L&T Finance Holdings (LTFH), the non-bank lending arm of Larsen & Toubro (L&T), a diversified engineering-to-IT conglomerate, has successfully integrated all its financial services entities, forming a unified lending entity. This strategic move consolidates lending companies, namely L&T Finance, L&T Infra Credit, and asset manager L&T Mutual Fund Trustee, into LTFH.

To align with its widely recognised market identity, the company plans to seek approval from the Reserve Bank of India (RBI) for a name change to L&T Finance, as confirmed by CFO Sachinn Joshi.

This consolidation brings about significant advantages, reducing operating costs and liberating management bandwidth previously dedicated to various committee and board meetings. Notably, it releases Rs 30 billion from the former infrastructure debt fund, L&T Infra Credit, previously invested in liquid assets like government securities. These funds, now redirected towards retail lending, are expected to yield returns of 15%, a substantial increase from the 6.5-7% they were generating. The improved utilisation of liquidity and cost efficiencies could potentially elevate the company's return on assets (RoA) to 3.5%, up from the current 3.4%, and increase the return on equity (RoE) ratio to five.

Furthermore, the merger aligns with the company's strategic shift towards retail loans, constituting 88% of the portfolio, surpassing the 80% target set for the end of fiscal 2026. With a halt in disbursing loans to infrastructure and real estate, the company aims to achieve 90-95% retail loans.

CEO Dinanath Dubhashi emphasised that the merger is the culmination of a seven-year process, streamlining the number of NBFCs from eight to a single, more cohesive entity. He anticipates that this consolidation will unlock new growth avenues, foster innovation, and contribute to long-term success, thereby enhancing governance and creating sustainable value for stakeholders.

The unified entity also addresses regulatory considerations, ensuring compliance with RBI regulations. Notably, the merger avoids the creation of two separately listed financial entities, a significant factor given the RBI's scale-based regulations mandating compulsory listing for upper layer NBFCs until FY25. This strategic move positions LTFH for enhanced operational efficiency and regulatory adherence, paving the way for continued success in the financial services sector.