L&T Finance Holding plans to hasten the pace of retail loan growth

The groundwork for making L&T Finance Holding (LTFH) a retail credit-driven entity had begun before Larsen & Toubro (L&T), its parent, said its subsidiary would get out of wholesale and real estate funding.

Soon after declaring results for the third quarter of FY22, it articulated a roadmap to grow the share of retail loans from 50 per cent now to 80 per cent by the end of March 2026. 

It wants to hasten the pace of retail loans from the present compound annual growth rate (CAGR) of 10-15 per cent to 25 per cent.

Analysts said its book would shrink as the company gets out of wholesale and real estate funding and may have to hasten pace of work to expand its retail portfolio. 

The growth outlook is very conducive as the economy comes out of a turbulent period due to the pandemic.

According to India Ratings, after facing challenges in the past few years, finance companies in India would see normalisation of business activities and grow their loan book by 14 per cent YoY in FY23. 

Non-banking financial companies (NBFCs) — as a group — are expected to clock a loan growth of seven-eight per cent in the current financial year (FY22).

LTFH’s retail book saw a six per cent YoY growth to Rs 42,602 crore in December 2021, and sequentially, it posted a four per cent growth. 

Within retail, it has two segments — rural finance, with a loan book of Rs 32,166 crore and a retail housing finance portfolio of Rs 10,420 crore. 

The share of retail in the total book has grown from 40 per cent in December 2020 to 50 per cent in December 2021.

Analysts said the work on changing the profile of business began around 2016 when share of the retail segment was around 20 per cent. 

The company expects to remain a dominant player in the rural segment and build urban franchises. It will increase product penetration through strategies like cross-selling.  

LTFH would also bring in new products in agriculture, small and medium enterprises and urban finance.