HDFC Credila Cashes In On Rise In Study Loans

WHEN BOHORA BROTHERS, Ajay and Anil, started HDFC Credila Financial Services (then Credila) in 2006, no one would have foreseen its rise as India’s largest private overseas education loan provider. Despite belonging to a non-business family, the brothers scaled the Mumbai-based firm from zero to ₹4,331 crore value in 14 years.

Ajay recounts how he and his elder brother Anil had faced difficulties while raising funds for overseas education way back in 1989. “My father and I went from one bank to another for a ₹15 lakh loan for my MBA in Hofstra University, New York, and faced several challenges. My brother also faced similar challenges,” says Ajay.

Bohoras co-founded Credila after returning from the U.S in 2006. In the initial years, the vision was to create a company that acts as an “enabler” in transforming lives, says Ajay. “We founded Credila with a dream to build a specialised lending organisation for education loans, similar to what HDFC Ltd. is to home loans.” Life came a full circle in 2019 when Credila was wholly acquired by the mortgage giant.

Bohora brothers exited the company with ₹395 crore when HDFC Ltd. acquired their 9.12% stake in December 2019, valuing Credila at ₹4,331 crore. In the next three years, the company grew around 2.5x, and, in 2023, HDFC sold it to a consortium of private equity firms BPEA EQT and ChrysCapital for ₹9,552 crore at a valuation of ₹10,350 crore. Hong Kong-based EQT currently holds 72.01% in Credila, while 18% is held by ChrysCapital, and the remaining 9.99% by HDFC Bank.

Initially, Credila did U.S.-focused loans, which were later extended to Canada, Ireland, Germany, Singapore, and Dubai.

As the company transitions from its previous phase to the new one, HDFC Credila’s current MD and CEO Arijit Sanyal says the NBFC major will continue to “improve and innovate”.

“As we think of enhancing our products and services and deepening our ongoing digital transformation programme, we will leverage EQT’s deep expertise in the space. Further, creating operational excellence by drawing from ChrysCap’s expertise and past experience of investing in banks and NBFCs will form part of the company’s holistic growth strategy,” says Sanyal. “We also continue to remain focused on governance and controls,” he adds. As part of its investment initiatives, Credila has rolled out the Loan Origination System to help serve customers better by leveraging technology.

India’s education loan industry is heavily “untapped”, and Credila is a small part of a much larger market opportunity, says Sanyal. “...Think of the current size of the education loan industry, around ₹160,000 crore ($19 billion) approximately, versus the current spend on higher education by Indians both in India and overseas.”

Analysts have also given a thumbs-up to Credila’s performance. The company reported a “higher growth rate” in the loan book, majority of which came post FY21, says Sanjay Kumar Agarwal, senior director, CareEdge. “The growth has been fuelled by a surge in demand for overseas education among Indian students,” he adds. Credila remains the market leader with a 17% share in the overall education loan segment.

India’s Thriving Market

NBFCs dealing in education loans have shown decent growth in education loan outstanding, from ₹82,080 crore in FY18 to ₹1,09,975 crore in H1 FY23, according to the RBI's Sectoral Deployment of Credit report. The disbursement of specialised education loan financing NBFCs also increased over two-fold during the period — from ₹3,209 crore to ₹8,311 crore, Care Rated Entities data, forming 87% of outstanding AUM of NBFCs, as on September 30, 2022, shows.

A developing market, rising socio-economic status of the Indian middle class, and increasing interest among students to study abroad present huge opportunities for banks and NBFCs. Additionally, the cost of higher education in India is getting difficult to be borne out of family savings. Hence, education loans are helpful. The current pool of 250 million students in Indian schools, therefore, presents a huge opportunity.

The education loan sector in India is set for a major show.