TOKYO, July 6 (Reuters) – Sumitomo Mitsui Financial Group Inc (8316.T), Japan‘s second-largest lender by assets, said on Tuesday it would buy a 74.9% stake in Fullerton India for $2 billion, marking the first major foray by a Japanese bank into India during recent times.
Given a slow-growing domestic market, Japanese banks including SMFG have sought business opportunity outside the country, which faces an ageing and shrinking population.
Fullerton Financial, parent of the Indian non-bank firm, is a unit of Singapore’s state investment fund Temasek Holdings Pte. It is a central bank-registered shadow lender that offers loans to individuals and small businesses.
“SMFG will gain a retail finance platform in India as it is essential for the expansion of its Asia franchise,” the Japanese lender said in a statement, adding that it plans to acquire the Indian credit firm from Fullerton Financial at a later stage.
“India is one of our focus markets where we believe in its high growth potential and want to build a deeper presence,” Jun Ohta, President & Group CEO of SMFG added.
Citigroup, Cyril Amarchand Mangaldas, Allen & Overy were financial and legal advisors to Fullerton, while J.P. Morgan,
Anderson Mori & Tomotsune were financial and legal advisors to SMFG, according to the statement.
There are an estimated 10,000 shadow lenders in India out of which the top 100 manage at least 80% of the total assets under management, according to analysts.
The collapse of Infrastructure Leasing & Financial Services (IL&FS), a major shadow lender, in 2018 cast a long shadow over these non-banking financial companies (NBFCs) but they have made some recovery, despite the hindrance of the pandemic over the past year.
In the last financial year, NBFCs recorded a loan growth of 8.8% at a time when bank loans grew by 5.5%, according to the central bank’s report released last week.
Last month, SMFG agreed to invest about 10 billion yen ($90.26 million) in Philippine bank Rizal Commercial banking Corporation, and in April SMFG said it would invest up to 150 billion yen in Vietnam’s biggest non-bank lender FE Credit.
($1 = 110.7900 yen)
Reporting by Takashi Umekawa and Nupur Anand; Editing by Kim Coghill and Sherry Jacob-Phillips
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