L&T Infra cuts loan exposure to power, micro-fin cos

L&T Finance Holdings today said its subsidiary L&T Infrastructure Finance had reduced its exposure in providing loans to the power sector, primarily, due to increasing uncertainties about coal availability for the sector.

The company, whose initial public offer opens on Wednesday at a price band of Rs 51-59 per share, also said that it's another arm, L&T Finance, has stopped lending to micro-finance institutions in Andhra Pradesh.

The IPO, which is to close on July 29, is expected to raise Rs 1,245 crore from its listing on the bourses and will be among a few big issues to have come up amid volatile market conditions in this fiscal so far. For anchor investors, the issue will open a day earlier, on July 26.

"We have reduced our exposure in power sector from 40% in 2009-10 to 28% in 2010-11... Towards the end of last (fiscal) year, we have seen some issues in power sector because of non-availability of coal and some issues in transmission segment," the company Chairman YM Deosthalee told reporters here.

He added that this was not a major risk for L&T Infrastructure Finance as it has a diversified portfolio, which has increased lending to other sectors like roads and telecom.

In 2010-11, the L&T Infra Finance provided loans worth Rs 1,242.94 crore to roads sector, which contributes 17.30% of its total loan portfolio, while its exposure in telecom sector was 13.8%, the red herring prospectus of L&T Finance Holdings said.

Talking about the lending to micro-finance institutions in Andhra Pradesh, L&T Finance Chief Executive Officer Dinanath Dubhashi said that disbursement of new loans in the state has been stopped due to state law on the sector.

"We have stopped lending in the state because there is no choice. We keep asking for permission but it does not come," he said.

According to the Andhra Pradesh's law on micro-finance institutions, permission of state government is required for disbursement of loans more than Rs 10,000, Dubhashi said, adding, "we have an exposure of Rs 190 crore in the state, while our total exposure in this sector is Rs 400 crore."

The Andhra Pradesh' ordinance was promulgated in October last year.

"We have also made a provisioning of Rs 54 crore against micro-finance loans," Dubhashi added.

Moreover, the L&T Finance Holdings, a unit of engineering conglomerate Larsen and Toubro, do not have any plans to list its two arms -- L&T Finance and L&T Infrastructure Finance, in near future, its Chairman Deosthalee said.

The proceeds from the issue will be used primarily to augment the capital base of L&T Finance and L&T Infra, which will get Rs 515 crore and Rs 485 crore respectively, Deosthalee said.