Petr Kellner’s expansion in China was meant to turbo-charge one of eastern Europe’s biggest fortunes. Instead, the Czech billionaire saw a listing of his consumer lender collapse, followed by a fight to contain the impact of the coronavirus pandemic. Bloomberg writes.
In November, Kellner’s Home Credit canceled a planned initial public offering (IPO) in Hong Kong to raise $1.5 billion. Investors considered the amount at which the company valued itself to be too high. Now the company’s problems are exacerbated by the slowdown in the Chinese economy and the slowdown in consumer credit due to coronavirus measures, Bloomberg warns.
The value of Kellner’s assets is now around ten billion dollars (approximately 242 billion CZK).
“Unfortunately, the coronavirus pandemic will not remain without negative effects on Home Credit’s activities,” company spokesman Milan Tománek wrote in an e-mail. “Qualifying this impact when the pandemic is not over would be speculation,” he added.
Kellner was born in Czechoslovakia in 1964, studied economics, and shortly after the Velvet Revolution worked as a sales representative for an office equipment distributor. In 1991, he founded an investment fund and, with the support of external investors, acquired shares in 202 companies, Bloomberg writes.
Now this fund is known as PPF and operates in finance, telecommunications, biotechnology, real estate, and engineering. Kellner controls about 99 percent of the company. Launched in 1997, the Home Credit division is one of the largest consumer credit providers in Central and Eastern Europe.
The expansion in China came in 2007. Home Credit operates in countries where consumer credit coverage is weak, and demand for these loans increases along with rising disposable income.
The Amsterdam-registered company is the only consumer credit provider in China wholly owned by foreign investors. It has also expanded in Vietnam, India, Indonesia, the Philippines, and Kazakhstan.
Demand for short-term consumer credit in China is falling this year, according to the central bank. “Fewer people are willing to take longer trips, and fewer people will now buy luxury handbags or cars,” said James Chang, an analyst at PwC China. “These factors negatively affect the volume of new consumer loans,” he added.
The growth of the Chinese consumer credit market began to slow before the advent of COVID-19 due to stricter regulation of practices in the sector. In the case of Home Credit, last year’s interest rate cut led to a reassessment of the offer and a reduction in fee income, w had a significant impact on the company. However, last year it managed to increase the volume of loans to Chinese clients by 9.5 percent to almost 12 billion euros (322 billion CZK), Bloomberg writes.
Home Credit has tried to set its value at ten billion euros according to sources familiar with the situation on the planned listing on the Hong Kong Stock Exchange. When the investors withdrew, she decided not to list. According to the spokesman, the company is not currently planning another attempt to issue shares in Hong Kong.
Chang from PwC still believes that Home Credit will recover. “They’re from Eastern Europe, they’ve seen what the economy looks like, so they know how to reach their customers and prepare products for different scenarios, such as buying a new smartphone,” he told Home Credit.