L&T Finance Holdings looks to hike retail share to 80% by FY26

L&T Finance Holdings (LTFH) expects to grow the share of retail loans to 80 per cent by the end of March 2026 (FY26), from 50 per cent now. The financing arm of engineering major Larsen and Toubro (L&T) plans to achieve this by stepping up the growth rate of retail loans from the current compound annual growth rate (CAGR) of 10-15 per cent to 25 per cent.

To ramp up its capacity to face asset quality pressures, LTFH aims to increase provision coverage ratio to 60 per cent by FY26, from 50 per cent currently.

Laying down the road map, the company said it would continue to be a dominant player in the rural segment and build urban franchises. It will increase product penetration using strategies such as cross selling. The lender plans to bring in new products in agriculture, SME and urban finance segments, according to an investor presentation.

Its retail book saw a 6 per cent year-on-year (YoY) growth to Rs 42,602 crore in December 2021, while sequentially it grew 4 per cent.

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

The share of retail in total book has grown from 40 per cent in December 2020 to 50 per cent by December 2021 (Rs 42,602 crore).

While the retail book saw expansion, its total lending book contracted 15 per cent YoY to Rs 85,552 crore at end of December 2021. Sequentially, it declined from Rs 86,936 crore in September 2021, reflecting shrinkage in wholesale business.

The wholesale book — infrastructure finance and real estate — declined 28 per cent YoY to Rs 40,788 crore in December 2021.

It would continue to be active in wholesale lending, including infrastructure finance. But, the strategy would be to focus on capital and asset light models.

On the asset quality front, it is looking to bring down bad loans to below 4 per cent by FY26.  Its gross non-performing assets (NPAs) rose to 5.91 per cent in December, from 5.12 per cent a year ago and 5.74 per cent in September 2021. The net NPA also rose to 3.03 per cent in Q3 from 1.92 per cent in December 2020 and 2.81 per cent in September 2021.

In addition to this, the company continues to carry additional  provisions of Rs 1,699 crore,  about 2.19 per cent of standard assets.