Preparatory work to turn L&T Finance Holding (LTFH) into a retail lending-focused entity had begun before Larsen & Toubro (L&T), its parent company, announced that its subsidiary would withdraw from wholesale finance and lending. ‘immovable.
Shortly after announcing its results for the third quarter of FY22, it laid out a roadmap to increase the share of retail loans from 50% now to 80% by the end of March 2026.
He wants to accelerate the pace of retail lending from the current compound annual growth rate (CAGR) of 10-15% to 25%.
Analysts said its book would shrink as the company exits wholesale financing and real estate and may need to ramp up the pace to expand its retail portfolio.
Growth prospects are very favorable as the economy emerges from a period of turbulence due to the pandemic.
According to India Ratings, after facing challenges over the past few years, Indian financial companies would see a normalization of their business operations and increase their loan portfolio by 14% year-on-year in FY23.
Non-Banking Financial Companies (NBFCs) – as a group – are expected to see loan growth of 7-8% in the current fiscal year (FY22).
LTFH’s retail book grew by 6% year-on-year to reach Rs 42,602 crore in December 2021, and sequentially, it posted a growth of 4%.
In retail, it comprises two segments – rural finance, with a loan portfolio of Rs 32,166 crore and a retail housing finance portfolio of Rs 10,420 crore.
The share of retail in the total book increased from 40% in December 2020 to 50% in December 2021.
Analysts said work to change the company’s profile began around 2016, when the retail segment’s share was around 20%.
The company plans to remain a dominant player in the rural segment and to develop urban franchises. This will increase product penetration through strategies such as cross-selling.
LTFH would also bring new products in agriculture, small and medium enterprises and urban finance.