Finance
Retail therapy: Inside the business shift at L&T Finance
Roy, a financial sector professional with over two decades of banking experience, has been brought in to change the way the non-banking subsidiary of Larsen & Toubro, the eponymous builder of roads and bridges, does business, and make it as nimble and efficient as a fintech.
Despite the parentage of the engineering giant, in many eyes, L&T Finance has yet to distinctly carve out a space of its own in the financing arena. Indeed, the parent, if anything, has been displeased by the middling performance of the lender over the years.
In February 2022, at a press conference to announce that L&T Finance was exiting the wholesale loans business (funding infrastructure and real estate projects), then L&T chairman A.M. Naik had said, “Over a number of years, the only (L&T Group) company which has not performed and is publicly listed is L&T Finance…Our own board members are saying, to me at least, that greater L&T involvement is desirable so that we can drive the ideas and strategies that we want to implement in L&T Finance.”
Naik was not exaggerating.
Even after being in business for three decades, L&T Finance remains lower down the NBFC pecking order. Its total loan book, almost all (94%) of it retail (personal, home, two-wheeler loans, etc.), stood at ₹85,565 crore at the end of 2023-24.
Mahindra Finance, which started three years before L&T Finance, in 1991, is well ahead with assets under management (AUM) of ₹1 trillion at the end of the last fiscal year. Bajaj Finance, which started out in 1987 as Bajaj Auto Finance Ltd, an NBFC focusing on two- and three-wheeler finance, has eclipsed them both with an AUM of ₹3.3 trillion as of 2023-24.
L&T Finance’s price-to-book value (a measure that compares a company’s market value to its book value), at 1.97, lags peers Shriram Finance (2.17) and Bajaj Finance (5.68), though it is higher than Mahindra Finance’s 1.83, according to data from Bloomberg. In 2023-24, its return on assets—a key profitability metric—stood at 2.23%, again behind Bajaj Finance and Shriram Finance.
Junking Wholesale Loans
A large part of L&T Finance’s lacklustre performance is being blamed on its earlier focus on wholesale loans. Data from Crisil shows that these loans formed 62% of its portfolio as of 31 March 2016. According to equity analysts, that concentration was a result of the parent’s presence in those segments and the focus of the group as a whole on infrastructure.
In August 2022, not long after the press conference mentioned earlier, Naik told shareholders at L&T’s annual general meeting that steps were being taken to make the NBFC a healthier company. “We had very bad NPAs, particularly in the wholesale and realty businesses. We…are constantly looking for some of these sectors to sell, even if necessary at losses, and concentrate more on retail,” he said.
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Clearly, the wholesale business was a bad memory that the group wanted to leave behind as quickly as possible.
In June last year, The Economic Times reported that L&T Finance had invited bids from asset reconstruction companies for non-performing wholesale loans to the tune of ₹3,022 crore, across 10 accounts, mostly in the real estate sector.
As of 31 March, its wholesale book had shrunk 72% to ₹5,528 crore, from ₹19,512 crore in the previous fiscal year. And as of the June quarter of 2024-25, it had been pared to 4.8% of the overall loan book.
While it has had a modest retail book over the years, the company is now concentrating entirely on retail loans. A part of the shift toward retail happened under former chief executive officer (CEO) Dinanath Dubhashi, who retired in April, after spending 16 years at L&T Finance. The group is now banking on Roy, a former consumer banking and payments professional from ICICI Bank, to turn its fortunes around. He joined L&T Finance as its chief operating officer in July 2023 and took over the CEO role in January.
Five-pillar Strategy
“For the first six months, I focused on nothing but business,” said Roy, an avid wildlife photographer whose corner office on the eighth floor is full of photographs of tigers shot on his camera. “Dinanath gave me a free hand. The objective was to streamline the business and focus on performance delivery both in terms of credit cost and topline,” Roy told Mint.
As part of the effort to put the financier on a high-growth trajectory, the management has drawn up a five-pillar strategy, which was announced in October. The five pillars are: raising brand visibility, enhancing customer acquisition, sharpening credit underwriting; building a futuristic digital architecture and building capabilities.
