IPO-bound Credila suspects fraud in loan portfolio, makes Rs 80 crore provision

The suspected fraud cases were detected in the September quarter, Credila Financial Services has said

Overseas education loan leader Credila Financial Services, formerly HDFC Credila, is investigating suspected fraud cases in its loan portfolio and has made a provision of Rs 80 crore, regulatory disclosures made by the non-bank lending company show.

The suspected fraud cases were detected in the September quarter, the IPO-bound company said, without disclosing details on these suspected fraud cases.

“During the quarter ended 30 September 2024, the company has identified certain suspected fraud cases in its loan portfolio which are under investigation as per the process prescribed in the Master Directions on Fraud Risk Management in Non-Banking Financial Companies dated 15 July 2024, on fraud monitoring and reporting, and for possible involvement of any officer or employee of the company,” the disclosure read.

Pending completion of the investigation, the company has accounted for an impairment provision of Rs 80 crore based on its evaluation of the loan portfolio and at this stage, does not envisage any further material financial impact, it said.

The lender did not share more details of the fraud, which comes as the company gets ready to file its draft IPO papers leading to a public listing in 2025.

Moneycontrol reported on September 21 that Credila has picked five investment banks - Jefferies, Citi, Axis Capital, IIFL Capital & BofA Securities - to advise on the IPO, likely to be over Rs 5,000 crore.

In June 2023, HDFC Credila was acquired by a consortium consisting of Swedish investment giant EQT and home-grown private equity firm ChrysCapital from the HDFC Group for Rs 9,060 crore.

The EQT-ChrysCapital combine owns a controlling stake while HDFC Bank and South Korea's Shinhan Bank hold a minority stake in the company.

Emails sent to Credila Financial Services and EQT did not elicit a response till the time of publication.

HDFC Credila, set up in 2006, is a pioneer in specialised education loans. Since inception, Credila has funded 178,000 Indian students pursuing 3,300 programmes across 4,600 institutes in 63 countries, it said.

According to its annual report, education loans disbursed by the company increased 76 percent from the previous year to Rs 14,089 crore in FY24, while the repayments of principal, including pre-payments, were up 23 percent at  Rs 2,554.

Credila’s outstanding loan assets grew 84 percent to Rs 28,187 crore in FY24.

For the September quarter, Credila reported an interest income of Rs 1,067.57 crore,  a growth of 78 percent from the year-ago period.

The education loan provider reported a profit of Rs 226.48 crore in the quarter, compared to a profit of Rs 136.67 crore in the same period in the previous year.