Sumitomo Mitsui Financial Group (SMFG), Japan’s second largest bank with close to $2 trillion in assets has taken full control of its non banking finance company (NBFC) SMFG India Credit Co (SMICC) increasing its stake to 100% after infusing Rs 1,300 crore this fiscal.
The fund infusion increased the company’s capital adequacy ratio to 19.1% and allows the company to grow for the next couple of years, CEO Shantanu Mitra said. He expects the increase the company’s consolidated assets under management (AUM) to increase 29% to Rs 60,000 crore by the end of the current fiscal from Rs 46,500 crore at the end of June 2024.
“We will double our branches in our affordable housing subsidiary, Grihashakti from 175 currently and total assets from Rs 9500 crore currently with expansion planned in Tier II towns and below, in semi urban areas,” Mitra who rejoined as CEO in 2021 after a previous stint at the NBFC that ended in 2017 said.
Consolidated net profit fell 17% to Rs 88 crore in the quarter ended June 2024 from Rs 103 crore a year ago mainly as credit costs increased 43% to Rs 477 crore from Rs 333 crore a year ago. Ajay Pareek, chief business officer at SMICC said the rise in provisions was because the company had to increase cover for certain small ticket loans where payment had been impacted due to extreme heat and general elections last quarter. Net NPA was down to 1.5% from around 2% a year ago.
Mitra said the company follows a strict 120 days write off in loans and does not expect credit costs to increase above 4.5% of loans this fiscal. “We expect to make a return on equity of 12% to 15% which though lower than the 20% to 25% we have seen before, but still healthy. In the next few months we expect to reduce the percentage of unsecured loans in our book to around 55% from 60% currently especially through transfer of some high ticket loan against property from Grihashakti,” Mitra said.
Japan’s SMFG purchased 74.9% in the erstwhile Fullerton India Credit Co which it purchased from Singapore-based Temasek Group in 2021. The Japanese bank had valued the company at Rs 23,000 crore, buying the 74.9% stake for close to Rs 17,000 crore in 2021. The renamed SMICC opened its 1000th branch on Tuesday.
