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All the folks publishing gazettes on the bright future of Indian realty need to rally around the Larsen and Toubro Finance HQ really really quick.
Why: Because L&T Finance is considering inorganic structures for exiting the real estate lending segment. At least, the minimum goal is to lower the financing arm's high exposure in this category.
Wait, But Why?
L&T is targeting a reduced real estate loan book. The group company already has an INR 11,000 crore (and counting) exposure to real estate as of March, 2022. It feels that some parameters are still not favourable for continuing the funding spree, despite recent market recoveries.
What plans then?
🌂 No new loan underwriting in the category.
🌂 Partnerships with financiers for extra funding for a stuck infra venture. L&T Finance will then deliver the project as a developer, realize sale proceeds and repay the financier.
🌂 No extra capital for the infrastructure category where L&T's exposure stands at over INR 30,000 crore.
In one sip
Partnerships are in store with an entity, against a majority share in a new financial platform, as L&T Finance targets 80% better asset-quality and higher-margin retail composition by FY26.
With the glare on under-performance, the company is clearly sealing all the hatches with more austerity measures.