ST Leaders Private Equity (ST Leaders PE) has started the post-merger integration process on its portfolio company Hyosung Capital in an effort to greatly expand its corporate finance and investment banking divisions and seek a new revenue source.
Hyosung Capital has added a team under its investment banking division to uncover new investment opportunities, industry sources said on Tuesday (January 19). It also plans to register a new technology business and start a general partner (GP) role.
Although it is not common, some credit finance firms are actively acting as GPs. South Korea’s major credit finance company, KDB Capital, created a new organization last year dedicated to forming project funds and blind-pool funds.
Hyosung Capital also plans to increase the proportion of corporate loans in its operating assets and build a more balanced asset portfolio. Corporate loans accounted for only 3.3% of the firm’s total operating assets as of September 2020.
ST Leaders PE aims to scale up Hyosung Capital’s corporate finance and investment banking divisions because the company has to reduce its reliance on equipment finance, its field of specialization, for future growth. Equipment finance accounted for 52% of Hyosung Capital’s total operating assets six years ago, but it reduced the proportion to 35.4% in September 2020 so it was less vulnerable to external stresses.
The problem is that its operating assets have fallen since the core business was scaled down, dropping by about 11% to 2.25 trillion won ($2 billion) in September from 2.54 trillion won at the end of 2017. The company has to expand its corporate finance and investment banking businesses to overcome the growth plateau.
The credit finance firm is expected to strengthen Hyosung Capital’s retail finance business through the acquisition of JT Capital. (Reporting by Se-hun Jo)