Masayoshi Son led conglomerate SoftBank and Piramal Group might call off their deal due to rising differences. The Japanese bank had earlier been in talks with Piramal Group to invest $1 billion in its financial arms- Piramal Capital and Housing Finance.
According to reports, the deal was likely being affected by Piramal Group’s involvement in commercial loans to consumer lending and would only happen if the company moves away from it. Two people aware of the talks told that this was one of the biggest points of friction that has been forcing the SoftBank Vision Fund to resist the deal.
Why are the firms not on the same page?
Additionally, SoftBank also insisted Piramal Group that his financial arms should follow the Rocket Mortgage model, which is among the biggest debt providers in the US. The Son-led bank wanted Piramal to provide loans online with minimum human assistance.
The Group’s wholesale real estate exposure is just over 60% and housing finance forms 9% of its overall book. The firm has a total book size of Rs 56,000 crore with Rs 40,160 crore in its real estate loans account. Certain signs indicate that the Piramal group has been looking to expand into consumer lending.
Reports suggest that the Piramal Group was not SoftBank’s first choice. The firm wanted to invest in Bajaj Finserv due to its retail exposure through its consumer lending platform, Bajaj Finance. The Japanese firm, however, decided not to initiate talks as it didn’t want to invest in a public company.
Recently, the WeWork controversy has got SoftBank into the limelight. The Japanese conglomerate plans to continue investing in the real estate firm.
Digital Credit Market in India
The credit demand in India is predicted to be a $1.41 trillion market by 2022. The growth rate in credit demand is expected to be 3.73% between FY’17 to FY’22. Report by Boston Consultancy Group states that India’s digital lending platform has the potential to become a $1 trillion economy in the coming five years.
The digital-lending industry includes players like ZestMoney and Aye Finance, among others that provide B2C and B2B loans. On the other hand, firms like LoanTap, EarlySalary, Credy, Qbera, and EarnWealth give loans to customers.