We want to set up comprehensive financial services platform: L&T Fin

Q&A with N Sivaraman, president and wholetime director, L&T Finance Holdings

L&T Finance Holdings has recently announced acquisition of FamilyCredit which specializes in auto loans. The company also completed acquisition of Indo Pacific Housing Finance to enter into home loans market. Earlier this year, it had acquired mutual fund business of Fidelity in India. In an interview with Krishna Pophale and Parnika Sokhi, N Sivaraman, president and wholetime director at L&T Finance Holdings tells us what these acquisitions mean for the Non-Banking Finance Company which is gearing up to apply for banking licence once the final guidelines are out. Edited excerpts: 

Q. There have been three acquisitions in this financial year itself. Can we see it as preparatory steps towards the banking business?
  
A. It is a natural and evolutionary aspiration for a financial services firm to become a bank. They (recent acquisitions) are not desperate; they are part of a broader vision of creating a full-fledged commercial financial business. We want to set up a comprehensive financial services platform. You need to meet all the needs of your customers and get the best out of your distribution network.

Housing finance is the largest lending markets in the country. The ability to leverage balance sheet, to reach out to the customer is what you need to be successful in this business. This may need the required investment to scale it up. Along with the existing auto financing business, this (FamilyCredit acquisition) can help us participate in a larger business. The acquisitions open up the retail segment to a larger extent. In addition to our asset financing business this would build us into a much more stronger player.

Q. Where will these acquisitions take your retail loan book to?  

A. As soon as the acquisition gets completed it will take the retail portfolio closer to the Rs 10,000 crore mark from around Rs 8,000 crore currently. The retail book has grown about 12 per cent year-on-year in the second quarter of current financial year.

Q. There has been moderate growth in your lending portfolio in first half of the year. Apart from slowdown what is the reason?

A. The construction equipment financing, lending to corporate and infrastructure have been impacted because of the slowdown. On the corporate lending side, there are enough opportunities to finance, but we are keen because of the quality of assets. Credit selection and margin focus would continue forever. It’s not only about first half. It is a conscious decision.

Q. Were there any bad loans that came along with FamilyCredit?

A. Net Non-performing assets with FamilyCredit is about 0.2 per cent. Since they are a part of an international player they provide for NPAs as per the international standards and are very aggressive in provisions.

Q. What kind of credit growth are you looking at by the end of this financial year?

A. We are looking at 15-20 per cent loan book growth this year and with the government taking few positive steps, sentiments should revive which would in turn help us to achieve the credit growth target.

Q. What are your borrowing plans for this year?

A. At net level we would be increasing our borrowing by Rs 2,500-3,000 crore. We will evaluate the possibility of bond issuance as now interest rates seem to have stabilized.

Q. Your expectations from the second quarter review of monetary and credit policy to be announced by the Reserve Bank of India on October 30?

A. I would expect RBI do alter the cash reserve ratio (CRR) in the forthcoming policy as there are liquidity issues. Without predictable liquidity, I don’t see repo rate coming down going forward.