Centrum acquires L&T Finance’s supply chain business
Centrum expects to have a loan book of Rs 900 crore in the supply chain business by the end of the current financial year
MUMBAI: Centrum Financial Services Ltd, the NBFC arm of the Centrum Group, on Wednesday said that it had acquired the supply chain business of L&T Finance.
L&T Finance’s supply chain vertical provides working capital finance and short-term loans to entities that are suppliers to large industrial manufacturers and original equipment manufacturers.
Centrum, which has lending operations catering to SMEs, affordable housing and microfinance, started its own supply chain business this June. Centrum’s supply chain lending business has so far disbursed about Rs 80 crore worth of loans.
Centrum expects to have a loan book of Rs 900 crore in the supply chain business by the end of the current financial year, said Ranjan Ghosh, managing director and chief executive at Centrum Finance Services Ltd, in a telephonic interaction.
“We get a seasoned loan book, with NPAs less than 1%. In addition, half the loans are to suppliers and dealers of L&T itself, which gives us a lot of confidence about the quality of these loans,” said Ghosh.
The average size of these loans is generally around a crore and the average duration is of 90 to 180 days.
“As part of our strategy, strengthening our SME lending business is a key focus area for us. The supply chain finance business is a fast growing area and we wish to increase our presence in this space. We plan on infusing additional capital and are confident that the acquired L&T Finance team will play a significant role in helping us grow the business,” said Ghosh.
The business will also provide Centrum lucrative cross-sell opportunities, he added.
The sale of the supply chain business comes as part of L&T Finance’s strategy to focus on certain specific areas.
“This move is in line with L&T Finance’s dual objectives – concentrating on our core strengths and retailization of our overall lending book. Within the Wholesale Finance book, we continue to focus on the renewables, roads and transmission sectors, where we have built a leadership position”, said Virender Pankaj, chief executive, wholesale and group head, sell down, L&T Financial Services.
L&T Financial Services had an overall loan book of Rs86,571 crore as of Q1FY19, comprising rural finance, housing finance and wholesale finance.
Centrum has been focusing on building its lending business since Jaspal Bindra, former chief executive of Standard Chartered Asia Pacific, took over as chairman in 2016.
In November 2017, Centrum Microcredit Pvt. Ltd, a subsidiary of Centrum Capital Ltd, acquired the Indian microfinance business of South Africa-based FirstRand Bank, which had around 70,000 customers in Maharashtra. In 2016, the financial services firm had started its housing finance business.
Centrum, in April, sold its forex business Centrum Direct to Ebix, an American software and services company, for Rs1,200 crore.