L&T Finance exits wholesale lending business, appoints Subrahmanyan as chairman

SN Subrahmanyan, CEO and Managing Director of Larsen & Toubro (L&T), has been appointed Director and Chairman of the Board of L&T Finance Holdings (LTFH), an NBFC and a subsidiary of L&T. This appointment is in line with L&T’s overall commitment to strengthen its presence in the services field.

LTFH will refocus on wholesale lending and focus solely on retail funding. The company is present in the sector of infrastructure and real estate loans and is among the market leaders in the financing of agricultural equipment, the financing of two-wheelers as well as micro-loans. It also continues to be a major player in financing infrastructure sectors like renewable energy and roads.

Subrahmanyan replaces Shailesh Haribhakti who served as chairman of the LTFH board from June 1, 2017. Haribhakti will continue as an independent director on the board. Subrahmanyan is also Vice Chairman of the Boards of L&T Infotech, L&T Technology Services & Mindtree, and Chairman of L&T Metro Rail (Hyderabad).

“Not satisfied with the performance”

AM Naik, Group Chairman, L&T, said: “I have heard from our shareholders and independent board members that we need to improve the performance of L&T Finance. Members of our own Board of Directors have said that greater involvement of L&T is desirable so that we can drive the ideas and strategies we want to implement in L&T Finance and significantly improve its performance. In the nine months ended December 31, 2021, LTFH recorded net profit growth of 3.6% YoY at the consolidated level to reach ₹707.89 crore. The focus on retail paid significant dividends to the company during the quarter.

“We decided that this was a very important and major decision (to focus on the retail segment) where we are practically changing the character and structure of the business, because other changes will follow once the chairman is appointed. I am not satisfied with the performance of L&T Finance,” Naik added.

Decrease in the loan book

LTFH’s retail portfolio mix in the December quarter was 50%, while disbursements for the segment increased by 29% to record highs of around ₹7,600 crore. LTFH’s retail book size was 26% in fiscal 2016. The company’s retail book size at the end of the quarter stood at ₹42,602 crore.

LTFH’s total loan portfolio fell to ₹85,552 crore from ₹100,099 crore, driven by a 30% drop in infrastructure financing and a 22% drop in real estate financing. “Wholesale, meaning infrastructure and real estate, will be less and eventually, I think in less than two years, the business will be retail only. Then it will be structured on different retail verticals. And each will have a profit center and we expect to create value that will be visible in 6-9 months,” Naik added.

L&T is a major shareholder of BSE-listed L&T Finance with a 63% stake. This initiative is independent of the Vision 2026 shared by L&T earlier, Naik clarified.

Published on

February 28, 2022

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