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Roy quickly realized that the company needed to improve its brand recall and visibility. “I had noticed something from outside and it was also part of my discussion with SNS (L&T chairman and managing director S.N. Subramanyam) when I was going through the process of coming on board,” said Roy. “I realized that the L&T brand name is reasonably well known and well respected in urban India, but L&T Finance was thought to be predominantly rural.”
The numbers, however, show that L&T Finance’s rural leaning is a matter of perception. Rural and urban retail loans account for an equal share of the bank’s total retail loan book of ₹80,000 crore today.
I realized that the L&T brand name is reasonably well known in urban India, but L&T Finance was thought to be predominantly rural.
—Sudipta Roy
But Roy found that the brand recall and presence in urban areas was “literally next to nothing”.
Brand association is a critical aspect for Roy. While Bajaj Finance is known for its consumer durable finance, Mahindra Finance is associated with financing tractors and Shriram Finance, with used vehicles. L&T Finance, on the other hand, is not associated with any specific aspect. According to Roy, the NBFC’s three fulcrum businesses are micro-loans, tractor finance and two-wheeler finance. He therefore wants the company to be known as a diversified NBFC that “straddles both rural and urban businesses with equal ease”.
Using AI and ML
The new CEO is extremely excited about some of the technological changes at L&T Finance. There is ‘Project Cyclops’ for instance, named after the one-eyed Greek mythological figure, which was announced in a statement last month. A credit risk assessment and automated decision-making digital credit engine, Project Cyclops uses Artificial Intelligence (AI) and Machine Learning (ML) to determine the repayment capability and credit quality of potential customers.
Project Cyclops is a “three-dimensional credit engine” developed internally by a team of 100 developers, said Roy. “Since it was done internally, the cost was about ₹5 crore,” he told Mint.
How will it help? He explained that most of L&T Finance’s revenue comes from high-velocity credit businesses where quick decisions need to be made. “For instance, if a customer comes to a two-wheeler dealership and a lender doesn’t finalize whether it will finance within 30 minutes, he/she goes elsewhere,” said Roy. The new credit engine is expected to enable quick and correct decisions on who the company is lending to, especially microfinance customers, and those who are ‘new to credit’ (first-time borrowers).
“Nothing escapes Cyclops,” said Roy. “Our technology team has been working nonstop for the last 45 days to deliver it…We pushed it into beta mode (user testing to identify bugs) on 18 June and are currently using it in 25 two-wheeler dealerships. Over the next 45 days, we will scale it up to 100% of two-wheeler loans.”
After the two-wheeler business, Cyclops will be used in tractor financing, small business loans and finally for mortgages and personal loans. The financier expects Cyclops to improve underwriting standards in the sanctioning of loans.
Decent Start
Have the change in guard and the five-pillar strategy worked? While it is early to say so decisively, there has been a visible improvement in numbers. According to Roy, about a year ago, L&T Finance disbursed between ₹550-600 crore of two-wheeler loans every month; it now clocks ₹900-1,000 crore. Moreover, from 37% in the June quarter last year, the share of prime (better-rated) customers in two-wheeler loan disbursals had grown to 50% by the end of 2023-24.
₹900 crore and 1,000 crore of two-wheeler loans every month. ” title=”L&T Finance disburses between ₹900 crore and 1,000 crore of two-wheeler loans every month. “>View Full Image
“It has been going up for close to three quarters now and is serving us well…Our bounce rates (defaults in paying equated monthly instalments) are showing signs of improvement,” said Roy.
In aggregate mortgages and loans against property, it used to do ₹550-600 crore every month; now it does close to ₹900 crore. In rural business finance, the needle has moved from ₹1,550-1,600 crore last year to ₹1,900-2,000 crore per month now.
“We plan to grow our retail book to ₹2 trillion in another four years, by 2027-28,” said Roy. Currently, Federal Bank and Yes Bank have loan books close to this size.
Analysts are upbeat on the company’s push towards retail loans and the move away from wholesale credit. “There have been changes in organization structure, product mix and investments in technology at L&T Finance. We continue to remain bullish on the company and believe all these changes in the organization should eventually lead to balance sheet growth,” said Kaitav Shah, lead BFSI analyst, Anand Rathi Institutional Equities.
