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With the impending rate-easing cycle, L&T Finance plans to enhance short-term borrowings via commercial papers (CPs) by up to 15 per cent from the current 5 per cent and also tap external commercial borrowings (ECBs).
It plans to increase securitisation of part of existing loans to get money at competitive rates.
At present, securitisation forms a small portion (Rs 400 crore) of the resource mobilisation, Sachinn Joshi, chief financial officer (CFO), L&T Finance, told Business Standard.
There is strong demand for priority sector loans (PSL) from foreign banks.
As the interest rate scenario starts turning downwards — perhaps in the second half of the financial year — it opens up avenues.
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Joshi said whatever increase in short-term rates seen earlier is changing and they have actually come down in the last 10 days.
Any incremental requirement of funds can be raised through this route (short-term funds).
But the market is going to remain volatile. “We will try to keep raising through CPs to take advantage of the low rates,” the CFO said.
He said the company enhanced the borrowings for PSL.
It comes at a concessional rate (about 1-1.5 per cent benefit).
The expanding portfolio of tractor finance and micro loans has helped raise funds on this (PSL) route. The share of PSL funds was about 20 per cent in total borrowings. It was selective in drawing down from long-term funds when interest rates were going down a year ago.
The lender also stepped up activity of borrowing from overseas markets.
LT Finance has received sanctions and drawn-down partially from Asian Development Bank and Japanese financial institutions. It is in discussion for more ECBs with public sector banks, Joshi said.
The inclusion of the Indian government paper in the global bond index is expected to increase the flow of foreign funds and help get competitive rates.
The cost of borrowings and ability to pass on any rise in cost to borrowers will have a bearing on interest margins.
Diversified liability mix has enabled an increase in the quarterly weighted average cost of borrowings on a sequential basis at one basis point (bps) to 7.82 bps in Q4. The rise was about 11 bps from Q4 FY23 to Q4 FY24, according to an analyst presentation.
Sudipta Roy, managing director (MD) & chief executive officer (CEO), L&T Finance, said the margins are expected to be in the range of 11.0-11.25 per cent in FY25.
The company’s net interest margins (NIMs) plus fees improved to 11.25 per cent in Q4 FY24 from 9.21 per cent in Q4 FY23.
