Dewan Housing enters education loan space

MUMBAI: Mortgage financier Dewan Housing Finance Ltd ( DHFL) today entered the fast-growing education loan segment where it aims to have a portfolio of Rs 200 crore in the first year of operation.

DHFL has entered the segment through a dedicated subsidiary, Avanse Education Loans.

The World Bank-promoted International Finance Corporation (IFC) has agreed in-principle to pick up a 20 per cent stake in the new entity for about Rs 10 crore, DHFL Chairman and Managing Director Kapil Wadhawan said.

"We will be announcing the deal (with IFC) in some days. The total capital for the new company will be Rs 50 crore, which will come from DHFL, our family and IFC," he said, adding the Wadhawan family will be the majority shareholders in the venture.

DHFL is investing Rs 10 crore through internal accruals as a start-up capital in Avanse, he said, adding each of the stakeholders will pay up as per their holding.

The parent's network will be used for sourcing of loans, Wadhawan said.

DHFL business head Neeraj Saxena said the company is targeting 5,000 customers and a portfolio of Rs 200 crore in the first year of the venture, which it hopes to scale up to Rs 4,000 crore in the next five-seven years.

"We're entering this segment as this is a complimentary business for us. We feel there is a huge opportunity in this segment, which is now served only by public sector banks," Wadhawan said, adding that service and quicker turnaround time will be the focus of the new entity.

It can be noted that many banks are facing asset quality issues with their education loan portfolios, which is pegged at Rs 55,000 crore.

Wadhawan sounded confident about asset quality and said underwriting expertise gained by DHFL in its lending business will prove useful for the company.
The company announced its base rate at 11.5 per cent and said it will charge a spread above the rate depending on the placement record of the institute and collaterals offered, among others factors.