L&T Finance group focuses on retail, aims 25% CAGR in 3-4yrs

L&T Finance future growth: Larsen & Toubro Group's non-bank financing vertical aims to maintain a compound annual growth rate (CAGR) of over 25 per cent predominantly by focusing on retail financing as a long-term strategy, a senior official said on Sunday. With the current growth rate, the retail portfolio of the group is estimated to reach Rs 1,00,000 crore by FY2025-26.

"In FY23 we grew by 35 per cent. Our CAGR for the next few years will continue to be at least 25 per cent with the opportunities lying ahead," L&T Finance group CFO Sachinn Joshi told PTI. L&T Finance Group would predominantly become a retail finance company in the long term, gradually reducing the wholesale book from its existing portfolio, which is around Rs 19,500 crore now," he said.

In the current fiscal year itself, he expects retail to reach 80 per cent of the total loan book, two years ahead of the target under its goal "Lakshya." The group's non-banking finance companies' loan book currently stands at about Rs 81,000 crore spread across its group companies. The share of retail in the total loan book is expected to scale up to about 90 per cent by FY'26 from around 75 per cent, fueled by streamlining with the ongoing corporate restructuring, according to a senior official.

The group is currently undergoing a restructuring process where it will amalgamate 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 to simplify the corporate structure and enable greater focus on retail financing. These wholly-owned subsidiaries have already received approval from the Reserve Bank of India.

Out of the total outstanding loan book of Rs 81,000 crore spread across its group companies, only Rs 4,500 crore is on the books of L&T Infra Credit Limited. L&T had hived off its mutual fund business to HSBC.

Joshi expects that its new businesses, like consumer loans, SME Finance, and home loans, will grow faster than the matured businesses. Rural group (microfinance), tractor loans, and two-wheeler loans are treated as matured and have cumulative assets of about Rs 40,500 crore. He stated that the merger process would be completed within the current fiscal year, and post that, the management will explore dropping the word "Holding" from the company's name. Asked about fundraising, Joshi said with loan portfolio churning, borrowing will remain limited in the current fiscal.

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