RESEARCH PROJECT

ON

DEPLOPMENT OF MARKETING STRATEGY OF FINANCIAL

PRODUCT (LARSEN & TOUBRO LIMITED) COMPANY

Submitted in the partial fulfillment of the M.Phil degree of commerce

SUBMITED TO:- SUBMITED BY:-

Dr. D.P. WARNE DEEPAK MATHIL Associate Professor Roll NO. 05Department of commerce M.Phil. (Commerce)

CHAUDHARY DEVI LAL UNIVERSITY

SIRSA, (HARYANA) SESSION-2012-13

ACKNOWLEDGEMENT

It is only when a person is working on a project, that he realizes the amount of

difficulties he has to overcome. However, in spite of all the difficulties, he knows

help is always near hand at hand trickling the problems. Theoretical knowledge

without practical is incomplete. Therefore, the exposure to practical word gives a

new dimension to whatever has been grasped till time and it also gives a chance to

understand that where the learned knowledge can be applied. It is my great

privilege and honor to express my heartiest gratitude to our lecturers who provide

us the conceptual knowledge. I have deep and soulful gratitude towards our

Assistance professor & Associate professor DR. D.P. WARNE for providing

detailed and explanatory information regarding the preparation of the project

report. Special thank to my colleagues who were always there when I needed them.

(DEEPAK MATHIL)

PREFACE

M.PHIL is a stepping stone to the research carrier and to develop good Researcher.

It is necessary that the theoretical must be supplement with exposure to the real

environment. Theoretical Knowledge just provides the base and it’s not sufficient

to produce to produce good researcher that’s practical knowledge is needed

therefore the research product is an essential requirement for the student of

M.PHIL. this research project not only helps the student to utilize his skills

properly learn felid realities but also provides a chance to the organization find out

talent among the budding in the very begi8nning .in arrogance with the

requirement of M.PHIL coerce I have reach project on the topic DEPLOPMENT

OF MARKETING STRATEGY OF FINANCIAL PRODUCT (L&T)

COMPANY. While preparing this project I got an opportunity to lean many

valuable things.

CERTIFICATE

This is to certify that the research project entitled DEPLOPMENT OF

MARKETING STRATEGYOF FINANCIAL PRODUCT (L&T) COMPANY

has completed by Mr. Deepak Mathil, student of M.Phil. (COM.) 2nd semester

under my supervision. He has shown conscientiously zeal and innovative attitude

for the successful completion of this research project. I recommend it for the

submission to the university and same may be sent for evaluation.

I wish his all the best in his future endeavors.

Dr. D.P. WARNEAssociate ProfessorDepartment of Commerce Chaudhary Devi Lal University, Sirsa (Haryana)

DECLARATION

I, DEEPAK MATHIL, hereby declare that the research project of M.Phil entitled

DEPLOPMENT OF MARKETING STRATEGY OF FINANCIAL

PRODUCT (L&T) COMPANY Successfully completed by me under the

supervision of Associate professor Dr. D.P. WARNE, READER Department of

Commerce Chaudhary Devi Lal University, Sirsa (Haryana) the material embodies

in this report has not been submitted earlier for award of any degree or diploma to

the best of my knowledge and belief.

(DEEPAK MATHIL)

TABLE OF CONTENTS

Chapter   No. Subject Page   No

Ch.-1.0 Introduction 7

Ch.-2.0 Review of Literature 10

Ch.-3.0 Research Methodology 13

3.1Objective of the study

3.2 Research Design

3.3 Nature of Data

3.4 Scope of the study

Ch.-4.0 L&TF products and services 19

4.1 Types of Strategies

4.2 Swot Analysis

Ch.-5.0 Findings 25 

Ch.-6.0 References 28

CHAPTER-1

INTRODUCTION

History The Company was founded in Mumbai in 1938 by two Danish engineers, Henning

Holck-Larsen and Soren Kristian Toubro. The company began as a representative of Danish

manufacturers of dairy equipment. However, with the start of the Second World War in 1939 and

the resulting restriction on imports, the partners started a small workshop to undertake jobs and

provide service facilities. Germany's invasion of Denmark in 1940 stopped supplies of Danish

products. The war-time need to repair and refit ships offered L&T an opportunity, and led to the

formation of a new company, Hilda Ltd., to handle these operations. L&T also started to repair

and fabrication shops signaling the expansion of the company. The sudden internment of German

engineers in India (due to suspicions caused by the War), who were to put up a soda ash plant for

the Tata’s, gave L&T a chance to enter the field of installation. In 1944, ECC was incorporated

by the partners; the company at this time was focused on construction projects (Presently, ECC is

the construction division of L&T). L&T decided to build a portfolio of foreign collaborations. By

1945, the company represented British manufacturers of equipment used to manufacture

products such as hydrogenated oils, biscuits, soaps and glass. In 1945, the company signed an

agreement with Caterpillar Tractor Company, USA, for marketing earth moving equipment. At

the end of the war, large numbers of war-surplus Caterpillar equipment were available at

attractive prices, but the finances required were beyond the capacity of the partners. This

prompted them to raise additional equity capital, and on 7 February 1946, Larsen & Toubro

Private Limited was born.

