IFC Leads $550MM ECB Investment Round in L&T Finance

L&T Finance will receive $550 million in an ECB investment round anchored by IFC, BNP Paribas, Citibank, and DBS Bank. L&T will use the $125 million contributed by IFC to expand its farm equipment finance book by extending loans to farmers for buying equipment and modernizing farming.

In the first tranche, the investors have contributed $275 million.

With the closure of this financing deal with foreign banks as lenders, L&T Finance has taken a step further in diversifying its funding sources. This follows the successful public issuances of non-convertible debentures (NCDs) in March and April 2019, by L&T Finance.

Mechanization of farming plays a crucial role in increasing agricultural productivity. However, purchasing a tractor and other farm equipment is a difficult decision for small and marginal farmers due to lack of timely financing options. Eighty-six percent of Indian farmers are smallholders. According to the National Bank for Agriculture and Rural Development, there is a formal financing gap of $80 billion in agricultural financing. Specialized NBFCs, such as L&T Finance, with their widespread reach and tailored solutions, serve as an important source of credit to small farmers.

“Our business strategy is actively aligned to the needs of our nation. NBFCs have a crucial role to play in financial inclusion in India. Lending scientifically and methodically to customers who do not have access to last mile credit is the next growth opportunity for NBFCs. We are investing in technology, and data and analytics to lead this change,” said Dinanath Dubhashi, managing director & CEO, L&T Finance Holdings. “Investments from organization like IFC, which follows stringent due diligence before investing, reaffirms our strategy for growth and diversification of liabilities.”

IFC prioritizes investment and advisory engagements which promote modern and climate-smart farming practices, increase farmers’ incomes, and improve agricultural logistics. In addition to farm equipment finance, the rural book of L&T Finance also comprises two-wheeler finance and micro loans for rural women micro entrepreneurs.

IFC was one of the early institutional investors in the NBFC space and has successfully supported several asset financing NBFCs. IFC invested $100 million of debt in L&T Infrastructure Finance for onlending to developers of solar power projects and $75 million of debt in L&T Housing Finance for onlending to developers of affordable housing units.

L&T Finance Holdings is a financial holding company offering a focused range of financial products and services across rural, housing and wholesale finance sectors, as well as mutual fund products and wealth management services, through its wholly-owned subsidiaries: L&T Finance, L&T Housing Finance, L&T Infrastructure Finance, L&T Infra Debt Fund, L&T Investment Management and L&T Capital Markets.

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