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Mumbai, July 23 L&T Finance Ltd (LTF), the wholly-owned financial services subsidiary of engineering and construction giant L&T, is mulling entry into the general insurance and asset management space by floating separate companies.

LTF, which is predominantly into construction equipment financing, is a distributor of life insurance, non-life insurance, and mutual fund products.

“We have the ability to access capital, people and customers. The financial services sector provides reasonably steady returns through business cycles. Moreover, shareholders get diversification and value creating opportunity. We are evaluating our strategy about floating a general insurance company and an asset management company,” said Mr N Sivaraman, Director, LTF. India currently has 21 non-life insurance and 35 asset management companies.

L&T’s financial services subsidiary has three lines of business — asset backed financing, supply chain financing and other business (distribution of life insurance, non-life insurance and mutual fund products, and capital market financing).

“The capital requirement for floating a non-life insurance venture (at Rs 100 crore) is not as large as compared to a life insurance venture,” Mr Sivaraman said.

In FY10, the non-banking finance company plans to grow its asset base to Rs 7,000 crore from Rs 5,218 crore in FY09. This financial year it will raise Rs 1,000 crore from banks, mutual funds and insurance companies to fund its asset growth. Plans are also afoot to tap retail investors by floating a non-convertible bond issue.

On plans to list LTF, Mr Sivaraman said L&T could wait till the market environment improves.

LTF reported a lower net profit of Rs 98.83 crore in FY09 as against Rs 115.01 crore in FY08. As of March-end 2009, its net interest margin stood at 5.5 per cent. The company had a gearing of 5.54 times as against the industry average of 8-10 .

More Stories on : NBFCs | Diversification | Larsen & Toubro Ltd

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