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Rs 1,500-crore NCD issue part of L&T Fin strategy to diversify sources of funds: Dinanath Dubhashi

FY20 is the year for taking a pause and strengthening the balance sheet.

ET Now|
Dec 12, 2019, 03.33 PM IST
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Of the Rs 1,500 NCD issue, Rs 500 crore is the basic issue and Rs 1,000 crore is the greenshoe option. It is being taken in line with our overall strategy of diversification of sources of funds, says Dinanath Dubhashi, MD & CEO, L&T Finance. Excerpts from an interview with ET NOW.

We understand that you are looking to raise Rs 1,500 crore via NCDs. Can you confirm the amount and tell us a little bit about how you plan to use the proceeds for this issue?
Yes, absolutely. Rs 500 crore is the basic issue and Rs 1,000 crores is the greenshoe option. As you would know, it has to be taken in line with our overall strategy of diversification of sources of funds. We had set a target in the beginning of the year that close to about 20% of our total balance sheet, total borrowings will come from sources which are totally new to us. As you know, the NBFC sector went through certain ups and downs and strong companies like us have to show the way of diversifying the sources of funds.

We have always been very strong on ALM. Based on our AAA rating and group strength, we have been able to raise wholesale funds but it is good to diversify the sources and hence public NCDs, ECBs, maybe foreign bonds some times, priority sector borrowings are the new sources of funds that we are looking for and this issue is to be taken as a step in that direction. You would recall that we raised close to Rs 2,500 crore about six months back in two issues. This is the next step towards that.
Based on our AAA rating and group strength, we have been able to raise wholesale funds but it is good to diversify the sources and hence public NCDs, ECBs, maybe foreign bonds , priority sector borrowings are the new sources of funds that we are looking for.

-Dinanath Dubhashi



What is the coupon rate that you are offering on these NCDs? How do you see your margin trajectory shaping up?
Just to put the Rs 1,500 crore in context, our overall balance sheet is Rs 1 lakh crore with borrowings and a treasury of Rs 85,000 crore. So, Rs 1,500 crore is not going to change interest cost this way or that way. Just for the record, the effective rates that we are offering are between 8.45% and 8.65% based on the tenure.

But the purpose here is not so much to reduce interest cost or anything like that, the purpose is to bring more stability, more safety and basically more diversification. We have been retail-ising the asset side. Now we are retail-ising the liability side as such. It will add safety. At the same time, we have been guiding that our overall interest cost which today is 8.61%, should remain the same or maybe start a slightly downward trend. Our NIMs plus fees should remain in the narrow range that we have been maintaining always.

What is the outlook on disbursements and loan growth in the second half of FY20? When can we expect a pickup in sentiment?
We are seeing some early signs of pick up in rural sector but a little bit slower growth or steadying of growth is actually good for the sector. The core sectors have grown very fast and this is the year for pause and strengthening the balance sheet. That is what we have been doing now. Growth will come, but strengthening the balance sheet is the most important aspect. This is reflected in our credit ratings. All the other rating agencies have confirmed our credit rating at AAA. We went to CRISIL in October and now got a CRISIL AAA as well. In an atmosphere, where there have been a number of downgrades, AAA has been confirmed and assigned to us. That is a reaffirmation of the strength of our strategy and balance sheet and most importantly the strong parentage that we have.

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