December 04, 2024

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Shinhan Bank CEO Jung Sang-hyuk (right) and Credila CEO Arijit Sanyal shake hands during a signing ceremony at The St. Regis Mumbai, in Mumbai, India, Wednesday. (Shinhan Bank)

Shinhan Bank, a major commercial lender in South Korea, is bolstering its footprint in India through a strategic share acquisition of the local student loan provider, Credila.

The bank announced Thursday that it successfully secured an equity investment agreement with Mumbai-based HDFC Credila Financial Services the previous day.

As per the agreement, Credila will undergo a capital increase, with Shinhan Bank injecting around $180 million through the acquisition of new shares. This transaction will grant the Korean bank a 10 percent ownership stake in the Indian lender.

The Korean bank will execute its investment in Credila through partnerships with Swedish global investment company EQT Private Capital Asia and India's leading private equity firm Chrys Capital, gaining a major shareholder position in Credila alongside HDFC Bank.

Established in 2006, Credila stands as a major nonbanking financial institution in India, renowned for its leadership in the student loans market. Shinhan Bank anticipates that Credila will sustain robust growth, given the Indian population's emphasis on education and the increasing number of individuals heading overseas to study.

The agreement marks Shinhan Bank's inaugural venture into overseas investment through equity investment, rather than establishing a foreign branch or subsidiary, the bank noted. Additionally, it represents the first equity investment in an Indian company by a South Korean commercial lender.

Shinhan Bank said this strategic move comes as part of its broader objective to diversify channels for overseas expansion while solidifying its leading position within the sector among Korean banks. The bank reported a net profit of 549.3 billion won ($408 million) from its global business last year, surpassing other private banks and setting a new milestone in its history.

According to Shinhan Bank, India's nonbanking financial industry, which Credila is part of, constitutes a vital segment of the country's financial sector, complementing traditional banking services by providing a diverse range of loans, including those for housing, automobiles and education.

Notably, the robust growth of retail financing, driven by regulatory and policy support from the local government, has sparked growing interest among foreign companies and investors.

Meanwhile, Shinhan Bank was the first to debut in India among Korean lenders in 1996 and currently operates six branches there. Last year, the bank's Indian headquarters recorded 10 billion won in profit, up 117 percent from 4.6 billion the previous year.

"Shinhan Bank's Global Business Group aims to accelerate qualitative growth by prioritizing a balanced and unique asset growth strategy tailored to each country," an official from the firm stated, adding, "Through the latest investment, we will actively expand our presence in India's retail market and forge partnerships with various local entities."

On Wednesday, Shinhan Bank CEO Jung Sang-hyuk and Credila CEO Arijit Sanyal attended the signing ceremony at The St. Regis Mumbai in India.

"The increasing prominence of the Indian market is evident, driven by the ongoing restructuring of the global supply chain, geopolitical uncertainties and the vast growth opportunities stemming from the country's 1.4 billion population," CEO Jung stated.

"By investing in India's retail market leader, Credila, alongside other reputable partners within the country, we aim to bolster the financial competitiveness of our Indian subsidiary and advance various collaborative initiatives," he added.

By Choi Ji-won (jwc@heraldcorp.com)
The Korea Herald