L&T Finance exiting wholesale, will focus exclusively on the retail loans. You never know what you can become.

L&T Finance Holdings (LTFH) as part of the restructuring and consolidation has decided to move out of the wholesale business and focus exclusively on the retail lending.

Key points to note –

  • Retail lending for the Company consists of farm equipment, 2 wheelers, consumer loans, micro loans and home loans/ LAP. Wholesale lending comprises of infrastructure finance and real estate finance.
  • Retail book contributed 51% of the Company’s total outstanding as on December 31, 2021 and balance 49% by the wholesale book.
  • Within retail, Company primarily focuses on rural market that contributed 75% of it’s retail book as on December 31, 2021.
  • LTFH over period has been gradually focusing more and more on the retail segment. In FY 16, retail contributed 26% to it’s overall book as compared with 51% now.
  • Company’s decision to move out of the wholesale business is due to it’s not so good repayment experience from this segment. The Company expects to exit completely out of the wholesale business over the next two years.
  • Wholesale business has been a reason for volatility in Company’s financial performance over the years.

Company’s decision is further towards consolidation after it had recently decided to sell the mutual fund business to HSBC.

The interesting point to note is: 5-6 years back when I had met LTFH, one of the main strength they were highlighting was the advantage they had over the others because of the knowledge and relationships of the parent Larsen & Toubro in the wholesale segment.

As they say – you never know what you can become !

I also hope that they are not taking this decision at a wrong time – given that the economy is looking to revive. Infrastructure as well as real estate financing under that scenario should ideally do well.

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