On the back of strong growth in retail consumer finance, simpler lending procedures and rapid expansion of its network, Home Credit India, a part of Czech Republic-based consumer finance provider Home Credit BV, which started its operations in India in 2012, is likely to turn profitable in the current financial year. The non-banking financial company, which focuses on small-ticket loans for home appliance, mobile phone, laptop and two-wheeler purchases, primarily to people with little or no credit history, has presence in 175 cities and 29,000 points of sales servicing 6 million customers in the country. The company has so far invested €304 million and will pump in more capital to expand its footprint in India. As on June 2018, the company has a net loan portfolio of €563 million (around Rs 4,715 crore).
Jean-Pascal Duvieusart, a shareholder of PPF Group and member of the board of directors, Home Credit BV, said India’s growing economy will drive the company’s business and improve credit penetration as many people do not have access to formal loan products in the country. “Usually, it takes four-five years to break even and we are almost there, and expect to break even during this financial year,” he said. PPF Group NV is the holding company which, through an investment arm, controls Home Credit.
About 70% of Home Credit India’s customers are first-time borrowers without any credit history and the average ticket size of a loan is around Rs 11,000. The company uses its own tools for credit assessment and an effective customer authentication mechanisms help minimise risks. The two most important documents — a valid address and identity proof document and in certain cases, valid income proof — give an idea in a few minutes if a customer is eligible for a loan.
The company launched an online financial solution called Mini Cash Loan earlier this year, which enables an eligible applicant to borrow any amount up to Rs 10,000 to buy a product. In 2017 alone, the company added another 3.5 million customers, further consolidating its position as a leading consumer finance provider. In 2012, Home Credit Group acquired Rajshree Auto Finance and in 2013 it rechristened itself as Home Credit India Finance.
Fundraising from markets
Martin Navratil, the chief business development officer for India, said the company has been diversifying its funding through capital market securitisation. In the January–March quarter, Home Credit India raised `600 crore through a mix of consumer durables and cash loan loan securitisation and non-convertible debenture issue. Loan securitisation is a process in which the underlying pool of assets is structured and sold as financial instruments to investors, either directly or through a special purpose vehicle.
In fact, for the first time the company will float a commercial paper this month. The funding would be used to augment its loan book, invest in technology infrastructure and develop financing products to drive credit penetration and financial inclusion. Home Credit India has been assigned an IND A- (Stable) rating from India Ratings and Research, a Fitch Group company, and CARE Ratings has upgraded the company’s ratings to A- from BBB+. Founded in 1997, Home Credit operates across 10 countries and has over 100 million customers. The company’s total assets size is €22 billion and the total loan portfolio is around €16.4 billion.
(Travel for this report was sponsored by Home Credit India)