In the dynamic world of finance, achieving rapid growth speaks volumes about a company’s strategy and resilience. L&T Finance, a heavy hitter in the financial services industry, has recently made headlines by marking an impressive landmark in its Rural Business Finance (RBF) sector. The first quarter of FY24 brought a significant milestone with the business scaling new heights to reach a robust Rs 25,000 crore mark.
The journey to this achievement was charted by a compound annual growth rate that would be the envy of many competitors—a steady 26% from FY21 to FY24. This escalation has been centered around the strategic expansion of its micro-loan against property (LAP) business, focusing on rural regions hungry for such services: western Uttar Pradesh, Maharashtra, and Telangana are notable high-growth areas in this expansion. But how exactly has L&T Finance managed to accomplish this feat amid a challenging sector ripe with both opportunity and risk?
Scaling New Heights
Part of L&T Finance’s success in growing its rural business finance to such an impressive figure lies in the solid foundation of its retail portfolio, which stands at a substantial Rs 80,037 crore. With a 31% slice of this pie, the RBF sector is no small player. A whopping Rs 21,495 crore has already been disbursed, leading to a substantial book size and an eye-catching 32% year-on-year growth in FY24. These numbers, however, are not mere statistics; they represent the trust of over a million new customers—precisely 1.54 million—added in the last financial year, showcasing the burgeoning appeal of the RBF sector.
The robustness of the sector is further bolstered by the joint liability group (JLG) industry, a cornerstone of the microfinance sector rife with stable rural demand and a burgeoning loan performance. Breaking through the ceiling with assets under management exceeding Rs 4 trillion and a growth rate of roughly 30%, the sector also welcomed 10 million new customers. These are clear indicators of a thriving industry with L&T Finance at its helm.
Innovating for Success
L&T Finance has thrived thanks to a steadfast adherence to three cardinal principles: rigorous client selection, deepening relationships, and ironclad credit discipline. This firm approach, upheld by a team of over 10,000, is evidenced in an impressive collection efficiency rate exceeding 99.7%, underscoring effective risk control and portfolio oversight.
In the technological realm, L&T Finance has skillfully incorporated digital innovation to refine and safeguard its operations amid a growing digital landscape. Smartphones and government-led digitization have been the catalysts for boosting their digital collections from a mere 3% in April 2023 to a notable 21% by March 2024, showcasing their capacity for adaptation and foresight.
This shift towards digital not only signifies a seismic shift in how financial services operate but also enhances operational efficiency and reduces risk exposure. Through calculated growth and the rigorous implementation of digital tools, L&T Finance has expanded its reach and has become a model for rural financial development.
