L&T Finance Ltd, a wholly-owned subsidiary of L&T Finance Holdings, expects the highest growth rate in the Microfinance sector. Although the sector makes up for a very small segment in its portfolio the organization sees substantial potential in the industry.
“It accounts for close to maybe 7-8% of my total portfolio. But this portfolio if done well and with all the support systems that we are putting in place, it can grow at even 70-75% every year” says Mr. Dinanath Dubhashi, Managing Director and Chief Executive of L&T Finance Ltd. The sector has learnt from the debacle in 2010 and is much more disciplined and better regulated now. Better laws; more importantly much better penetration of the credit bureau has added a lot of security to this sector. As technology takes over and as the payment banks come in, the normal problems of handling financial inclusions like handling of currency notes etc is going to go away too. “Very clearly, according to me business of the future, the way we do financial inclusion is just about to go through a drastic change, as it happens in most of the changes. These are changes that will come at an exponential rate. And the kind of growth or the kind of developments this sector has seen in the last 5 to 6 years, it will see in the next 5 to 6 months perhaps.” added Mr. Dubhashi. L&T Finance has a model by which it has been able to show growth which is even more rapid than the industry and at the same time keep risks and processes well in control. It has grown by more than 100% in the microfinance segment both in the quarter as well as in the half year.
Another growth engine for the firm has been the two-wheeler industry where it has been able to grow by about 21% showing a very smart increase in market share. Housing finance is another focus area for the company where clearly there is uncertainty in the industry but who can deny that retail housing and the retail housing finance is clearly the need of the hour. “There is competition in the urban areas but there are pockets which offer good potential” said Mr. Dubhashi.
The company has a healthy mix of B2C, its consumer oriented business which focuses mainly on tractors; personal vehicles mainly two wheelers (a business it took over from a French bank), microfinance and housing finance. On the B2B side it caters heavily to the SME sector and the mid-market sector. The SME finance business for long has been largely dependent on L&T (the parent). Over the last one year this business has been very resolutely diversified .From a percentage of around 85% to 90% of L&T dependency the overall business has increased rapidly and the L&T dependent business has come down to close to 50% now. The B2B segment contributes to about 60-65% of the revenues and the B2C around 40-45% currently. L&T Finance being a very consumer oriented business aims to increase the B2C segment to about 60-65% in a bid to offer something different and provide a specific advantage to the consumer.
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