L&T Finance to increase retail loan portfolio to 75% of total loan book

L&T Finance Holdings (LTFH), a subsidiary of Larsen & Toubro, plans to focus on increasing its retail loan book after it sold its mutual funds business to HSBC last year. 

A senior company official said L&T Finance plans to increase its retail loan portfolio to 75 per cent of its total loan book by year-end and significantly reduce exposure to the wholesale book. L&T holds a 66.27 per cent stake in LTFH. L&T Finance Holdings is the holding company for the financial services business of the L&T group, which owns 100 per cent stake in its lending subsidiaries.

“We are expecting demand for loans from retail customers from urban as well as rural regions,” the official said.

LTFHL has three major verticals: rural finance, urban finance like two-wheeler loans, consumer loans, home loans, and loan against property, and wholesale finance like real estate finance and infrastructure project finance. Retail finance comprised 54 per cent share in the total loan book as on June 30, 2022, while wholesale business comprised 45 per cent. The company is expecting 25 per cent annual growth in its retail book and targets 80 per cent retail loans by 2026.

As part of the company’s strategy to move towards retail lending; the share of granular retail assets has been growing despite the disruption caused by the Covid-19 pandemic. “The focus of the company is changing to retail loans as that’s where the growth is,” said an official. Almost all NBFCs including Tata Capital, and Aditya Birla Capital have identified retail loans as growth areas.

In the September quarter, the company’s retail book for the first time crossed Rs 50,000-crore milestone and stood at Rs 52,000 crore - a 27 per cent rise on a year-on-year basis and showing 9 per cent growth on quarter-on-quarter basis.