Sumitomo Mitsui Financial Group (SMFG) of Japan has acquired a 74.9 percent stake in Fullerton India Credit Company Ltd from Fullerton Financial Holdings Pte Ltd, a wholly-owned subsidiary of Singapore's Temasek.
SMFG will pay $2 billion for a 74.9 percent stake for the Japanese bank to expand its business in Asia, according to a statement released on Wednesday.
According to the company, Fullerton India Credit, a non-banking financial company (NBFC), has now become a consolidated subsidiary of SMFG. SMFG will eventually buy Angelica Investments' remaining 25.1 percent stake in Fullerton India Credit over time.
The acquisition marks the Japanese lender's entry into the South Asian country, giving it access to Fullerton's pan-India footprint of 25 states, 600 towns, and over 58,000 villages via 698 branches.
As per the company, the acquisition of Fullerton India strengthens SMFG's push into Asian consumers and micro, small, and medium enterprises (MSME) lending.
In August, SMFG requested the Competition Commission of India (CCI) approval to acquire Fullerton India Credit Company.
The executive board of Fullerton India Credit will be reconstituted due to the transaction. It will now include Nobuyuki Kawabata , Rajeev
Veeravalli Kannan, Hong Ping Yeo, Anindo Mukherjee, Shantanu Mitra, Shirish Moreshwar Apte, Dr. Milan Robert Shuster, and Sudha Pillai.
Fullerton India's management team will continue to be led by Mitra, managing director, and chief executive officer of Fullerton India Credit, according to SMFG.Mitra was named chief in February of this year.
According to the company, this is the largest acquisition of an Indian private financial services company in the last two years and the largest-ever inbound-control acquisition by a Japanese enterprise entering the Indian market.
The transaction is also a step toward fully divesting Fullerton India Credit Company, which began operations under Fullerton Financial Holdings in 2007.
"The foundation of a country's development is not just corporate growth, but also citizen growth – Fullerton India will play an important role in promoting inclusive growth in line with our long-term strategy for India," said Mr. Jun Ohta, president, and Group chief executive officer, SMFG.
"We believe that SMFG's experience in developing high-quality franchises and digital platforms in emerging markets will be beneficial to the next stage of Fullerton India's journey," said Hong Ping Yeo, CEO of Fullerton Financial Holdings."FFH will work with SMFG as a significant minority shareholder to ensure a smooth and successful transition," Yeo added.
With businesses reopening, SMFG is betting on a credit demand recovery in India. According to the most recent Reserve Bank of India (RBI) data, housing and vehicle loans increased by more than 8% year on year in October.
"We are witnessing a strong revival of economic activity in India as a result of the rapid deployment of vaccines and steady decline in COVID infection rates." Credit demand is steadily increasing, and loan growth is healthy. Furthermore, portfolio quality is showing encouraging signs of improvement," said Shantanu Mitra, managing director and CEO of Fullerton India Credit.
Fullerton India launched its home financing unit, Fullerton India Home Finance Company Ltd, in 2016, under the Grihashakti brand. VCCircle exclusively reported in November of last year that its parent had received interest from private equity firms in purchasing the housing arm.