In an effort to overhaul the business portfolio of L&T Finance Holding (LTFH), parent company Larsen & Toubro (L&T) may look at offloading the non-retail portion of the business even at a loss if required, to concentrate entirely on retail, AM Naik, Chairman, L&T, said on Thursday.
Earlier this year, the company had announced plans to completely exit the wholesale and realty funding business of LTFH within two years, following difficulties experienced in repayment by borrowers.
“We are taking several steps to make L&T Finance a much healthier company. We had very bad NPAs, particularly in wholesale and realty businesses. We have reduced our weightage considerably in it and are constantly looking for some of these sectors to sell-off, even if necessary at losses, and concentrate more on retail,” Naik said responding to shareholders’ queries at L&T’s annual general meeting (AGM).
LTFH has a financing portfolio comprising lending to two-wheeler buyers, farm equipment finance, micro loans, housing finance, real estate finance, infrastructure finance, SME finance and consumer loans. The company is exploring to divest infrastructure finance and real estate.
Of the total book size of ₹88,078 crore, recorded in Q1, LTFH’s wholesale finance book size declined 13 per cent to ₹39,795 crore, in line with the company’s strategy. Retail finance, however, grew 19 per cent to ₹47,794 crore. The company stopped disbursing new loans in the real estate segment. “I have no doubt that once we are out of this wholesale and realty completely, and bring retail to 80 percent, the company will be much healthier,” Naik added.
Naik also reiterated L&T’s commitment to get out of non-core businesses and reduce the losses in non-profit-making entities. “When I became the CEO, I had declared that we will get out of small and unrelated non-core businesses. We have continued that journey. There are many businesses we got into which are non-profit making and we are trying to minimise the losses there like Hyderabad Metro and Nabha Power. I am sure we will have a much healthier balance sheet this year,” Naik added. This month completes a year since L&T announced its intention to sell equity in the loss-making Hyderabad Metro and Nabha Power.
Naik also highlighted the growing order book of the company despite challenging conditions in India and abroad. The company’s order inflow during last year stood at ₹192,997 crore while the group revenue stood at ₹156,521 crore, up 15 per cent. As on March 31, 2022, L&T’s order book stood at ₹357,595 crore.
“The government has declared a spending of ₹1-lakh crore on infrastructure this year. Compared to what a country of 130 crore needs, it is very less but it is more than before and the government is paying much higher attention than before on knowing that infrastructure is very important and it has a multiplier effect in the economic development of the country,” Naik added.