There are some green shoots of recovery emerging in the infrastructure sector in the country and this should help lenders do better this financial year, according to Dinanath Dubhashi, Managing Director and CEO of L&T Finance Ltd. The non-banking finance company’s diversification strategy — it has products to finance construction equipment, transportation equipment, rural products, supply chain, and corporates — has stood it in good stead over the past year, said the IIM-B alumnus. In an interview to Business Line , Dubhashi said notwithstanding the slowdown in urban India, rural India is the new vibrant growth engine. Excerpts:

How is L&T Finance riding out the current slowdown?

We have consciously followed a strategy of diversification. We mainly finance infrastructure, mid- and large-corporates and agriculture sector. We have been straddling all these sectors, thereby helping us de-risk at times when one of sectors is not doing well. History has shown us that not all of them will do very well or very badly at the same time. Because of this strategy, we have been able to maintain a steady growth. Strategies such as branch expansion, people hiring can be done very steadily. So, you will not find L&T Finance coming into news for sacking 300 jobs. This strategy has helped us maintain steady growth and use resources at our disposal better.

Which are the sectors which are contributing to the stress now for your company?

The infrastructure sector is facing a bit of a slowdown and so are some of the mid-corporate companies. However, agriculture is doing very well. This year, monsoon has been very good. Hopefully, there will be bumper crop this year. Retail demand in rural areas is very good. Most of the consumer durable companies, cars, consumer non-durables are making major forays into the rural areas. Initially, there was only income coming from the Mahatma Gandhi National Rural Employment Guarantee Act but now farmers are getting real income... income from farm produce.

Though overall the car market is down, in rural and semi-urban areas, the car market is doing well. It is the urban pockets that are doing badly.

So, how hopeful are you that infrastructure will see a turnaround?

There are some green shoots in the infrastructure sector. Infrastructure is a large part of our business. There have been various issues with roads and power starting from the Government approvals, availability of coal and environment clearances. Some of these issues are being taken up by the government and are likely to get resolved in the coming months.

Various State Electricity Boards have taken the re-structuring package offered by the Government and are fixing a few things like tariff revision and strengthening distribution.

So, even though all the problems in the sector will not disappear, there will be some improvement this year.

Since July 15, cost of resources in the economy has gone up due to liquidity tightening measures by RBI. Is L&T Finance planning to pass it on?

Our management is actively looking at it. Obviously, we will not be able to pass on the full hike to our customers. We will first try to increase it for customers, who default or delay payments. For instance, we have imposed a delayed payment charge on some of our customers.

Initially we thought that the RBI move is a short-term measure. However, as it has turned out, it looks like the measures are here to stay for another three-four months.

What are your branch expansion plans in rural areas?

We have about 120 full-fledged branches and 500 points of presence.

In NBFCs, no business happens in branches… the business happens at the place of the customer or the dealer.

How compliant are you with the Usha Thorat committee recommendations? Are you satisfied with what has been prescribed?

On the capital adequacy norms, we follow a very stringent practice and maintain the capital in excess of regulatory requirements at all times.

On the time being reduced from 180 days to 90 days when it comes to asset classification, we think we will have to push our customers much before for paying their dues.

As to whether the 90-day norm is good for financial inclusion, one cannot say. This could be a cost on the economy. We have made representations on this to the RBI.

satyanarayan.iyer@thehindu.co.in

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