Others had similar things to say. According to analysts at JM Financial Institutional Securities Ltd, a combination of factors would allow the lender to report strong returns. These include its shift from wholesale to a high-return retail book; stable asset quality metrics from the thinning of its legacy wholesale book and continuous strengthening of underwriting metrics; and strategic investments in “futuristic technology”.
Tighter Regulation
While aiming for growth, the company also has to navigate a stricter regulatory environment. In September 2022, the RBI classified L&T Finance as an upper-layer NBFC. RBI regulations classify NBFCs into four layers—base, middle, upper, top—based on their size, activity and perceived risks. According to the central bank, once an NBFC is classified as being in the upper layer, “it shall be subject to enhanced regulatory requirement, at least for a period of five years from its classification in the layer”.
The upper layer comprises prominent names such as Tata Sons, LIC Housing Finance and Shriram Finance. For some of the upper-layer NBFCs, the classification came as a challenge since norms mandated them to go public within three years of being identified as one. A few, such as Piramal Capital and Housing Finance, and Aditya Birla Finance, have tried to sidestep it by announcing mergers with their listed parents.
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L&T Finance faced a similar problem. While L&T Finance Holdings, the holding company, was listed, L&T Finance, which appeared on the RBI upper layer list, wasn’t. Last December, the company went through an internal restructuring that avoided listing L&T Finance separately.
Under the merger agreement, L&T Finance, L&T Infra Credit and L&T Mutual Fund Trustee were merged into L&T Finance Holdings Ltd (LTFH) and the new entity has also been named L&T Finance.
Roy believes there has been a harmonization of regulations between banks and upper-layer NBFCs. “We do not consider ourselves different from banks. And that is the message that I have given to the team: consider that you are a bank; consider that the same regulatory standards apply to you and consider yourselves to hold the standard that a bank is expected to hold.”
Interestingly, at one time L&T Finance had ambitions of becoming a bank but decided against it after the RBI made it clear that it would not be giving licences to conglomerates.
The RBI raised the level of capital that banks need to set aside for retail loans and loans to NBFCs, raising risk weights by 25 percentage points to 125%.
On another front, the financier will face a challenging environment as the NBFC sector is staring at a slowdown in growth today. Some of this is the result of the RBI raising the level of capital that banks need to set aside for retail loans and loans to NBFCs, raising risk weights by 25 percentage points to 125%, in an effort to curb their growth and lower the systemic risk. According to estimates by rating agency Icra, 2024-25 growth in AUM is likely to moderate to 17-19% in the base case and 14-16% in the stress cases.
“The unsecured consumer loans segment would be the most impacted and may face a sharp reduction in the growth rates in FY25 after many years of sustained robust growth,” Icra stated in April. “On the other hand, LAP/SME & MFI (loan against property/small and medium business and microfinance) loans, which also drove growth in the last two years, would continue to maintain healthy growth,” it added.
That said, Roy is optimistic about delivering the goods. “As a nonbanking financial services company, we are far more agile (than a bank). We are far more nimble and are able to do things much faster.” He has made a steady start, but it will take much more to catapult L&T Finance into the top league.
Scholars examine bank and cryptocurrency regulation and assess potential risks to financial stability and resilience.
Federal banking regulators recently proposed rules to implement the Basel III Endgame framework. Global banking regulators developed the Basel III framework after the 2008 financial crisis to strengthen bank regulation, supervision, and risk management through a set of international standards. The final set of rules to implement the framework has been dubbed “Basel III Endgame.”
Although regulators originally planned to finalize and implement the Basel III accord by the beginning of 2023, countries have repeatedly delayed implementation while tailoring the framework to national interests and as banks and policymakers around the world increasingly embrace a more deregulatory approach.
The updated proposal follows a 2023 proposal from the Biden Administration that drew criticism for threatening to impose burdensome capital requirements on U.S. banks that could reduce lending and credit availability. Regulators argued that strengthening risk-based capital requirements for large banks would promote financial stability and resilience, but critics contended that the proposal could instead restrict banks’ lending capacity and push lending and traditional bank activity into more lightly regulated shadow banking sectors, such as private credit.
