Q&A: V S Rangan, Executive Director, HDFC

'We want to be students' chosen financier'

India’s largest mortgage lender, Housing Development Finance Corporation, is betting big on education. It supplemented its acquisition of education loan company Credila Financial Services with an investment in Career Launcher's Indus World Schools. Last month, HDFC said it had bought a minority stake in Kaizen Management Advisors, the asset management company which runs India’s first education-focused private equity fund. Executive Director V Srinivasa Rangan explains these moves to Somasroy Chakraborty. Edited excerpts:

What is the current size and growth rate of the education loan market? Which streams will be growing more rapidly than others?
Education loan dues in India (for all lenders put together) are around Rs 37,000 crore. The segment has been witnessing rapid growth in recent years. Approximately Rs 8,000 crore was disbursed in 2009-10.

In our experience, the fastest growing categories are masters’ degree courses in engineering streams and management education, especially for Indian students going to the USA and other overseas locations. Some specialised industry-focused courses also seem to be getting more attention from Indian students. They’re exploring options in making careers in different upcoming fields like customer experience management, logistics management, marine engineering, clinical research, etc.

What is the status of your entry into the education business?
We have been looking at the education space for quite some time. But we have not decided on anything specific.

Will the investment in Kaizen Asset Management strengthen your plans to enter the education business? Are you looking at more such investments in this space?
As part of our normal portfolio investments, we keep investing in unlisted entities. These are not always strategic in nature. In non-strategic investments, we do not participate in the day to day running of the business. Normally, as part of the terms of investments, we may have a right to have representation on the board of the investee companies.

The investments in Credila and Indus World Schools were made by HDFC directly. In Kaizen, the investment is being made through our 100 per cent subsidiary.

Was the Credila acquisition strategic in nature? How much does HDFC hold in that company?
Education has already become the second highest household spend in India. Credila, being a first-of-its-kind private education loan entity, enjoys unique positioning as a specialist in an underserved market that requires specific expertise, knowhow and finance.

We have recently raised our stake in the company; we have about 62 per cent stake. It is a subsidiary of HDFC. Through Credila, HDFC would like to positively impact the socio-economic fabric, by facilitating higher education dreams of talented Indian students.

How is Credila different from the existing banks in this space? What are its plans?
Credila is currently the only specialised lender in this space. It has done extensive research in this domain for over three years and tried to identify the challenges Indian students and their parents face while applying for an education loan.

The findings and focus on a single product have helped Credila launch innovative and flexible products. We also leverage technology-driven process efficiencies that can deliver best services and are quick and convenient. Credila has ambitious plans to become the most preferred financier to talented Indian students aspiring to fulfil their higher education dreams.