Aim to grow market share; see disbursement growth more from rural: L&T Fin Holding

L&T Finance Holding saw a robust growth in disbursement in the thirds quarter ended December, 2017, especially in the rural book.

To throw more light on the Q3 performance and the outlook going forward CNBC-TV18 spoke to Dinanath Dubhashi, MD & CEO, L&T Finance Holding.

Below is the transcript of the interview

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Q: Strong disbursement growth was seen in Q3. What is your guidance for FY18 & FY19?

A: The maximum disbursement growth is actually coming from rural sector. We all know that there are tremendous tailwinds in the rural sector. Kharif crop has been decent, Rabi is quite good. Government schemes, loan waivers etc are giving very good boost to the rural sector.

Also, we are gaining market share. We are concentrating on the best manufacturers, the large dealers and gaining market share based on our digital proposition. So, that is where the growth is coming from. We expect the rural sector to continue to do well and hence we continue to gain market share.

In home loans, in housing, whereas the overall housing sector is doing quite decently but our growth has happened using our strengths, our group strengths of knowing the builders well and our construction funding book has shown very good growth.

As far as wholesale is concerned, that in any case is our strength business, xinfrastructure. We are no 1 and that is where we are growing. So we expect these kinds of growth rates to continue.

Q: Your de-focused book continues to decline. By when will it become zero?

A: It will take around 1 year more for it to become completely negligible. If we get an opportunity to sell, we can do it even before that.

Q: GNPA remained sticky in absolute basis in q3 vs q2. Why? Has there been incremental slippages?

A: According to us, I think the asset quality is improving quite well. So I will talk sector by sector. Rural asset quality has actually absolutely reduced - both in terms of percentage as well as absolute NPA- it has reduced.

Housing has largely remained same, it is anyways low and it has remained same. Whole-sale we had always given the guidance that it will as companies go to NCLT and we start taking provisions etc, the GNPA level will slowly creep up. So when you see from quarter to quarter - the absolute NPAs has just slightly reduced. It is coming from sharp reduction in rural NPAs and a small increase in infra NPAs. And that is what explains why the GNPAs are the same.

What we have done is actually further increased provision coverage and hence the NNPA is now down to something like 2.9 percent from 3.3 percent even sequentially.

Q: You are now AAA rated entity. How does this affect your cost of funds going ahead?

A: Let me put it in context. Already our cost of funds has reduced from last year 8.7 to 8.1 percent in the quarter. We are an L&T company and being an AA+ company and an L&T company, we were getting near the AAA rate anyways in the market. The group strength add a lot of strength to our treasury.

Being AAA - it will give further advantages. How much is that quantifiable, we will only know as time goes ahead. But nonetheless, it is a very positive development.

Q What was the net interest margin in Q3 compared to previous quarters?

A: We measure our net interest margins (NIMs) plus fees as the measurable metric because the philosophy of this org is while NIMs will be the function of product mix, will be the function of which business does well in a particular qtr. NIMs plus fees is what your topline really is and NIMs plus fees from last year has increased from 6.6 to 7 percent this year and last quarter also it was 7 percent. So it has been maintained at 7 percent QoQ.

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