“Banks have also entered this market segment because it has more room for growth. This has triggered increased competition in the segment.” – Sutharntip Phisibuntoon, Managing Director, Heng Leasing and Capital
Consumer loan provider Heng Leasing and Capital Plc (Heng) will grow their businesses through an inorganic growth strategy, the company’s chief executive, Sutharntip Phisitbuntoon, said in an exclusive interview with the Bangkok Post.
Heng’s initial public offering on the Thailand Stock Exchange (SET) took place on October 19. On the first day of trading, Kasikornbank (KBank) bought 10% of Heng’s shares from some of the company’s existing shareholders through Big Lot’s board of directors.
Ms Sutharntip added that other companies and other financial institutions were also interested in acquiring shares in the company.
Heng is a joint venture of four northern car rental service providers with over 20 years of industry experience, namely: Taweeheng Group; Pattanasin group; the Mitr Ua Aree group; and the Sinpranee group.
Before the joint venture, each of them was strong in their business activities. But due to the tougher competition in the market and their overlapping business and customer bases, they decided to synergize and grow the business together.
The joint venture aims to strengthen their financial operations and capital base to facilitate sustainable national business expansion. As a result, the four owners decided to register Heng on the SET.
The four founding groups also plan to pass the baton to the next generation to lead the company in the digital age.
Currently, second-generation members of two founding groups sit on the company’s board and management team, said Ms Sutharntip, who has been appointed managing director to prepare for the company’s listing on the. SET.
She added that although the company has already solidly grown the business, the four founders are always ready for other new strategic partners to help grow the business.
EXPERTISE IS KEY
In the consumer credit segment, car leasing is the core business of the company and focuses only on used car loans. It also needs more expertise, long-term experience and unique services in this business segment.
Heng plans to expand its branch network from around 451 currently to 830 outlets nationwide in 2023.
Ms. Sutharntip added that with the company’s high growth potential, several companies and financial institutions are interested in becoming Heng’s strategic partners. Heng decided to forge a strategic partnership with KBank because of their long-term relationship and the bank’s good reputation.
KBank will also support the company’s long-term business expansion.
âAlthough we were approached by some banks to be a strategic partner, Heng chose KBank primarily because of our strong long-term relationships. KBank is now both our creditor and shareholder. This will support Heng’s financial condition and reliability, which will create greater opportunities. for the company on the future expansion of its business, âMs. Sutharntip said.
Given a more solid financial status due to the reputation of its strategic partner and a strong capital base after the introduction on the SET, the company will have more alternatives for the mobilization of financing, including on the loan market, the bond market and the capital market with lower financial costs.
On average, the company’s clients are those with a monthly income of around 20,000 baht and are between the ages of 35 and 49. Independent clients and small business owners constitute its key customer base, accounting for 30% of the total client portfolio, followed by salaried employees at 28%, farmers at 24%, corporate employees at 10% and civil servants at 8%. .
The line of credit per borrower is between 20,000 and 200,000 baht. Most of the clients belong to the underbanked segment, which often borrows from the loan shark market.
As a result, Heng still has opportunities to expand its business in this customer segment to help them access formal financial services.
âBesides non-banks, banks have also entered this market segment because it has more room for growth. This has triggered increased competition in this segment,â Ms. Sutharntip said.
With strong expertise and a long track record in the business field, Heng hopes to expand her business nationwide, she added.
Ms Sutharntip added that the company aims to increase total outstanding loans from 8.4 billion baht in June this year to 14.8 billion by 2023, an annual growth rate of 28% for both. coming years. The double-digit growth target will be supported by positive demand in the auto credit market and the company’s weak base.
In addition, Heng plans to expand its branch network, which is primarily located in northern Thailand, from around 451 currently to 830 outlets nationwide by 2023.
Due to the unique nature of auto leasing loans, especially the used car lending market, a physical branch office and human resources are required for the complicated loan service. Staff are essential to forging an understanding with customers, Ms. Sutharntip said.
Heng offers both secured and unsecured loan products, including vehicle hire-purchase loans, auto title loans, mortgages, personal loans, and nanofinance.
Its auto leasing accounts for the largest part of the business with 65% of the total loan portfolio, followed by auto title loans at 27%.
The company plans to increase the proportion of auto title lending to 48% and reduce auto leasing to 37% by 2023 in order to generate better returns and higher revenues.
Ms Sutharntip said that even with an ambitious loan growth target, the company plans to reduce the NPL ratio to 3.2% in 2022 and 2.9% in 2023, from 3.68% currently.
A larger loan portfolio and strong risk management will support the reduction of bad debts, she added.
PREPARE FOR THE DIGITAL AGE
In addition to expanding its physical branches, the company has developed a digital platform to deliver services and reduce operating costs in the digital age, Ms. Sutharntip said.
The company is expected to launch the Heng digital platform in the first quarter of 2022, initially focusing on being a channel of communication with customers. She plans to offer a digital personal loan as a pilot project in the third quarter of next year.
The company is expected to take longer to bring an auto loan service to the digital platform. However, given the unique and complicated nature of the auto credit business, a digital platform alone will not be enough to meet real customer demand.
OBSERVE REGIONAL MARKETS
In addition to focusing on expanding business across the country as part of its medium-term plan, the company also plans to expand into regional markets, focusing on Cambodia, Laos, Myanmar. and Vietnam as part of the next step.
But first, the company is mainly focused on strengthening operations in Thailand and building a strong infrastructure base, including the development of the digital platform, as there is room to develop activity in the country.
The company plans to spend 70-90 million baht on IT investments to offer a digital lending service next year, Ms. Sutharntip said.