In a weak economic environment, banking and financial sectors have been hardest hit. But L&T Finance has opted for rebalancing of its portfolio to beat the slowdown. Speaking to Bloomberg TV India , L&T Finance Managing Director YM Deosthalee says the company will look at any opportunity to get into the banking space even though it has not applied its mind on IDBI Bank.

L&T Finance was a serious aspirant for a bank licence only a couple of years ago when RBI opened the window. But, the company is refocusing on non-banking finance operations. What has changed the perception? What’s the road ahead?

Let me start off by saying that we were one of the aspirants for a banking licence. And we had also prepared ourselves in anticipation of that. In the hindsight, one can ask if it was necessary for us to do that or not.

But, anyway, that’s history. So, once the results were announced and we were not selected — which happened in 2014 or just about a couple of years ago — since then, we have been doing work with a belief that: Okay if an opportunity arises tomorrow, we shall look into it. But, for now, let’s create a robust NBFC. Let us ensure that the business that we are in is profitable and generates decent return on equity.

So, if tomorrow an opportunity arises, we will address that. But right now, let us look at product lines or businesses which will give us sustainable long-term return. So, that process has already started. We had started about a year ago and refocusing on some of the businesses.

Does it mean that you have given up hopes on banking?

No.

There are going to be new banking licences. There is a lot of consolidation expected. What is your stance on banking right now?

Clearly, we have not given up. We clearly have aspirations. There is no doubt on that at all.

However, I want to make it abundantly clear that it will not be banking for the sake of banking. The focus is on returns. And if it makes sense for us to get into specialised banking space or general universal banking space, which is going to create sustainable value for the shareholders and which is going to produce decent return on equity, we will look at it. So, everything will be looked at from this particular angle.

That’s what I’m trying to say and we do believe if we are able to play the game well, we’ll be able to that. So, we are clearly aspiring to be a bank but it doesn’t mean that we’ll do that at any cost.

Does it make sense to look at some kind of acquisition or possible stake buys inbanks or reverse mergers?

Well, let me tell you very clearly, everything will be looked at from the point of view of returns. We are not going to do things just because they are very exotic.

We are not going to get carried away by this concept that we need to be a bank at any cost. If it makes sense from the point of view of creating superior returns, we’ll look at it and we’re not taking short-term calls. In the medium to long term, it must make sense.

But, there are big changes expected in the PSU banking space. In the Budget, the finance minister did mention one specific bank and that is the IDBI Bank could be privatised on the lines of Axis Bank. Are you going to be interested in IDBI Bank?

First of all, we have not even applied our mind to that, I must tell you. Secondly, like I said earlier, everything will be looked at from the point of view of returns. It is not because just for the sake of it that we want to be a bank.

So, you are not ruling out the possibility of acquiring stake in IDBI Bank?

We have not even applied our minds. There is nothing on the cards. We have not even looked at it. I can’t comment hypothetically. I can’t comment on anything which is just speculation.

How are you rationalising your portfolio?

We have to look at the product basket from an industry attractiveness point of view — what’s the size of that particular market, what’s our competitive position and what’s the regulatory environment. We have applied these filters on all our product lines.

In tractor financing, we have created a good position. We are market leaders in 2-wheeler financing. We are clearly a leader in renewable financing. In the last one year, we have also created a distinctive position in micro finance. We are not in housing and real estate. But we will create a right to win in these segments.

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