Have viable options to adhere to RBI clarification: L&T Fin

In an interview to CNBC-TV18, N Sivaraman, president & whole time director of L&T Finance spoke about the latest set of clarifications from the RBI on the new banking licence norms.

"We can do some of the reorganizing of capital structure of the underlying business and the other way is of L&T diluting only for the purpose of the business requirements and regulatory requirements rather than just for the sake of meeting only the RBI guidelines in the current juncture," he says. Also read: Clear on RBI norms, need to modify structure: Shriram Group Below is an edited transcript of the interview on CNBC-TV18. Q: One of the intriguing things in the 164 pages clarification was that the non-operative holding company will have to be owned by the promoters in such a way that at least part of that ownership is by publically held companies -- 51 percent is owned by the public. In L&T Finance Holdings, you are held 80 percent by L&T. So how do you plan to work around this issue? A: There are two ways of looking at it. 1) From a structural perspective and 2) in terms of what is L&T’s shareholding. As far as the structure is concerned, we are very conscious about the 17.5 percent the other shareholders who are sitting on this company. So there interest will have to be protected. So we have certain options to work around this structure -- to come around with the complying with the guidelines of RBI. They are very viable options to meet with the requirements of L&T Finance being the promoter. Q: Yesterday, we had sourced information that you all will probably ensure enough capital raising that will in any case bring down the shareholding of L&T. Is that one way to think about it? A: That is the second route. 1) By the time the banking license approvals are given or the banks become operational, L&T would have had to anyway bring it down to 75 percent under the Sebi guidelines so that is one thing. 2) There are going to be ongoing capital requirements that L&T Finance will have to meet with the growth requirements of its underlying subsidiaries. The combination of these two will definitely reduce the gap between the sharing holding of L&T not holding more than 49 percent and the actual share holding that L&T might end at having at the end of all these exercises. So, it is not going to be so challenging to meet with this requirement. We can do some of the reorganizing of capital structure of the underlying business and the other way of L&T diluting only for the purpose of the business requirements and regulatory requirements rather than just for the sake of meeting only the RBI guidelines in the current juncture. Q: But you are clear that L&T Finance will be the company that will own the non-operative financial holding company (NOFHC) and all your businesses will be held by two levels lower that will be in all probability the way you will go? A: I agree. It is going to be important for the existing shareholders of L&T Finance. We will do everything that is required to make sure it happens to whatever structuring is required or any other way of making sure that the value dilution of the existing shareholders are eliminated is something, which we will definitely do. Q: You indicated that you have many viable options to adhere to these corporate structure requirements. But is the regulatory requirement of L&T pairing it down to 75 percent plus the capital raising for business per se the preferred option. Is that the one, which you all are going to actively consider? A: It is impossible to say at this juncture because we still are at least four-six months before the principal approval is given.