IndoStar Capital Plans to Exit Corporate Lending Business by March 2022

The alternative asset manager Brookfield and private equity player Everstone promoted non-banking finance company Indostar Capital Finance is looking to completely exit from the corporate lending business by March 2022, says, R.Sridhar, Executive Vice-Chairman and Chief Executive.

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.

In an interaction, Sridhar says, "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 percent (We have collected Rs 3,500 crore). By March 2022, the wholesale and corporate book will become zero."

He further adds, The company will continue to focus on and expand its retail segment.
Currently, the retail segment contributes 73 percent to the company's total book, while the balance 27 percent is from the corporate segment. In the retail business, the company focuses on vehicle finance, small and medium enterprises (SMEs), and affordable housing finance.

Sridhar further states, in March 2020, it made accelerated provisioning and carried out aggressive write-offs both incorporate 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.

He continues, "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."

A provision coverage ratio of 97 percent was achieved to deal with the impact of pandemic, he added. During September, the company's collection efficiency improved to 93 percent, and touched 100 percent in October.
Sridhar further states, "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."

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.