Non-bank lender L&T Finance Holdings Ltd, the financial services arm of engineering giant Larsen & Toubro Ltd, plans to raise funds through a rights issue, said three people aware of the development.
“They have initiated discussions with law firms and investment banks on their plans to raise funds through a rights issue. They have been exploring the idea for some time now. Earlier they were also considering a QIP, but now they are most likely to go ahead with a right,” said one of the people cited above, requesting anonymity, as he is not authorized to speak with the media.
The company is yet to formally appoint advisors to start work on this fundraise, he added.
Another person cited above said L&T Finance could look to raise around ₹2,000-3,000 crore through the rights issue.
“As a matter of policy we do not comment on speculation,” L&T Finance said in an emailed response.
With its plans to raise equity capital, L&T Finance joins its many peers in the financial services industry that have raised funds in recent months. Several banks and NBFCs have raised capital to bolster their balance sheets against the disruptions caused by the covid-19 pandemic, as well as to tap opportunities that may arise out of the pandemic and its economic fallout.
This month alone, leading private sector lenders ICICI Bank, HDFC Ltd and Axis Bank have together raised around ₹39,000 crore in equity capital through their respective QIPs (qualified institutional placement).
NBFCs such as Mahindra Finance and Shriram Transport Finance have raised ₹3,089 crore and ₹1,500 crore through their respective rights issue.
For the first quarter of this fiscal, L&T Finance reported a 73% drop in its profit to ₹148 crore, largely on incremental provisions taken by the lender to strengthen its balance sheet against the effects of the covid-19 pandemic.
The lender recorded provisions worth ₹577 crore in Q1 FY21. It had recorded a net profit of ₹549 crore for the June quarter last year.
L&T Finance said it witnessed a considerable reduction in portfolio under moratorium for retail products from 79% in the March quarter to 44% in the June quarter.
During the April-June quarter, retail businesses saw an improvement in the momentum on a month-on-month basis, the lender said. It financed over 10,000 farm equipment in June, an increase of 19% on a YoY basis. It expects retail disbursements to accelerate in Q2.
