L&T Finance Holdings, the leading infrastructure lender has hinted at entering into the banking sector. The NBFC recently surprised everyone by acquiring the Fidelity India's Mutual Fund business.
"We think it is an excellent business for the long-term," said Mr. Y.M. Deosthalee on the company's acquisition of Fidelity. It is suggested to be company's long term plan of diversification.
The bank's plans to diversify are suggested to be a hedge plan against the tightening regulation of RBI for NBFC. Recently gold loan companies asked to reduce exposure and increase loan to value to 60%; similarly infrastructure lenders were in trouble over mining bans.
The idea is to reduce the risk of exposure in just one area, and to increase the heads in the loan books by entering new sectors and consumer class. The NBFC has managed to maintain a growth rate of 40-50% in the loan books, which began at Rs. 6,600 crore to Rs.25,000 crore last fiscal.
The company has managed to keep its ratios intact, and is ready to apply for banking licence if RBI were to release one. The net interest margin at 5.4% and gross NPA ratio of 1.8%, the company rivals those of big banks.
Although diversification has been good for L&T Finance in Fidelity which added Rs. 8,800 crore to its funds, the company burnt its hand by venturing into microfinance in Andhra Pradesh.
Mr. Deosthalee also stated on the RBI's current drive to tighten screws on NBFC, "We have already set our norms tighter than the RBI requirements." And the company is prepared to apply for the licence as and when the central bank gives out new norms.