Fullerton India parent infuses Rs 750 crore equity as additional buffer

The company will also benefit from various government initiatives recently announced in the economic package

Temasek backed Fullerton Financial Holdings (FFH) has infused Rs 750 crore equity capital in its Indian arm Fullerton India as additional buffer during the current difficult period (Covid-19 led lockdown) and growth capital as business gradually opens up.

Fullerton India, a Reserve Bank of India regulated non-banking finance company, with focus on lending to individuals and small business (MSME), will benefit from the various government initiatives recently announced in economic package.  

The capital infusion consolidate its growth agenda for lending  demonstrates parent’s confidence in resilience of the Indian

Company, Fullerton India said in a statement. Temasek is a sovereign wealth fund of the government of Singapore

According to India Ratings FFH has been regularly infusing equity in its Indian subsidiary. It has infused around Rs 2,300 crore equity since FY07, of which Rs 300 cr was infused in FY20. Fullerton India’s Tier-I capital ratio stood at 16.1 per cent as on December 2019 (3QFY20).

Bulk of its branches are in Green and Orange zones, where restrictions have been relaxed substantially. The company will re-connect with customers to assess their needs and provide solutions, said Rajashree Nambiar, MD and CEO, Fullerton India.

According to India Ratings, in the past Fullerton India has witnessed high credit costs due to demonetisation-related stress (credit cost in FY18: 4.1%; FY17: 3.1%), post which it further tightened its underwriting policies and managed to keep non-performing asset levels sub 3% (as of FY19). As on end-3QFY20, the company saw uptick in delinquencies in the commercial vehicle and rural portfolio.

The operating environment has become challenging due to the Covid-19 led lockdown for most segments that the company operates in. The borrowers’ cash flows are expected to be severely impacted during the lockdown with cash flows only gradually resuming original levels even after the lockdown is lifted, rating agency added.