The latest proposal departs significantly from the 2023 proposal and would reduce the regulatory burden on large banks. The banking industry has applauded the recent deregulatory push, but critics warn that this approach risks weakening bank regulatory infrastructure only a few years after several major bank failures revealed ongoing gaps in bank supervision. Silicon Valley Bank’s collapse in 2023 marked the third-largest bank failure in U.S. history and required major emergency intervention. Although U.S. bank regulators largely contained the fallout and prevented contagion risks, the episode highlighted ongoing systemic risks to financial stability.
Debate over U.S. banking regulation also coincides with financial innovation and the rise of cryptocurrency, which have upended traditional financial services. The proposal comes less than a year after Congress passed the GENIUS Act, which established a baseline framework for stablecoin issuance. The GENIUS Act represented a significant regulatory breakthrough in a rapidly developing industry but left open many questions about its implementation and the future of cryptocurrency and stablecoin regulation. Federal regulators recently proposed rules to begin implementing the GENIUS Act framework, which will take effect in January 2027.
In this week’s seminar, scholars explore and offer competing views on current risks to the banking system and financial stability and identify potential regulatory vulnerabilities, including new payment systems tied to cryptocurrency.
- In a National Bureau of Economic Research working paper, Stephen Cecchetti and co-authors advocate implementation of the Basel III Endgame standards and higher U.S. capital requirements for large banks. They argue that criticisms of the 2023 proposed regulations are not supported by data and that heightened capital requirements do not reduce bank lending. The authors warn that failure to align U.S. regulations with the international Basel III standards could start a deregulatory race to the bottom that would undermine global banking stability.
- In an article in the University of Illinois Law Review, American University Washington College of Law Professor Hilary Allen explains that financial stability risks can arise from often-overlooked sources beyond the traditional banking sector, such as venture capital. Using the venture capital industry as a case study, Allen contends that speculative sectors such as cryptocurrency can pose risks when regulatory oversight is weak. She argues that effective banking regulation of emerging risks requires a more proactive, systemwide approach, including increased monitoring of risks arising from venture capital investment and more aggressive securities law enforcement against cryptocurrency activities.
- In a Stanford Law Review article that predates the GENIUS Act, Gabriel Rauterberg and Jeffrey Zhang argue that shadow banking, including stablecoin issuance, should fall under securities regulators’ oversight. Shadow banking covers a broad range of activities that resemble banking but fall outside the traditionally narrow bank regulatory perimeter and lack banking regulation. As a result, shadow banking receives significantly less regulatory oversight, creating vulnerability and instability in the financial system. The authors contend that many shadow banking activities fall within securities law’s purview and that securities regulation should promote systemic stability by working with traditional bank regulation.
- Financial regulation has not kept pace with the financial system’s rapid changes, University of Pennsylvania’s Wharton School Assistant Professor of Finance Yao Zeng asserts in the International Monetary Fund’s Finance & Development quarterly publication. Zeng frames stablecoins as innovative in form but economically familiar in function and financial vulnerability. He argues that although stablecoins promise faster, cheaper, and more accessible payments, their bank-like economic functions and lack of protections such as deposit insurance and lender-of-last-resort support create familiar risks to financial stability. Zeng proposes that regulation should depend more on function than label: if stablecoins perform bank-like monetary functions, they should provide similar safeguards.
- In a Delaware Journal of Corporate Law article, Arthur E. Wilmarth argues that the GENIUS Act institutionalizes nonbank stablecoin issuance, a practice that carries severe economic risks and lacks offsetting benefits. Wilmarth contends that nonbank stablecoin issuance undermines traditional banking and allows nonbank entities, such as tech firms, to perform bank-like functions without proper regulatory safeguards. He argues that the resulting ecosystem carries significant risks for financial stability and maintains that stablecoin issuance should be limited to FDIC-insured banks to ensure that adequate protections safeguard depositors’ money.
