TOKYO • Sumitomo Mitsui Financial Group (SMFG), Japan's second-largest lender by assets, said yesterday that it would buy a 74.9 per cent stake in Fullerton India for US$2 billion (S$2.7 billion), marking the first major foray by a Japanese bank into India during recent times.
Japanese banks, including SMFG, have sought business opportunities 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 Temasek. 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," added Mr Jun Ohta, president and group chief executive of SMFG.
Citigroup, Cyril Amarchand Mangaldas, Allen & Overy were financial and legal advisers to Fullerton, while JP Morgan, Anderson Mori & Tomotsune were financial and legal advisers 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 per cent of the total assets under management, according to analysts.
The collapse of Infrastructure Leasing & Financial Services, a major shadow lender, in 2018 cast a long shadow over these non-banking financial companies (NBFCs) but they have made some recovery over the past year.
In the last financial year, NBFCs recorded a loan growth of 8.8 per cent at a time when bank loans grew by 5.5 per cent, according to the central bank's report released last week.
Last month, SMFG agreed to invest about 10 billion yen (S$121.5 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.
REUTERS
