China's Hexindai says strict credit risk practices to drive growth
03/11/2017 15:01
By Shu Zhang and Matthew Miller
BEIJING, Nov 3 (Reuters) - China's Hexindai Inc HX.O ,
which debuted on Nasdaq on Friday, said it was betting on
stringent credit risk practices to help drive growth, at a time
of increased regulatory scrutiny of an opaque online-lending
sector at home.
The American depositary shares of the company, priced at $10
each in the IPO, rose as much as 70 percent to $17 by 10:55 a.m.
ET (1455 GMT) on their debut.
Founded in 2014 by 35 year-old An Xiaobo, Hexindai is among
a slew of online finance firms seeking to profit from China's
booming and loosely regulated consumer-lending industry - a
market that is expected to grow at a compound annual rate of 49
percent to $620 billion by 2020, consultancy Oliver Wyman says.
But this unfettered growth of the micro-credit industry, or
the so-called "pay-day" loan sector, has spurred concerns that
unscrupulous operators may charge millions of borrowers
excessive interest rates, increasing default risks.
It has also fanned fears of a "Minsky Moment", or a sudden
collapse of asset prices after a long period of growth, sparked
by debt or currency pressures. urn:newsml:reuters.com:*:nL4N1MU2DZ
"What we do is very different from pay day loan firms,"
Hexindai CFO Johnson Zhang told Reuters. "They are lending to
marginalized groups at very high interest rates and making the
people unable to escape the growing debt burden."
"We are targeting the emerging middle class - a group of
people who have credit cards, stable jobs and stable monthly
income, and helping them when they need to spend a large amount
for consumption," the CFO said ahead of the listing.
Also, apart from the company's own risk control measures and
assessment of creditworthiness of borrowers, Hexindai relies on
Changan Insurance to provide cover to investors on the platform
in case of any default - not a very common practice in the
online-lending sector - the CFO said.
Hexindai has already said it plans to use proceeds from its
U.S. IPO, which raised about $50 million, to upgrade its
operating structure, including risk control, privacy protection
and anti-fraud and billing systems.
Hexindai's IPO comes amid steep falls in the shares of some
of its local peers after their U.S. listing reflected concerns
around China's thinly-regulated Internet-enabled finance sector.
Qudian Inc QD.N shares plunged about 30 percent last week,
just days after it raised $900 million in the biggest U.S.
listing by a Chinese fintech firm. The stock is down 13.4
percent since listing on Oct 18 at the close on Thursday.
Hexindai had facilitated 9.7 billion yuan in loans to 56,230
borrowers as of end-June, most of which are mid-sized at 20,000
yuan to 140,000 yuan, with a typical tenor of three years, Zhang
said.
Brushing aside concerns of default risks, Zhang said: "We
don't lend to people with blank credit history."
($1 = 6.6171 Chinese yuan renminbi)
(Reporting By Shu Zhang and Matthew Miller; Editing by Sumeet
Chatterjee and Himani Sarkar)
((shu.zhang@thomsonreuters.com; +86 10 6627 1271; Reuters
Messaging: shu.zhang.thomsonreuters.com@reuters.net))
Keywords: HEXINDAI LISTING/