Sumitomo Group to snap up Fullerton Credit in $2.5 bn deal

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July 06, 2021 6:00 PM

At the current exchange rate, the deal value is about Rs 18,550 crore. Fullerton India Credit Company is a non-banking lender and is wholly owned by Fullerton Holdings. It started India operations in 2007 and has since grown across 600 towns and over 58,000 villages with 629 branches and employs over 13,000 and serves 2.3 million retail and small business borrowers.

Fullerton Holdings is an independently operated strategic and operating investor in financial and related services in emerging markets.

Diversified Japanese conglomerate Sumitomo Mitsui Financial Group on Tuesday inked an agreement with Singapore-based Fullerton Financial Services Holdings to acquire its non-banking arm Fullerton India Credit Company in a reported USD 2.5 billion deal.

Fullerton Financial Services is a fully-owned subsidiary of Singaporean investment giant Temasek Holdings.
The Japanese acquirer did not disclose the deal value in the public statement, but market sources told PTI that Sumitomo will pay around USD 2 billion for the 74.9 per cent stake it is buying in the first leg of the two-legged deal, and another USD 500 million-plus for the remaining stake to take the ownership to 100 per cent.

At the current exchange rate, the deal value is about Rs 18,550 crore. Fullerton India Credit Company is a non-banking lender and is wholly owned by Fullerton Holdings. It started India operations in 2007 and has since grown across 600 towns and over 58,000 villages with 629 branches and employs over 13,000 and serves 2.3 million retail and small business borrowers.

The two-legged deal involves Sumitomo buying 74.9 per cent in the Mumbai-based Fullerton India Credit Company — subject to regulatory approvals — and later the remaining stake, Sumitomo and Fullerton said in a joint statement.
Sumitomo said the acquisition will help it participate in India’s long-term growth story on one hand and on the other help it strengthen its digital reach across Asia.

Sumitomo Mitsui Financial Group Inc today entered into an agreement with Fullerton Financial Holdings of Singapore to acquire a 74.9 per cent stake in Fullerton India Credit Company, subject to regulatory approvals. Sumitomo will eventually acquire 100 per cent of Fullerton Credit, the Japanese giant and Singaporean owners said in the statement.

This investment brings together our Asian push towards consumer and MSME lending, with Fullerton’s expertise in serving mass-market consumers and MSME customers in India. We expect the deal to help strengthen our medium-term objective of widening our digital reach in Asia as envisaged in our three-year business plan beginning FY2020, Jun Ohta, president & group chief executive of Sumitomo Mitsui Financial Group was quoted as saying in the statement.

Currently, Sumitomo has a subsidiary in Indonesia and the Fullerton deal will help it widen the same into India and then the rest of Asia, which means that the company is on the lookout for more inorganic opportunities elsewhere in the continent.

Fullerton Financial Holding, fully owned by Temasek, has 3.85 per cent of Fullerton Credit, while Angelica Investments, a fully-owned arm of Fullerton Holding, owns the remaining 96.1 per cent.

Transaction reaffirms the strength of Fullerton’s platform underpinned high corporate governance, risk management, prudent liquidity management, agile technology, and advanced analytics. Sumitomo and Fullerton will work together on the next leg of growth of Fullerton Credit, Ohta said.

Post-deal, Fullerton India Home Finance, the housing finance arm, will continue to be wholly-owned by Fullerton Credit. With this deal, we intend to leverage our expertise in Japan as well as our capabilities in our franchises across key emerging Asian markets.

India is one of our focus markets due to its high growth potential and we want to build a deeper presence in the third-largest Asian economy. As a long-term investor, we believe Fullerton’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 Ohta.

We have developed Fullerton Credit into a differentiated financial services franchise driving impact for mass-market consumers and enterprises through a pan-India presence and a scalable digital platform. We are convinced of India’ growth potential, Fullerton Holdings chief executive Hong Ping Yeo said.

Over the years, Fullerton Credit has built a strong franchise with high governance standards, serving customers in the hinterlands, said Shantanu Mitra, managing director and chief executive of Fullerton Credit.
While Citigroup, Cyril Amarchand Mangaldas, Allen & Overy advised Fullerton, the Sumitomo group was advised by JP Morgan, Anderson Mori & Tomotsune.

Sumitomo Mitsui Financial Group Inc is the holding company of one of the largest global banking and financial service groups, offering commercial banking, leasing, securities and consumer finance with a heritage exceeding 400 years in Japan, and is one of the globally systemically important banks.

Fullerton Holdings is an independently operated strategic and operating investor in financial and related services in emerging markets.

The group launched Fullerton India Housing Finance in 2015 to offer loans to salaried and self-employed. Headquartered in Mumbai, it has over 23,000 home loan customers and operates across 70 locations with 650 employees.

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