Home Credit India is expected to become profitable in fiscal 2019

Given the strong growth in retail consumer credit, the simplification of loan procedures and the rapid expansion of its network, Home Credit India, part of the Czech Republic-based consumer credit provider Home Credit BV, which started operations in India in 2012, is expected to become profitable in the current fiscal year. The non-bank financial company, which focuses on small loans for the purchase of home appliances, cell phones, laptops and two-wheelers, primarily to people with little or no credit history, is present in 175 cities and 29,000 points of sale serving 6 million customers in the country. The company has so far invested 304 million euros and will inject more capital to expand its presence in India. As of June 2018, the company has a net loan portfolio of €563 million (approximately Rs 4,715 crore).

Jean-Pascal Duvieusart, shareholder of PPF Group and board member of Home Credit BV, said the growth of the Indian economy will boost the business of the company and improve credit penetration, as many people do not have access to formal loan products in the country. “Usually it takes four to five years to break even and we’re almost there, and we expect to break even in this fiscal year,” he said. PPF Group NV is the holding company which, through an investment arm, controls Home Credit.

Small loans

Around 70% of Home Credit India customers are first time borrowers with no credit history and the average loan amount is around Rs 11,000. The company uses its own credit reporting tools and effective customer authentication mechanisms help minimize risk. The two most important documents – a valid address and ID and, in some cases, valid proof of income – give an idea within minutes if a client is eligible for a loan.

The company launched an online financial solution called Mini Cash Loan earlier this year, which allows an eligible applicant to borrow any amount up to Rs 10,000 to purchase a product. In 2017 alone, the company added an additional 3.5 million customers, cementing its position as the leader in consumer credit. In 2012 Home Credit Group acquired Rajshree Auto Finance and in 2013 it renamed itself Home Credit India Finance.

Market fundraising

Martin Navratil, business development manager for India, said the company has diversified its funding through capital markets securitization. In the January to March quarter, Home Credit India raised 600 crore through a combination of consumer durables and securitization of cash loans and issuance of non-convertible debentures. Loan securitization is a process in which the underlying pool of assets is structured and sold as financial instruments to investors, either directly or through a securitization vehicle.

In fact, for the first time, the company will launch a commercial paper this month. The funding would be used to increase its loan portfolio, invest in technology infrastructure and develop financing products to drive credit penetration and financial inclusion. Home Credit India has been assigned an IND rating of A- (Stable) by India Ratings and Research, a Fitch Group company, and CARE Ratings has upgraded the company’s rating to A- from BBB+. Founded in 1997, Home Credit operates in 10 countries and has more than 100 million customers. The company’s total asset size is €22 billion and the total loan portfolio is approximately €16.4 billion.

(The trip for this report was sponsored by Home Credit India)