IndoStar Capital Finance, a non-banking financial company in India, is planning to exit the corporate lending business. R Sridhar, executive vice-chairman, and chief executive of IndoStar Capital, said that the company’s wholesale and corporate book would become zero by March 2022, and they would continue to focus on and expand the retail segment. IndoStar Capital is promoted by alternative asset manager Brookfield and private equity player Everston. Over the past two years, the company has been reducing its corporate book, as of now, the portfolio size is cut down close to Rs. 3,500 crore.
Sridhar said that the corporate book portfolio size was at Rs. 6,000 crore in 2018, and it has been brought down to Rs. 2,500 crore as of date, indicating a reduction of 60%. The company had collected Rs. 3,500 crore. The company is focused on the retail segment, mainly in vehicle finance, small and medium enterprises (SMEs), and affordable housing finance. Currently, 73% of the total book is contributed by the retail segment, and 27% is from the corporate segment.
The company’s collection efficiency increased to 93% in September and 100% in October. IndoStar is gradually growing its disbursements to build its retail business from April 2021 in a highly scalable manner. Disbursement from November 2020 has started. As the rural economy has started to pick up from the impact of the pandemic, the lender is planning to finance passenger vehicles, construction, and farm equipment.
Sridhar said that in March 2020, the company had made accelerated provisioning and carried out aggressive write-off to ring-fence its balance sheet from possible credit loss that it may encounter in the next few quarters in both the corporate and retail financing segment. Through this conservative approach, it strengthened its position and placed itself in an ideal place to take advantage of future growth opportunities. He also added that IndoStar is seeking to build its retail business over the next three to five years. The company achieved a provision coverage ratio of 97% to deal with the pandemic.
For the second quarter, IndoStar Capital reported a 36% decline in consolidated profit after tax to Rs. 32 crore from Rs. 49.4 crore in the same period last year. Compared to the second quarter of the previous fiscal year, the gross NPAs improved from 3.8% to 2.9%, while net NPAs reduced to 2.1% from 3%.