- In a recent article in the Quarterly Review of Economics and Finance, Roanoke College’s Zane Mullins addresses common critiques of stablecoins and pushes back against the view that stablecoins pose risks to the financial system. Mullins proposes a narrow stablecoin framework that would allow stablecoin issuers to settle payments with common central bank reserves. He argues that this framework would mitigate credit and liquidity risk by giving all stablecoin issuers similar access to a common settlement medium. Mullins contends that the framework would also address interoperability concerns, promote a level playing field among issuers, and mitigate counterparty risk.
Finance
Evoke Entertainment Closes $35 Million Production Financing Facility Backed By Major Private Credit Fund
EXCLUSIVE: Evoke Entertainment has closed a senior secured production financing facility of up to $35 million backed by a multi-billion-dollar private credit fund.
While we verified the deal with the lender, they spoke with Deadline on the condition of anonymity, per company policy. The revolving production facility is designed to support Evoke’s expanding slate of independent features, television movies, streaming films, and series — significantly increasing the company’s already high-volume production output across major studios, networks, and streaming platforms.
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Structured around contracted revenue streams, distribution agreements, tax incentives, and the value of Evoke’s existing library and historical production performance, the facility provides the company with flexible, scalable production financing across multiple genres and platforms. Evoke’s lender comes to the partnership with extensive experience in structured finance, asset-backed lending, and entertainment-related investments.
The deal was spearheaded by Evoke Entertainment CEO Stan Spry, who told us, “This financing marks a transformative moment for Evoke. The backing of a major institutional private credit partner gives us the ability to substantially scale our production operations while continuing to focus on commercially driven, cost-efficient content for the global marketplace.”
The first projects to be financed under Evoke’s facility include a large slate of TV and streaming movies including a Christmas film for Hallmark, a survival thriller for Lifetime, alongside the independent feature films Suburban Kings, Homesick, and Bali Hai.
Founded in 2011, and formerly known as Cartel Entertainment, Evoke Entertainment is a full-service management, production, and finance company that produces more than 20 films and series annually across major platforms including Netflix, Hallmark, Lifetime, Tubi, NBC/Peacock, AMC, and Great American Media. Notable past projects include Creepshow (AMC), Day of the Dead (Syfy), Twelve Forever (Netflix), and the upcoming Breaking Bear for Tubi, to name a few.
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Background
India is home to the world’s largest livestock population of 536.76 million, which produces 25% of the world’s milk1. This increase in livestock population leads to increased methane emissions, primarily from enteric fermentation and manure management. As a result, livestock contributes to 58% (BUR 4, 2020) of India’s agricultural methane footprint. However, unlike crop-based emissions, livestock methane is diffuse, biologically driven, and more complex to measure and manage, making it less visible within existing climate finance frameworks.
Current research and policy discussions indicate that while technical mitigation solutions exist through feed improvements and manure management, evidence of their effectiveness in maintaining dairy productivity, animal health, and protecting farmers’ incomes is scattered. This leads to heightened risk perceptions among dairy producers when considering methane mitigation measures. Furthermore, even where the evidence is compelling, the fragmentation of dairy producers precludes their aggregation. Additionally, there is a lack of robust, affordable, and scalable monitoring, reporting, and verification (MRV) systems at the grassroots level. These barriers prevent the development of a clear, scalable, and financeable pipeline of livestock methane abatement in India.
The Government of India has actively supported dairy development and livestock health through various schemes and programs introduced by the Department of Animal Husbandry and Dairying. At the same time, livestock systems in India are deeply embedded within rural livelihoods and socio-economic structures, making the sector a critical component of rural resilience. Consequently, interventions must be context-aware and farmer-centric, with a strong focus on livelihood security and alignment with local values and practices.
With this background, CPI is organizing a roundtable to explore how livestock methane can transition from a technically understood challenge to actionable opportunities on the ground, including both animal feed and manure management. The forum would bring together dairy producer organizations, nodal agencies, think tanks, ecosystem enablers, and financial institutions. It will deliberate upon possible projectized solutions and accompanying financing mechanisms that could be scaled up to address the twin objectives of methane abatement and farmers’ income security.
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