributed Rs 435 crore of profit before tax (PBT) to the company till FY2019.
Armed with adequate capital, following funds infusion by Canadian asset management company Brookfield, IndoStar is gearing up for a revival of demand for loans.
The lender has aggressive plans to grow its portfolio of retail loans for second-hand commercial vehicles and affordable housing. It has already ring-fenced its balance sheet by taking aggressive write-off and accelerated provisioning while finalising the accounts for the year ended March 2020. “Apart from this and moratorium-related provisions, we also made an extra provision of Rs 100 crore towards Covid-19 impact, taking our PCR to 95%,” said Sridhar.
The company claimed its balance sheet was the strongest among the listed NBFCs. IndoStar is waiting for the next three-six months for the Covid impact to ease before it starts growing its retail business. “We have just started disbursements cautiously and focusing more on asset quality to reduce the number of customers seeking moratorium by increasing the collections,” added Sridhar.
IndoStar has been able to bring down the moratorium customers to 30% by the end August from a level of 90% seen during March.