Top Story: HDFC chalks out a major foray into education

Housing Development Finance Corporation Ltd. - (Amalgamated) | Finance - Housing | BFSI | BSE: 500010 | NSE: HDFC

29 Nov 2010 Evaluate

Housing Development Finance Corporation (HDFC), India’s largest housing finance company, will make a big-bang entry into education. HDFC will look at small towns to either set up schools or take over defunct boarding schools. The entry into education will be made through a separate subsidiary. HDFC directors will need to be on the board of schools as trustees. When a company director becomes a trustee on a school’s board, he can co-opt another trustee and the trust can be taken over. The trust can then sign agreements with interested parties to manage the assets.

Kindergarten to class 12 (K-12) is said to be the most attractive segment of the education market, as a student usually stays on for 12 years. The K-12 segment will be the direct beneficiary of rising middle-class incomes in India. HDFC already has an educational loan unit — Credila Financial Services — in which it raised its stake to 51 per cent in July. Credila plans to leverage the distribution network and customer base of HDFC Bank to expand and also bring down the cost of funds.

Credila, which hopes to grow its loan book 2.5 times in the current financial year, is also in talks with other banks to diversify sources of funds. It has a line of credit from Punjab National Bank. At present, Credila lends around 65 per cent to students pursuing courses within the country. The company charges interest rates of between 9.75 per cent and 12.5 per cent on loans of up to Rs 50 lakh, unlike PSBs, which do not lend more than Rs 20 lakh.crack crack