1. Investment-led credit growth may be some distance away: YM Deosthalee

Investment-led credit growth may be some distance away: YM Deosthalee

YM Deosthalee, chairman and managing director at L&T Finance Holdings expects infrastructure debt funds to contribute to the company’s growth.

By: | Published: December 22, 2015 12:46 AM

Although consumption-led credit should continue to grow next year, both in urban and rural markets, investment-led credit growth may be some distance away according to YM Deosthalee, chairman and managing director at L&T Finance Holdings. Deosthalee tells Pranay Lakshminarasimhan, he expects infrastructure debt funds to contribute  to the company’s growth.

What is your outlook for 2016 in terms of overall credit growth?
While we could see consumption-led growth both in urban and rural markets, investment-led growth is going to be limited primarily because there is not going to be much investment by the private sector. The reasons are well-known and among them is the fact that the commodity sector is not doing well and there is excess capacity. That’s the situation globally. Second, in infrastructure, several developers are currently going through pain and do not have the financial muscle to put in equity into projects. So, unless some new developers come in, it will not be a very easy road for investments.

What about big-ticket sectors like power or steel? Will higher prices help?
Steel is not only about prices, it is about excess supply and large global capacity. So, therefore, there’s little room for improvement and investments will take time even if prices rise. In the power sector, the the problem is not necessarily in generation but in transmission and distribution. We need to quickly complete the transmission networks and make sure distribution is efficient so that losses are reduced. Discoms have to profitable and their past problems resolved and that’s why a package has been announced recently. New investments in power capacity will depend on the economy, demand for power and on how efficiently the grid operates.

How are infrastructure debt funds coming along?
It’s a very good product that will provide growth for NBFCs like ours because is an extremely good refinancing tool for projects which are operational.

First of all, it is a tax-free entity and secondly, it has some guarantee mechanism and because of these characteristics, it is normally a AAA entity.

Therefore, the borrower’s cost is lower and it improves his equity IRR (internal rate of return). Second, given the fact the you have the track record  you can elongate the tenure, which also helps the borrower.

We have an operational IDF and since we can now bring in several sectors into infrastructure debt fund arena, we hope to grow very well.

What is your outlook on the tractor finance sector?
There is no impediment to growth as far as tractor financing is concerned but it is a cyclical product. A couple of years ago, it did exceedingly well but this year there is a negative growth. Secondly, coupled with that, is the drought situation so the industry isn’t likely to do well and tractor financing is related to that. So, it is important to have a basket of products because if you are only in one product line, then you get completely impacted because of the cycles.

Your view on taxation on provisions made by NBFCs vis-a-vis provisions made by banks?
We have been saying there is really no reason for not giving this exemption. Deduction actually, I should say, for NBFCs. If you lend to a customer, and if it becomes an NPA, and you make a provision, that provision is not allowed as a deductible expenditure for NBFCs. Whereas, if the banks make the same provision, then it is allowed as a deductible expenditure. So, the tax outgo for the NBFCs, for the same customer, is higher than that of the bank.

What is RBI’s point of view on the matter?
As far as the Reserve Bank of India (is concerned) it is extremely supportive. They have said that there is logic behind this, that it should be done, but it is not really RBI’s issue. It is a finance ministry issue. We have taken this up from time to time and the finance ministry has heard us. I hope something good comes out in this budget.

