L&T Finance group focuses on retail, aims 25pc CAGR in 3-4yrs

Larsen & Toubro Group’s non-bank financing sector aims to maintain a compound annual growth rate (CAGR) of more than 25 percent mostly by focusing on retail financing as a long-term strategy, a senior official said on Sunday.

With the current growth rate, the retail portfolio of the group is expected to reach Rs. 1,00,000 crore by the 2025-26 financial year.

“In fiscal ’23, the company has grown by 35 percent. The compound annual growth rate for the next few years will remain at least 25 percent with opportunities ahead,” Mr. Sachin Joshi, CFO, L&T Finance Group, told PTI.

L&T Finance Group will become predominantly a retail finance company in the long term, gradually reducing the wholesale book from its existing portfolio, which is now around Rs 19,500 crore.”

In the current fiscal year itself, retail is expected to reach 80 percent of the total loan book, two years ahead of the target under the Lakshya target.

The group’s non-bank finance companies loan book is currently around Rs. 81,000 crore spread across the group companies.

Retail’s share of the total loan book is expected to rise to about 90 percent by FY26 from about 75 percent, bolstered by streamlining as the company continues to restructure, according to a senior official.

The group is currently undergoing a restructuring process as it will merge its financial subsidiaries, L&T Finance, L&T Infra Credit Limited, and L&T Mutual Fund Trustee Limited with listed L&T Finance Holding Ltd to streamline the corporate structure and enable a greater focus on retail financing. These wholly owned subsidiaries have already received approval from the Reserve Bank of India.

Of the total outstanding loan book of Rs.81,000 crore spread across the group companies, only Rs.4,500 crore is recorded in the books of L&T Infra Credit Limited. L&T has moved its mutual fund business to HSBC.

Joshi expects its new businesses, such as consumer loans, SME financing, and home loans, to grow faster than companies that have matured. Rural Group (Microfinance), Tractor Loans and Two Wheeler Loans are treated as receivable and have cumulative assets of around Rs.40,500 crore.

He stated that the merger will end during the current fiscal year, after which the management will consider deleting the word “holding” from the company’s name.

Asked about fundraising, Joshi said that with the loan portfolio fluctuating, borrowing will remain limited in the current public finances.

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