Centrum set to buy L&T Finance's supply chain business

The Centrum Group, controlled by former Standard Chartered banker Jaspal Bindra, is set to acquire L&T Finance’s supply chain lending business that has an outstanding loan book of Rs 800 crore.
The divestment is part of a broader Larsen &Toubro effort to trim its wholesale lending business and to concentrate instead on retail and housing segments. The supply chain finance business provides loan and working capital support to manufacturers and dealers of large industrial equipment.

Centrum is expected to take on board the executive team of about 60 people, scaling up the business significantly after the buyout.

A definitive agreement is expected to be signed as early as next week, multiple sources with direct knowledge of the matter told ET.

"The deal has been done. It's a transaction that will be strategically beneficial to both Centrum and L&T Finance. We think a formal announcement could be made by next week," said one of the sources mentioned above.

Both L&T Finance and Centrum declined to comment on the matter.

“Two years ago, when we started our turnaround plan, wholesale was 62 per cent of the balance sheet and that was excessive for any business,” Dinanath Dubhashi, MD & CEO, L&T Finance Holdings, had said in April in an interview to ET Now.

“Naturally, that had to be reduced and the share of rural and housing had to be increased.”

Dubhashi had said in April that the focus would be on rural loans and home financing.

In the April-June quarter, wholesale financing grew at the slowest pace - by 7 per cent year-on-year - compared with a 76 per cent surge in financing of rural assets and 48 per cent jump in funding house purchases. Total lending business grew 27 per cent to Rs 85,380 crore during the three-month period.

Centrum, which recently sold its foreign exchange business to NASDAQ-listed Ebix Corp, is looking to expand its lending business and has been aggressively expanding both retail and wholesale loans.

Centrum has an SME loan book of Rs 750 crore and this acquisition will double the size of the book.

In November last year, Centrum acquired FirstRand Bank's Indian micro finance portfolio along with 300 employees and 25 offices across the country.