Shares of L&T Finance (LTF) rose 2.5% on June 9 after the NBFC said it completed the acquisition of Paul Merchants Finance Ltd's (PMFL) gold loan business.
The acquisition includes PMFL’s 130 branches, approximately 700 employees, and business transfer of its gold loan book size of Rs 1,350 crore to LTF.
Earlier this calendar year, LTF had announced the proposed acquisition of gold loan business undertaking of PMFL, marking its entry into gold loan business. The gold loan franchise will be an addition to LTF’s portfolio of secured loan products.
Sudipta Roy, Managing Director & CEO of LTF said, “We are pleased to announce the completion of PMFL’s gold loan business acquisition. In-line with our five-pillar strategy of enhancing customer acquisition, we continuously endeavour to expand our existing product offerings in a synergistic and contiguous manner."
At 10 am on June 9, L&T Finance's shares on NSE were trading 2.5% higher at Rs 195 apiece, their 52-week high. The market capitalisation of the stock is Rs 47,300 crore.
"Our rural workforce of 20,000 feet-on-street will provide an immediate force multiplier, enabling active generation of gold loan leads within our existing customer base. This is a significant strength that sets us apart from the competition," the company said in a stock exchange filing.
“The gold loans business will fill a crucial gap in our portfolio, introducing a secured, high-yield product that will benefit both our rural and urban customers. This acquisition is not just about expanding our offerings; it's about solidifying our position as a comprehensive financial partner for our customers across the country,” added Roy.
LTF's entry into the gold loan business aligns seamlessly with the company’s philosophy of risk-calibrated inorganic growth, fulfilling considerations such as addressing a critical capability gap, ensuring an easily integrable business model and people profile, and being available at attractive valuations, the company said.
Sat Paul Bansal, Chairman and Managing Director of PMFL said, “We are proud to have built a strong, compliant, and customer centric gold loan business undertaking and we believe that LTF is the ideal partner to take this legacy forward. We are confident that the customers and employees transitioning to LTF will continue to thrive under its leadership and expansive ecosystem.”
What has also been aiding the sentiment is that Reserve Bank of India on June 6 raised the loan-to-value (LTV) ratio for lending against gold to 85% for borrowings under Rs 2.5 lakh from the present 75%.
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