L&T Finance Holdings plans to sell a 3.5-4 per cent stake to private equity (PE) investors and raise about Rs 1,000 crore as capital to fund growth in the next two years.
The L&T group’s financial services arm expects to complete the process this financial year.
N Sivaraman, president, said they were looking at annual growth over 20 per cent in the next two years. Part of the capital requirement will be through retained earnings. It has been in talks with PE investors. At present, Capital International holds about three per cent stake, taken at the time of the public offering.
The net retained earnings were about Rs 500 crore last year. This gives the ability to grow the assets by Rs 5,000-6,000 crore. “When talking of 20 per cent (annual) growth, we are talking of Rs 9,000-10,000 crore of business. This will need Rs 500-700 crore of capital in a year,” Sivaraman said.
Assuming internal capital generation of Rs 1,000 crore, it would need a little over Rs 1,000 crore as external capital to fund growth for 2016-17 and 2017-18.
Referring to business growth prospects, he said the overall investment activity would be better in the second half of the current financial year. With a combination of renewable energy projects, refinanced ones and the roads sector, the wholesale segment should see 25-30 growth in the balance sheet. This is on a base of about Rs 22,000 crore.
“I am not expecting too many projects coming in for active financial closure on the roads side. Many projects are on an EPC (engineering, procurement and construction) basis. We will have a significant level of opportunity for refinancing in this sector,” he said.
On the retail side, it is cautious on pace of growth. “We are a little more conservative. The housing and micro finance book will grow quite well, with traction and a well established credit appraisal process.”
Adding: “In commercial vehicles, tractors and construction equipment, we will be a little cautious. On aggregate retail segment should grow 15-17 per cent this fiscal, on the base of Rs 25,000 crore.”
Loans and advances grew 21 per cent to Rs 49,219 crore in June 2015 from Rs 40,764 crore in June 2014.
This was led by disbursement growth of 37 per cent over a year in “our key focus areas i.e. B2C (business to consumer) products — two-wheelers, housing and micro finance in the retail business, and operational projects in the wholesale business,” said Sivaraman.