The decision to end the corporate lending and structured finance business it started with comes in the wake of the IL&FS crisis that hit the industry in 2018.
By Malini Bhupta
IndoStar Capital Finance, a non-bank finance company, is exiting the business lending business after encountering difficulties in raising funds. Currently, the financier has a loan book of Rs 10,000 crore. It will only focus on retail lending once it has reduced its business portfolio to zero. The decision to end the corporate lending and structured finance business it originally started with comes in the wake of the IL&FS crisis that hit the industry in 2018. R Sridhar, Vice Chairman executive and CEO of IndoStar Capital, told FE, “After the IL&FS crisis, as with all NBFCs, we were unable to raise institutional funds to fund property developers and structured corporate finance.”
The shadow bank has already reduced its corporate book portfolio from Rs 6,000 crore in financial year 2018 to less than 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 lending business had contributed Rs 435 crore in pre-tax (PBT) profit to the company till the financial year 2019.
Armed with adequate capital, following the injection of funds by Canadian asset management company Brookfield, IndoStar is preparing for a revival in loan demand.
The lender has aggressive plans to grow its retail loan portfolio for used commercial vehicles and affordable housing. It has already closed its balance sheet with aggressive write-off and accelerated provisioning while finalizing the accounts for the year ended March 2020. Impact of Covid-19, bringing our PCR to 95%,” Sridhar said.
The company claimed that its balance sheet was the strongest among listed NBFCs. IndoStar is waiting the next three to six months for the impact of Covid to subside before starting to expand its retail business. “We have just started disbursements cautiously and with more focus on asset quality to reduce the number of clients requesting a moratorium by increasing recoveries,” Sridhar added.
IndoStar was able to bring moratorium customers back to 30% at the end of August from 90% in March.
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