We want to set up a comprehensive financial services platform: N Sivaraman

Interview with President and whole-time director, L&T Finance Holdings

Recently, L&T Finance Holdings announced the acquisition of FamilyCredit, which specialises in automobile loans. It also entered the home loans market by completing the acquisition of Indo Pacific Housing Finance. Earlier this year, it had acquired the mutual fund business of Fidelity in India. N Sivaraman, president and whole-time director of L&T Finance Holdings, in an interview with Krishna Pophale and Parnika Sokhi, talks about what these acquisitions mean for the non-banking financial company. Edited excerpts:

You have carried out three acquisitions this financial year. Are these preparatory steps towards the banking business?
It is a natural and evolutionary aspiration for a financial services firm to become a bank. These (the recent acquisitions) are not desperate steps; 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. The housing finance market is the largest lending market in the country. The ability to leverage the balance sheet and reach out to the customer is what you need to be successful in this business. The required investment may be needed to scale this up. Along with the existing automobile financing business, this (the FamilyCredit acquisition) can help us participate in a larger business. To a large extent, the acquisitions open the retail segment. In addition to our asset financing business, this would turn us into a much stronger entity.

How would these acquisitions affect your retail loan book?
As soon as the acquisition is completed, it would take the retail portfolio closer to the Rs 10,000-crore mark, compared with the current Rs 8,000 crore. In the quarter ended September, the retail book grew about 12 per cent annually.

In the first half of the year, there was moderate growth in your lending portfolio.
Construction equipment financing, lending to companies and infrastructure have been impacted by the slowdown. On the corporate lending side, there are enough opportunities to finance, but we aren't keen because of the quality of assets. Credit selection and a focus on margins would continue forever. It's not only about the first half; it is a conscious decision.

Did FamilyCredit bring bad loans along with it?
FamilyCredit's net non-performing assets (NPAs) stand at about 0.2 per cent. Since it is part of an international player, it provides for NPAs, according to international standards. It is very aggressive in provisions.

What kind of credit growth are you looking at by the end of this financial year?
This year, we are looking at growth of 15-20 per cent in the loan book. With the government taking a few positive steps, the sentiment should revive. This would help us achieve the credit growth target.

What are your borrowing plans for this year?
At a net level, we would increase our borrowing by Rs 2,500-3,000 crore. We would also evaluate the possibility of bond issuances, as interest rates seem to have stabilised.

What are your expectations from the Reserve Bank of India (RBI)'s second quarter review of monetary and credit policy to be announced on October 30?
I expect RBI to alter the cash reserve ratio in the forthcoming policy, owing to liquidity issues. Without predictable liquidity, I don't see the repo rate coming down.