HDFC sells company that spawned education loan business – Times of India

by The Technical Blogs


MUMBAI: HDFC Bank on Wednesday said it has sold its education loan arm, HDFC Credila, for Rs 9,552 crore to investors led by Baring Private Equity Asia and ChrysCapital, valuing the company at Rs 10,350 crore. The sale was necessitated by a regulation that barred the bank from owning its inherited education loan company after last year’s merger with its parent company HDFC.
HDFC invested in the education loan company in phases from 2009, which proved profitable for HDFC Bank. The company has a loan book of Rs 25,237 crore and a 9-month net profit of Rs 379 crore with less than 0.1% bad loans.
Founded by brothers Ajay and Anil Bohora in 2006, HDFC Credila is the country’s largest education loan company. In an interview with TOI, the Bohora brothers said that the sale validated that education loans can be a successful business and that the NBFC structure can work for such loans.


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Credila’s success has spawned a Rs 1-lakh-crore industry with many employees of the company either setting up education loan businesses on their own or heading education loan verticals for other lenders.
Prashant Bhonsle, part of the startup team, founded Kuhoo, a platform for education loans. “The vision was to pioneer the private education loan industry in India & then have HDFC Credila alumni run the private education loan industry,” said Ajay Bohora.

The brothers got the idea of setting up a startup to finance education from their own experiences while raising funds for their overseas education. Anil has an MS from the US, while Ajay earned his MBA in New York after completing an engineering degree at VJTI.

Ajay attributes the low defaults to their meticulous identification process, which assesses individuals’ willingness and ability to repay. According to Ajay, those who are sincere in their studies are also diligent in loan repayment. What was needed was frequent updates to ensure that all contact details were available and the borrowers had easy access to repayment wherever they were.

Ajay suggests that the significance of US education will persist due to the billions of dollars of endowments with the universities.

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