L&T Fin will enter gold loan biz but no timeline yet

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L&T Fin will enter gold loan biz but no timeline yet

N Sivaraman, president and whole-time director of L&T Finance Holdings spoke to CNBC-TV18 about the latest happenings with the company and the way ahead.

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N Sivaraman, president and whole-time director of L&T Finance Holdings spoke to CNBC-TV18 about the latest happenings with the company and the way ahead. 

Below is the edited transcript of the interview. Also watch the accompanying video.

Q: Last time you had mentioned that you are looking to enter gold loans. Can you update us?

A: As a concept, as a product, we are evaluating it, but we cannot rush into it for two reasons; one is the regulatory environment at the moment seems to be little fluid. I think we need to see the regulatory environment emerging to be better. The second aspect is that we need to put in place significant level of risk management because this is an asset where significant frauds can happen and also issues in terms of evaluation and storage is also important. At the moment, we are putting in place all those requirements to make sure that a robust system and process will be available to manage this business.

So both, the regulatory environment and the process risk management have to be in place; we are working on it. I do not want to give you a timeframe because it's also important that the market doesn't get wrong indication of when we will enter. It will take some time, but we would definitely look to get this business going forward.

Q: You saw a bit of margin compression in Q3. Has there been any decline in the cost of funds that you are seeing in Q4, how do you see margins panning out from here?

A: What we have seen is a stabilization of interest cost at the moment, even as we replace some of the old borrowings in our book. That clearly indicates that rate stability has come into being, and hopefully with the inflation coming down and credit growth also slowing down, we will see some improvement in the overall borrowing cost. RBI is also worried about the current liquidity level which is indicated by the LAF borrowings. So the overall indication is to see the shorter end of the borrowing becoming cheaper than what it was today in the near-term. That should help us improve the margins.

In addition to that, we have also been able to put through some price increase measures to the borrowers over the last few months to the extent that new borrowings have been done out of L&T Finance. In any case, L&T Infra asset side is fully floating, so consequently we are being able to pass through most of the cost increase that we have suffered based on rates increases. So the margin level, L&T Infra should look to remain stable except for increase in gearing levels. L&T Finance should start seeing some improvement in the margins in the next two to three quarters. That's what our outlook is at the moment.