Everstone Capital Management has joined hands with the private equity arm of Goldman Sachs and UK-based investment manager Ashmore to launch a non-banking finance company (NBFC), which will be known as Indostar Capital Finance.
Indostar will aim to be an independent credit institution that satisfies the credit needs of mid- and large-sized companies in India.
The credit market in India is currently estimated to be worth US$750 billion and these markets have witnessed a 15-20% growth each year. According to the Reserve Bank of India, the credit market grew by 23% last year.
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Dhanpal Jhaveri, the CEO of Everstone, said that the idea behind Indostar was to fill a void in the credit markets by creating a specialized financial institution capable of offering a different set of products for borrowers that banks were unable to provide. “The credit markets are 80-95% dominated by the banking system, and within that, government-owned banks dominate,” he explained.
“75-80% of loans are given by government banks. We looked at the space, across businesses and verticals and we realized that while the banks are playing this large credit role it is hard to compete with them purely on capital cost and on the cost of acquiring a customer.”
Jhaveri said that there had been a large development of mid-sized companies that have capital needs that are not met by vanilla loans traditionally offered by banks. “There is a space for newcomers to build value,” he told India Business Law Journal.
“There is huge demand in the wholesale lending space for meeting corporate needs – not many NBFCs have focused on that. There are needs across all stages of the corporate life cycle and a growing need for specialized financial institutions which can offer different and innovative products required by corporate borrowers.”
Indostar will focus primarily on creating products for capital investments and capital optimization. “While there are NBFCs doing shades of what we do, no one is doing it in a holistic manner,” said Jhaveri. “There is a structural demand for capital and we want to meet this demand.”
