As part of the strategy to have over 80 per cent retail lending on its books by 2026, L&T Finance Holdings plans to lower its exposure to infrastructure and real estate.

The objective will be to reduce the overall wholesale portfolio through sale or transfer of assets to drive retailisation.

In infrastructure financing, it will continue with an asset light model and will explore divestment or tie up with a strategic investor.

In real estate financing, the NBFC will not do any new underwriting and will explore exit through various inorganic structures.

“We have built an excellent and solid platform for infrastructure financing. As we go ahead, we will continue with that but explore partnerships. L&T Finance will limit capital going into that business,” said Dinanath Dubhashi, Managing Director and CEO, L&T Finance Holdings.

Noting that many risks have emerged in the real estate sector, he said the risk return paradigm is not favourable.

“We have stopped new underwriting over the last two years. We will explore certain inorganic opportunities to reduce and sell some of this portfolio. We have no intent of taking a haircut or loss,” he said.

In real estate finance, Dubhashi said the partner will help bring in more money to complete the projects.

The decision is part of L&T Finance’s 3.0 or Lakshya 2026 strategy, as part of which it will take the retail mix on its book to over 80 per cent and foresees retail lending growth at over 25 per cent CAGR. The remaining 80 per cent of the portfolio will be for wholesale finance.

It is also targeting Gross Stage 3 assets at less than 3 per cent and Net Stage 3 assets at less than 1 per cent along with an RoA of between 2.8 per cent to 3 per cent by 2026.

Retail finance book

As on March 31, 2022, retail finance book was ₹45,084 crore, real estate finance book was ₹11,210 crore and infrastructure finance was ₹30,521 crore.

Retail assets contributed to 51 per cent of portfolio mix in the fourth quarter of 2021-22 from 26 per cent in 2015-16.

As part of the retailisation strategy, L&T Finance will look to become a “fintech at scale” and will also launch more products. In the current fiscal, it will plans to launch rural individual loans, warehouse receipt finance, urban finance such as consumer loans for education and hospital, and overdraft facility for SMEs. In the future, it will launch products including rural LAP and SME loans, agri allied loans for farmers, consumer loans for other partnerships and flexi overdraft for SME businesses.

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