Company Profile L&T Finance Holdings Ltd is a financial holding company offering a diverse

range of financial products and services across the corporate, retail and infrastructure finance

sectors. The company also offers mutual fund products and investment management services,

through their direct and indirect wholly-owned subsidiaries. The company is promoted by Larsen

& Toubro Ltd, one of the leading companies in India. The company has established their

presence in 21 states in India. The company has 5 subsidiaries, namely L&T Finance Ltd, L&T

Infrastructure Finance Company Ltd, L&T Investment Management Ltd, L&T Mutual Fund

Trustee Ltd and India Infrastructure Developers Ltd. They have four business groups, namely

Infrastructure Finance Group, the Retail Finance Group, the Corporate Finance Group and the

Investment Management Group. The company's wholly owned subsidiary L&T Finance Ltd

conducts the retail finance business and the corporate finance business. The Retail Finance

Group provides financing to their retail customers for the acquisition of income-generating assets

and income-generating activities generally, and comprises the segments of construction

equipment finance, transportation equipment finance, rural products finance and microfinance.

The Corporate Finance Group provides financial products and services to the corporate

customers, and comprises the segments of corporate loans and leases, supply chain finance and

capital markets products. The company's wholly owned subsidiary L&T Infrastructure Finance

Company Ltd conducts their infrastructure finance business, which provides financial products

and services to the customers engaged in infrastructure development and construction, with a

focus on the power, roads, telecommunications, oil and gas and ports sectors in India. The

company's wholly-owned indirect subsidiary, L&T Investment Management Ltd conducts the

investment management business which comprises the mutual fund segment and the portfolio

management services segment. L&T Finance Holdings Ltd was incorporated on May 1, 2008 as

a public limited company with the name L&T Capital Holdings Ltd. The company was promoted

by Larsen & Toubro Ltd as a holding company for their financial services business. In May 15,

2008, the company received the certificate of commencement of business. In March 31, 2009,

Larsen & Toubro Ltd's investment in L&T Finance Ltd, L&T Infrastructure Finance Company

Ltd and India Infrastructure Developers Ltd were transferred to the company and hence, L&T

Finance Ltd, L&T Infrastructure Finance Company Ltd and India Infrastructure Developers Ltd

became the wholly owned subsidiaries of the company. In January 20, 2010, the company's

wholly owned subsidiary L&T Finance Ltd acquired L&T Investment Management Ltd

(formerly DBS Cholamandalam Asset Management Ltd) and L&T Mutual Fund Trustee Ltd

(formerly DBS Cholamandalam Trustee Ltd), the trustee company for L&T Mutual Fund. As of

August 31, 2010, the company had 715 points-of-presence across India, comprising 103 branch

offices, 221 meeting centers, 27 KGSK centers and 364 customer care centers across all of their

business groups and segments. In September 1, 2010, the company changed their name from

L&T Capital Holding Ltd to L&T Finance Holdings Ltd. The company plans to raise funds

through public issue to augment the capital base of L&T Finance and L&T Infra to meet the

capital requirements arising out of expected growth in their assets.

L&T Finance Holding Ltd was incorporated in 2008, is registered as an NBFC ND SI with RBI.

It is a financial holding company offering diverse range of financial products and services across

the corporate, retail and infrastructure finance sectors, as well as mutual fund products and

investment management services through its wholly owned subsidiaries. The company was

promoted by Larsen and Toubro Ltd which holds 95.94% stake currently. It has pan India

presence with 103 branch offices, 221 meeting centers, 27 KGSK (Kisan Gaurav Seva Kendra)

centers and 364 customer care centers. Company operates through four business groups, the

Infrastructure Finance Group, the Retail Finance Group, the Corporate Finance Group and

Investment Management Group under its wholly owned subsidiaries. L&T Finance is one of the

leading NBFCs in the country and offers a wide spectrum of financial products and services for

trade, industry and agriculture. L&T Finance Limited (LTF) is a subsidiary of Larsen and

Toubro. It was incorporated as a Nonbanking Finance Company in November 1994. Through

LTF, L&T aims at making a strong foray in the ever-expanding financial services sector. As a

business philosophy, we fund income generating assets/activities while maintaining a clear focus

on returns.LTF offers a spectrum of financial products and services for trade, industry and

agriculture. The company’s focus segments are corporate products, construction equipment, CVs

and tractors. Despite the turbulence in the financial services markets over the past few years,

L&T Finance has adapted well to the changing market dynamics to remain consistently

profitable. Like the rest of the companies in L&T group, LTF is also professionally managed.

LTF shares the professional values and ethos of its parent company, and has acquired and

maintained a reputation for reliability, transparency of operations and absolute integrity. A

steady growth rate validates the trust that industry has reposed in the company.

