Czech financial group PPF is trying to find a strategic partner to acquire a majority stake in its consumer credit arm Home Credit in China, said PPF's new CEO Jiri Smejc, confirming longstanding rumours.
"We are trying to find a strategic partner there who will gain majority and following that will completely take over the firm, because we believe that without that, it is impossible to operate in China under current conditions," Smejc told reporters.
According to him, it was a mistake that PPF failed to sell Chinese Home Credit in 2017. PPF's vision to create a company worth $10bn failed due to structural changes in the Chinese economy and the impact of the coronavirus pandemic, he added. The Communist regime has been imposing a liquidity squeeze to cool the economy down, and closing parts of the country to contain the pandemic.
PPF is also engaged in selling its assets in Russia, including the operations of its Home Credit arm there. The sale of a majority stake in Russia's Home Credit & Finance Bank should be completed by the end of June.
The main focus of PPF Group's investments should now be in Europe, he said, adding that the company will be able to define a comprehensive investment strategy in September.
Smejc would like to expand PPF's business in Western Europe, particularly in industrial or financial services, while looking at acquisition opportunities in telecommunications. However, this would be more likely to involve a merger with another financial or investment partner.
PPF, which has investments in financial services, telecoms, media, mechanical engineering and biotech, was looking for private equity or family office partners to raise funds for acquisitions in Europe, Smejc said.
Even before Kellner’s death in March 2021, PPF had been trying to wind down its investments in Russia and Asia to refocus on more developed markets, diversifying its portfolio and stabilising its returns. Smejc said he believes founder Petr Kellner, who died in March last year, would have also preferred to invest in the European region.
After the cancellation of the long-prepared merger of Czech Moneta Money Bank with PPF's Air Bank group, the company plans to further develop Air Bank, he said.
He said there are not many investors for PPF to cooperate with in the Czech Republic given its size, so it would be better to look for Western players. PPF has historically worked well with tycoon Daniel Kretinsky and there is nothing to change about that, he noted.
According to Purple Trading analyst Petr Lajsek, PPF's actions after the death of Kellner only confirm the group's westward trend. "Given the current geopolitical tensions caused by Russia's invasion of Ukraine, it is not surprising," he said, adding that the Chinese market is a big unknown given the continuing coronavirus crisis there.
Smejc said PPF wanted to develop Home Credit in India, Vietnam, Indonesia and Philippines but needs partners with banking licences to secure access to cheap funding from deposits, which were more stable than markets. Bloomberg has reported that those assets could be worth up to $2.5bn.
In November 2019, Home Credit dropped a plan for a $1.5bn initial public offering (IPO) in Hong Kong because of poor market conditions. The IPO had been designed to turbocharge Home Credit's Asian growth. Subsequently, China’s slowing economy, liquidity squeeze and strict COVID-19 lockdowns have damaged PPF's business there.The Home Credit group lost €303mn last year and €584mn in 2020.