IndoStar Capital to exit corporate lending business by March 2022

Mumbai: Alternative asset manager Brookfield and private equity player Everstone promoted non-banking finance company IndoStar Capital Finance is looking to fully exit from corporate lending business by March 2022, its executive vice-chairman and chief executive R Sridhar said. The company has been reducing its corporate book over the last two years, and has brought down the portfolio by close to Rs 3,500 crore.

"From a portfolio size of Rs 6,000 crore in 2018, the corporate book is down to Rs 2,500 crore as of date, which is a reduction of around 60 per cent (We have collected Rs 3,500 crore). By March 2022, the wholesale and corporate book will become zero," Sridhar said.

The company will continue to focus on and expand its retail segment, he said.

Currently, retail segment contributes 73 per cent to the company's total book, while balance 27 per cent is from corporate segment.

In the retail business, the company focuses on vehicle finance, small and medium enterprises (SMEs) and affordable housing finance.

In March 2020, it made an accelerated provisioning and carried out aggressive write offs both in corporate as well as retail financing businesses to ring fence its balance sheet for any eventual credit loss which may come over the next few quarters, Sridhar said.

"The conservative approach adopted has strengthened IndoStar's position and places it ideally to take advantage of future growth opportunities. We are now looking to the future to build our retail business over the next three to five years," he said.

A provision coverage ratio of 97 per cent was achieved to deal with the impact of pandemic, he added.

During September, the company's collection efficiency improved to 93 per cent, and touched 100 per cent in October.

"We have started disbursements from November 2020. We are growing disbursements gradually to build our retail business in a highly scalable manner from April 2021," he said.

With rural economy picking up, the lender is also expanding its products in commercial vehicle segment. It is looking at financing passenger vehicles, construction and farm equipment, he said.

In the quarter ended September 30, 2020, IndoStar Capital's consolidated profit after tax declined 36 per cent to Rs 32 crore from Rs 49.4 crore in the same period of previous year.

Its gross non-performing assets (NPAs) improved to 2.9 per cent from 3.8 per cent, while net NPAs stood at 2.1 per cent compared to 3 per cent in September quarter of the previous fiscal.