  1. H
    Harry Potter
    Dec 22, 2015 at 6:56 am
    L&T bres have displa geriatric trait of biting more than they can chew. Later cry foul policies, political situations etc. Hydrocarbon projects losses of 900 cr, they concede it as error of judgment, underestimating risks, aggressive bidding, and overestimating capabilities. Cost overruns in Hyderabad/Riyadh metro, 5k cr of stagnating investment in defence - they want to build ‘India’s defence capabilities’ – please do BUSINESS of profits. GoI is under no obligation to commit fixed orders. Laxmi Mittal the steel magnet have no time to cry/blame - dead busy expanding his empire from north pole to south pole, no less India lover, still holds Indian Pport, will do business in India at right time. Why L&T is asking for VGF? Do your calculations bear risk – simple. Jeff Bezos – Amazon CEO- “when asked whether doing business was easy in India, he said, ''doing business is not easy anywhere. Every country has its quirks, differences and uniqueness, companies must work around them".-------------------------------------------------------------------------------------------------------------Even self-confessed Avatar Purush like Chairman A M Naik seems to be failing to manage L&T - Mr Naik's views on succession - why Mr Naik is slogging at 73 – Quote- You find a man in the world who will kill himself four times a day, has worked for more than a hundred years-- There is no such person.-- None of us here (at senior level) are working for money -UnQuote. LnT stock touched 18 month low of 1331 (Nov 14 2015) , from all-time and 4 months peak of 1879 (July 10 2015). Lost whopping 29 percent in last 4 months. Net debt as on 30 Sep 201598 thousand crores. Would it hit 3 yr low of 722 in a quarter or two?--------------------------------------------------L&T in melting - devil or the deep blue sea - stake or post losses. Complete stake at Dhamra Port (Rs 2500 crores) to Adani group saved LnT from posting losses in q1-2014. LnT Inra stake to Canadian FII (2000 crores) saved LnT from posting losses in q2-2014. LnT Finance not made any money for shareholders in 6-7 yrs, 10% stake sold to Bains, 1300 crores. Kuttapali Port deal final with Adani. On a look out to sell Rajpura Power plant – cost 9600 crores. Plans to sell 15% stake at LnT Infotech to raise 2k crores. Threatened to pull out from Hyderabad Metro 16 k crores, LnT opts out of GAIL tender to build LNG carrier, ss Kachchigarh Gujarat port project. L&T’s commercial real estate project in Chandigarh sold to Carnival Group – Rs 1785 crores. LnT Halol Shamlaji Tollway defaults on Rs 1014 crore loan. LnT Chennai Tada Tollway defaults on Rs 475 crore loan. Inherent malignancies – Hydrocarbon and Ship Building losses of Rs 900 cr each, Hyderabad Metro cost overruns Rs 4k crores, Rs 5k crores stagnating investment in Defence. Financial mismanagement charges see a dozen leaving L&T Hydrocarbon arm. Aging CXO-MD potion of septuagenarians, leading the pack 73 yrs old Chairman Mr Naik completed 50 yrs with LnT as Paid Employee. LnT stock touched 18 month low of 1270, from high of 1879. Total consolidated debt 2014-15, 98 thousand crores. Lost whopping 20 percent in last 3 months ! Post Q2-2015 results 3 yr low of 722 ?? Another Satyam in making - L&T like Styam was barred by World Bank over FORGERY !------------------------------------------------------------------------------------------------------------------------- L&T Chairman (aged 73) Mr Naik-s brainchild, LnT Infotech is stunted juvenile. Founded as LnT-IT in late 80s, renamed to LnT Infotech in 1997 claiming to touch $1 billion in revenues since 2010 – still not there. Cognizant founded in 1997 is more than $10 billion in revenues. Sans DNA destruction of work culture and mockery of corporate governance at LnT, LnT Infotech could be what TCS is for TATAgroup companies, a great saviour for old-economy TATA companies. LnT Infotech a proven laggard, in news for failed attempt to bid for Satyam, Patni, Polaris, Hexaware, rumoured sell off to Fujitsu. Perennial entry/exit of lateral CXOs, listing gimmicks – it’s in shambles. Year 1999, Mr Naik appointed CEO of LnT group, Infosys headcount in March 2000 nearly 5k, now nearly 1.7 lakhs and LnT Infotech is nearly 20k. What policy paralysis, RBI rates etc Mr Naik wants to blame for this most dismal performance in IT space? LnT has failed to cut even 1% of IT business pie of $116 billion in India. LnT Infotech in IT space for more than quarter of a century (25 years) and not even $1 billion in revenues, headcount less than 20k! Please GOOGLE – white collar criminal equivalent of rape and murder- “Cl Action Suit Seeks $100 Million for Pregnancy Discrimination, Other Violations”. All and sundry above 60 at L&T Leave Now!!-------------------------------------------------------------------------------------------------L&T is an example of brazen disregard for merit and professionalism , a mockery of corporate governance. L&T legacy of true founders Danish engineers Mr Ln and Mr Toubro is in clutches of despotic geritocracy. Leading the pack of engineers who joined L&T in 60s is Chairman Mr Naaik. State owned LIC and UTI are biggest stakeholders, upto 10 and 17% each. Mr Naik's views on succession - why Mr Naik is slogging at 73 – QUOTE- You find a man in the world who will kill himself four times a day, has worked for more than a hundred years-- There is no such person.-- None of us here (at senior level) are working for money -UNQUOTE. Please refer ToI article – Vibrant Gujarat summit Day 1: 25 private jets bring high-flyers. Excerpts –Cabinet ministers arrived via scheduled flights -- private jet of AM Naik left immediately after arriving –. State owned LIC/UTI are biggest stakeholders at L&T, PM Mr Modi should intervene to restore insutional integrity at L&T and fix retirement age to 60. It is like BCCI a cozy club of septuagenarians, all above age of 60 should be smoked out of L&T---------------------------------------------------------------------------------------------------------------------- Please GOOGLE - L&T fraud / forgery /harment / risk / succession / default to know more about blood curdling Egyptian Mummies. Like Satyam L&T was also barred by the World Bank over forgery. PM Mr Modi should intervene to restore insutional integrity at L&T. It is like BCCI a cozy club of septuagenarians, all above age of 60 should be smoked out of L&T. All above 60 at L&T Leave Now!!
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