80% of Rs1,500 crore NCD issue of L&T Finance is reserved for HNIs and retail investors: Dinanath Dubhashi, MD & CEO

We will raise around Rs1,500 crore through NCDs of which Rs500 crore is the basic issue and remaining Rs1,000 crore is the greenshoe option, says Dinanath Dubhashi, Managing Director & CEO, L&T Finance Holdings Ltd. In an interview with Swati Khandelwal, Zee Business, Dubhashi said, "We are seeing green shoots in the rural sector and are confident that the rural sector will do good in 2021". Edited Excerpts: 

Provide some details of the recently announced public issue of the NCD like the number of tranches in which it will be made public and the amount that will be raised through it? And, will it improve your capital issue?
It is an Rs1,500 crore NCD issue of which Rs500 crore is the basic issue and Rs1,000 crore is the greenshoe option. It is a triple A rated issue by CRISIL, CARE and India Ratings. It is a public offering from the L&T Group is backed by the safety that comes from the group and the triple-A rating. It will come in 3years to 7years tranches and its effective interest rates will lie between 8.25%-8.65% and almost 80% of the issue is reserved for the HNIs and retail. Last time, we received a good response to the issue from retail and that's why the maximum issue is reserved for retail. 

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NBFC sector has gone through a period of distress. So, can you tell us the kind of impact that the situation had on your company and what strategy is being adopted to turn around the situation in your favour?
Let's discuss the strategy of the liability side. Parentage is very strong and is triple-A rated but it is the responsibility of the company to make it safer which can be done by diversifying the liability side as well. So, the original traditional source of NBFCs, like CP, privately plus NCD banks, should be diversified to keep the sources. But, we kept a target to have around 15-20% part of our balance sheet that should come from new sources. So, we will receive around 15-20% of the balance sheet from new sources like NCDs, external commercial borrowings, foreign bonds and priority sector lending. This will add a new layer of safety in fundraising. It should be as safe as possible in addition to which comes from the brand name, the group and triple-A rating and we want to build that much more safety in the balance sheet. This issue is part of the same strategy.  

If we talk about segment-wise credit growth then let us know about the segment where you are seeing the demand or concern?
It is too early to talk about demand and growth. Every NBFC or lending entity has four sections and they are (i) liquidity, (ii) credit quality, (iii) profitability & margin and (iv) growth and under normal conditions, they should be equal to each other but their importance can fluctuate in any particular situation. So, the current situation is a good opportunity for every NBFC to make sure that their liquidity condition is strengthened, asset quality is good and is improving, margins are strong and growth, which is essential, but for a time being they must not be worried a lot about it because several sectors are still lying in a negative zone till date. We are seeing green shoots in the rural sector and are confident that the rural sector do good in 2021 and its support will allow us to grow well. The current year is mainly for ensuring your profitability and safety by doing all the engineering of the company right. There is a need to strengthen your liability side. 

How much growth is expected from the housing finance segment and do you seeing concerns in the auto finance segment?
We are into tractor and two-wheeler financing in the auto sector. We are in the second position in tractor financing and among top-five in the two-wheeler segment. The overall growth of the sector is negative this year and we hope that, on this low base, there will be positive growth, next year. But our strategy has always been a different one under which we use our digital and data analytics to target the dealer with whom the business should be done. To be true the time is over when rain was a factor on basis of which it was decided to lend for tractor or not, i.e. lending more for tractors as rain has been a good one and not if it wasn't. Now, we chose the brand of the tractor, its model and the dealer with whom the business should be done and then put our full energy on it. This always helps us in doing better than the industry but it doesn't mean that if the industry stands at - (minus)10% then we will grow by +20% but will maintain our market share and our counter share will increase with the good dealers. This helps us in keeping our asset quality good amid negative/low growth and grow faster than the industry when the growth is positive. That is our focus for all industry. It is a cycle and I have seen almost 5-6 such cycles in my experience of 29years in this sector in which every industry moves up and down. Exuberating when it goes up and sadness, when there is a fall, can't be a business model. The business model means strengthening your company in a way that your asset quality and the balance sheet remains strong when there is a downfall in the industry and you grow when the things are positive.