L&T Finance Group seeks a 25% CAGR in three to four years

12 Jun 2023 , 10:47 AM

According to a senior official on Sunday, the non-bank finance vertical of the Larsen & Toubro Group aspires to sustain a compound annual growth rate (CAGR) of above 25% by concentrating on retail financing as a long-term strategy. 

By FY2025-26, the group’s retail portfolio is anticipated to exceed Rs 1,000,000 crore at the current growth pace.

‘In FY23, our growth was 35%. With the potential that lie ahead, our CAGR for the upcoming years will remain at least 25%, L&T Finance group CFO Sachin Joshi told PTI.

Long-term, L&T Loan Group would gradually reduce its wholesale book from its current portfolio, which is currently roughly Rs 19,500 crore, and primarily become a retail loan company, he said.

He anticipates that retail will achieve 80% of the overall loan book in the current fiscal year, two years ahead of schedule under its goal ‘Lakshya.’

The loan book of the company’s non-banking financial companies currently totals roughly Rs 81,000 crore, distributed among various group companies.

According to a senior official, the share of retail in the total loan book is anticipated to increase from roughly 75% to 90% by FY26, thanks to simplification brought on by the ongoing corporate restructuring.

To simplify the corporate structure and enable a greater focus on retail financing, the group is currently undergoing a restructuring process in which it will merge its finance subsidiaries, L&T Finance, L&T Infra Credit Limited, and L&T Mutual Fund Trustee Limited with the listed L&T Finance Holding Ltd. The Reserve Bank of India has already given its permission to these fully owned subsidiaries.

Only Rs 4,500 crore of the group’s total outstanding loan book of Rs 81,000 crore is recorded on the books of L&T Infra Credit Limited. L&T had given HSBC control of its mutual fund division.

Joshi anticipates that its newly launched businesses, such as consumer loans, SME Finance, and home loans, would expand more quickly than its more established ones. The cumulative assets of the rural group (microfinance), tractor loans, and two-wheeler loans total around Rs. 40,500 crore.

The merger process, according to him, would be finished by the end of the current fiscal year, after which the management would consider getting rid of the word ‘Holding’ from the firm name.

Joshi responded that borrowing will be restricted in the current fiscal due to the churning of the loan portfolio when questioned about fundraising.

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