L&T to Decide Future of Financial Services Arm in 2026 Amid Profit Rise

Larsen & Toubro's consolidated net profit rose 11% to ₹554 crore in Q4 FY24, driven by healthy net interest margins and fees. The company will review its financial services arm, L&T Finance Holdings, in 2026, considering its role in the company's overall strategy.

author-image
Bijay Laxmi
New Update
L&T to Decide Future of Financial Services Arm in 2026 Amid Profit Rise

L&T to Decide Future of Financial Services Arm in 2026 Amid Profit Rise

Larsen & Toubro (L&T), a leading Indian engineering and construction conglomerate, is set to make a crucial decision regarding the future of its financial services arm, L&T Finance Holdings, in 2026. The company's consolidated net profit rose 11% to ₹554 crore in the fourth quarter of the fiscal year 2024, driven by healthy net interest margins and fees.

Why this matters: The decision on L&T Finance Holdings' future will have significant implications for India's financial sector, particularly in rural and microfinance areas where access to credit is limited. The outcome of the review will also impact L&T's overall strategy and portfolio, potentially leading to changes in the company's business operations and investments.

L&T Finance Holdings, which was created with the intention of seeking a banking license, will undergo a comprehensive review as part of L&T's group-wide assessment of its businesses in 2026. R Shankar Raman, President, Whole-time Director & Chief Financial Officer of L&T, stated, "In FY26 we will go through an exercise of what the company will be and in the scheme of things if financial services will have a role to play. If it does we will keep and grow and if there are no roles to play we will see whether it forms part of divestment." limited, call

The financial services arm will continue to focus on microfinance and rural finance, areas where commercial banks struggle to reach despite digitization efforts. Shankar Raman emphasized the importance of L&T Finance in the credit value chain, stating, "Micro and rural finance are the markets where the commercial banks are unable to reach despite digitisation, we have become an important part of the credit value chain as we present across the country." The company has sufficient capital and plans to scale up its operations in these segments, with the possibility of raising additional capital if business growth is compelling.

L&T, which operates in over 50 countries worldwide, has a diverse range of business segments, including Infrastructure Projects, Energy Projects, Hi-Tech Manufacturing, IT & Technology Services, Financial Services, Development Projects, and Others. The market, may capitalization of ₹450,692.54 crores as of May 10, 2024.

The company's decision to review its financial services arm comes as part of its regular five-year assessment of its portfolio. Shankar Raman clarified, "There is no emotional attachment to a particular business and based on commercial decisions every five years we review our portfolio." The outcome of the review will determine whether L&T Finance Holdings will continue to play a significant role in the company's overall strategy or if it will be considered for divestment.

L&T's consolidated net profit growth of 11% in Q4 FY24 and its focus on microfinance and rural finance demonstrate the article resilience and adaptability in the face of changing market dynamics. As L&T prepares for its group-wide review in 2026, the future of its financial services arm hangs in the balance, with the potential for significant strategic shifts based on the outcome of the assessment.

Key Takeaways

  • Larsen & Toubro (L&T) to review financial services arm in 2026.
  • Decision will impact India's financial sector, especially rural and microfinance.
  • L&T Finance Holdings to focus on microfinance and rural finance.
  • Review outcome may lead to changes in L&T's business operations and investments.
  • L&T's consolidated net profit rose 11% to ₹554 crore in Q4 FY24.