L&T Finance is looking for "inorganic structures" to leave or at least minimize its exposure in the real estate projects lending market by partnering with other financiers. The company is also searching for dedicated funds to collaborate with in order to build a platform that will commit cash to infrastructure projects. This will aid the corporation in lowering its loan book in the division over time.
Despite some improvements it has seen, such as an increase in flat sales, the L&T Group company, which had exposure to the realty sector of over Rs 11,000 crore as of March, feels the risk-return paradigm in the sector is "not favourable," according to its Managing Director and Chief Executive Dinanath Dubhashi.
He stated that the corporation is considering "inorganic structures" to slim down its portfolio, but that there are no plans to take a haircut in the process. If a sale does not materialise, the portfolio would be gradually depleted, he added.
The company said in a presentation to the stock exchanges that it will not be performing any new underwriting of loans in the division and that it will look into exiting through various inorganic structures.
Dubhashi said the plan could include partnering with a financier to provide additional funding for a struck project, which would eventually benefit L&T Finance because the developer would be able to complete the project, realize the sale potential, and pay off the creditor.
The plan is to not allocate any additional capital in the infrastructure segment, where it has an exposure of over Rs 30,000 crore, and instead partner with an entity that will take a majority stake in the platform, according to Dubhashi, who made it clear that the valuation will have to be of the company's choosing to move forward.
The company is carrying additional provisions of over Rs 1,700 crore and will wait for up to two quarters more to take a call on whether to write those back, he said, adding that there are already reports of a fourth Covid wave forming up. Dubhashi stated that the book must increase by 25% yearly on a compounded basis, up from 20% in the previous few years.
He said the business is holding additional provisions of over Rs 1,700 crore and will decide whether to write them down after two quarters, adding that there are already rumours of a fourth Covid wave forming up.