IFC proposes debt investment of $125m in India’s L&T Finance

Photo: Reuters

International Finance Corporation (IFC), a part of the World Bank Group, has proposed to extend $125 million (Rs 900 crore) in debt funding to L&T Finance Ltd to help the latter augment its farm equipment financing portfolio.

The proposed investment comprises a five-year senior, secured debt, IFC said in a disclosure dated April 1.

L&T Finance will match IFC’s investment 3x by contributing up to $375 million for farm equipment financing, and at least 60 per cent of the combined fund will be utilised for on-lending in the low-income states of India, the disclosure added.

IFC said it may also mobilise additional funding from other investors for the project.

“The project will provide access to finance to farmers including those in low-income states with critical funds needed for them to modernise their farming techniques, thus enabling resource efficient growth. The investment would enable further market development. This project is part of a programmatic approach under the liquidity facility for NBFCs in response to the recent liquidity shortage,” IFC said.

L&T Finance is the rural financing focused arm of L&T Finance Holdings, which is the financial services holding company of the L&T Group. Headquartered in Mumbai, the company has a countrywide presence through 234 branches and 1,181 microloan meeting centres.

Its loan book comprises rural (54 per cent), real estate financing (18 per cent), wholesale financing (26 per cent), and others (2 per cent). The rural book, which is the focus segment of the entity, is further segmented into farm equipment financing, 2-wheeler financing and microloans.

L&T Finance’s assets under management stood at $6.04 billion and equity at $1.25 billion as of December 31, 2018.

Besides providing debt investment support, IFC also plans to assist the company in strengthening its environmental and social (E&S) and corporate governance framework by sharing international best practices and working with the company in implementing the same.

Last year in September, L&T Finance sold its supply chain business to Centrum Financial Services Ltd, the NBFC arm of the Centrum Group, with an aim to focus on its core strengths. Its supply chain vertical provided working capital finance and short-term loans to entities that were suppliers to large industrial manufacturers and original equipment manufacturers.

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