Fullerton Financial Plans ₹2,000 Crore Investment in Lendingkart Finance for India Re-entry

Singapore's Temasek-backed Fullerton Financial is making a significant move in the Indian financial services sector with plans to invest ₹2,000 crore in Lendingkart Finance. This strategic investment marks Fullerton's re-entry into the Indian market, signaling a renewed focus on the country's financial landscape.

Investment Strategy and Operational Changes

Fullerton's approach involves booking secured loans on its own balance sheet, departing from the previous model of sourcing loans for partner banks. This shift indicates a more direct involvement in the lending process and potentially greater control over the loan portfolio.

Increased Stake and Management Control

The company has substantially increased its stake in Lendingkart Technologies, the parent company of Lendingkart Finance:

• Stake increase: From 38% to 56%
• Additional investment: Over ₹250 crore
• Total investment since 2018: ₹972 crore

With this increased ownership, Fullerton has assumed management control of Lendingkart. A key change in leadership has been implemented:

• Previous Managing Director: Harshvardhan Lunia
• New Managing Director: Prashant Kumar Joshi (Fullerton's nominee)

Lendingkart Finance's Financial Position

Lendingkart Finance's recent financial snapshot reveals:

The reported loss is attributed to deterioration in the company's unsecured loan book, highlighting the challenges faced in the unsecured lending segment.

Future Expansion and Capital Adequacy

The fresh capital injection of ₹2,000 crore is expected to fuel significant growth for Lendingkart Finance:

• Projected loan book expansion: At least three times the current size
• Focus: Maintaining healthy capital adequacy ratios

This expansion strategy aims to strengthen Lendingkart's position in the market while ensuring financial stability.

Fullerton's Previous Exit and Re-entry

Fullerton's re-entry into the Indian market comes after a notable exit in 2021:

• Previous exit: Sale of stake in Fullerton India Credit
• Buyer: Japan's Sumitomo Mitsui Financial Group
• Deal value: $2 billion

The exit was prompted by significant bad loans experienced during the pandemic, which affected many financial institutions globally.

Conclusion

Fullerton Financial's substantial investment in Lendingkart Finance represents a strategic move to re-establish its presence in India's financial services sector. By focusing on secured lending and taking a more direct approach to loan management, Fullerton aims to capitalize on the growth potential of the Indian market while potentially mitigating risks associated with unsecured lending. The success of this venture will depend on Lendingkart's ability to leverage the fresh capital effectively and navigate the complexities of the Indian financial landscape.