lending activity: L&T Finance explores the lending activities of outgoing real estate projects

L&T Finance is exploring “inorganic structures” to exit the real estate project lending business or at least reduce its exposure in the segment by partnering with other financiers, a senior company official said on Monday.

The company is also looking to partner with dedicated funds to create a platform that will commit funds to infrastructure projects. This will help the company eventually reduce its loan portfolio in the segment.

L&T Group, which had an exposure of over Rs 11,000 crore to the property sector in March, believes the risk-return paradigm in the sector is “not favourable” despite some improvements it has witnessed as an improvement stable sales, its managing director and managing director Dinanath Dubhashi told reporters.

He said the company was considering “inorganic structures” to shrink its portfolio, but clarified there was no intention of cutting hair in the process. If a deal does not materialize, it will gradually reduce the portfolio, he added.

In a presentation shared with the exchanges, the company said it would not underwrite any new loans in the segment and would explore exit through various inorganic structures.

Giving an overview of what is in the works, Dubhashi said the plan could involve partnering with a financier who would provide additional funding for a hit project, which would eventually help L&T Finance as the developer will be able to deliver the project, make the potential sale and repay the creditor.

In the infrastructure segment, where it has an exposure of over Rs 30,000 crore, the plan is not to allocate additional capital and instead partner with an entity that will take a majority stake in the platform. , Dubhashi said, noting that the valuation will have to be the choice of the company to move on.

It can be noted that in recent years, many financiers, in particular non-bank lenders, have suffered setbacks on bets on real estate and long-term infrastructure.

Recently, AM Naik, the chairman of parent company L&T, reportedly said that L&T Finance is the only listed company in the group that “didn’t perform”.

Managing Director and CEO of Parent L&T, SN Subrahmanyan, has been appointed Non-Executive Chairman of L&T Finance.

L&T Finance has responded with a plan to further increase the share of higher-margin, higher-quality asset mix in the portfolio to 80% by FY26, from 51% in March 2022.

Dubhashi said on Monday it would take 25% annual growth in the book on a compounded basis, compared to 20% achieved by the company in recent years.

The company is carrying additional supplies of over Rs 1,700 crore and will wait up to two more quarters to take a call on whether to write them, he said, adding that there are already reports of the formation of a fourth wave of Covid.

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