CHAPTER-2

REVIEW OF LITERATURE

1. Company Profile (1938) Founded in 1938, Larsen & Toubro Limited (L&T) is one of Asia's

largest vertically integrated Engineering &Construction conglomerate with additional interests in

Information Technology and electrical business. Strong, customer-focused approach and the

constant quest for top-class quality have enabled the company to attain and sustain leadership

position for over seven decades. Serving the core sectors and infrastructure of the economy, L&T

has pioneered spectacular achievements in Indian industry. Many of the engineering and

construction projects executed by L&T have set new benchmarks in terms of scale Sophistication

and speed. So do many buildings, ports, highways, bridges and civil structures around the

country, which are widely regarded as landmarks

2. L & T – An Indian multinational (2005) In line with its strategy of aligning capabilities to

meet emerging trends, L&TF recently initiated a mega-transformation process, internally to

ensure that it emerges, as a knowledge-based Indian multinational Over the years the company

has proactively created the necessary infrastructure for its global initiative with office locations

in USA, Europe, Middle East and Japan. The Engineering & Construction Division made

significant progress during the year in increasing its presence in the overseas markets. The

Division secured orders from international clients located at Malaysia, USA, UK, Brazil, Saudi

Arabia, UAE, Qatar, Bangladesh, Sri Lanka, etc. The export earnings of the Division amounted

to Rs. 24600 million during the year 2005-06

3. The Customer Profile (2006) the customer profile includes leading names such as Samsung,

Chevron, Bechtel, Kvaerner, Pirelli, Siam Michelin, Goodyear, etc...The Electrical & Electronics

Division too has increased its thrust on exports and the share of export revenues during the year

ended March 31, 2006 increased to 11% as compared to 8% in the previous year. L&TF believes

that progress must necessarily be achieved in harmony with the environment. Commitment to

community welfare and environmental protection constitute an integral part of the Corporate

Vision.

4. Mr. Y.M.Deosthalee, Chairman & Managing Director, L&T Finance Holdings (2008)

said, “The decision to acquire Fidelity’s mutual fund business in India was made with an aim to

become the best value provider of investment solutions across asset classes. With this

acquisition, our fund suite spans the whole range of investment opportunities – equity, fixed

income, and hybrid, domestic and international funds – and moves us closer to becoming one of

the country’s leading and admired asset management companies. We now have a high quality

business that combines best‐in‐class practices, a strong domestic brand, market knowledge and a

proven performance track record.”

5. Mr. N.Sivaraman, President & Wholetime Director, L&T Finance Holdings.(2009) Said

L&T Mutual Fund has strengthened its investments team. The AMC has appointed S.N. Lahiri as

Head – Equities, Shriram Ramanathan as Head – Fixed Income and has enhanced its research

team in order to increase coverage. “The new entity has five important pillars in place: people,

processes, products, performance and presence. Over the last few months, we focused on a

seamless transition and adding high quality talent to our investments team and other areas.”

6.Ashu Suyash, CEO, L&T Mutual Fund.(2009) added, “The comprehensive fund range,

proven track record, geographical reach, our commitment to distributor training and investor

education, and the support of our investors provides an opportunity to take the All New L&T

Mutual Fund to the next level. We have significantly enhanced our capabilities in all areas

including equity and debt fund management, operations and customer service. We aim to

consistently deliver long term investment performance through a disciplined approach to

investing, great customer experience through product innovation, technology and high service

standards.”

CHAPTER-3

RESEARCH METHODOLOGY

3.1 Objectives of the study:

1. To study the financial performance of L&TF company.

2. To identify the key areas to be considered for improvement of financial problem.

3. To suggest the Strategy of financial products.

3.2 Research Design:

Research Design pertains to the great research approach or strategy adopted for a particular

project. A research project has to be the conducted scientifically making sure that the data is

collected adequately and economically. The study used a descriptive research design for the

purpose of getting an insight over the issue.  Descriptive research is used when the objective is to

provide a systematic description that is as factual and accurate as possible.

3.3 Nature of Data:

Secondary data: Secondary data that is already available and published .it could be internal and

external source of data. Internal source: which originates from the specific field or area where

research is carried out e.g. publish broachers, official reports etc.

External source: This originates outside the field of study like books, periodicals, journals,

newspapers and the Internet.

3.4 Scope of the study:

The present study will provide the information about the L&TF Company financial products and

which strategy are use to beat the other company.

Strategy Mission - LAKSHYA

To compete and grow in a globalised business environment, L&TF is implementing a Strategy

plan (LAKSHYA) for 2005-10. The plan has been drawn up in consultation with a leading

international strategy consultant. It has set ambitious growth targets for each business. Also

included are opportunities for diversification of L&T's business portfolio.

Strength

Larsen and Toubro is a leading technology, engineering, construction and manufacturing

company. The company’s other key activities include manufacturing of electrical and electronic

equipment, services and information technology. The company operates primarily in India. It is

headquartered in Mumbai, India. The company recorded revenues of INR297, 129.9 million

(approximately $7,380.7 million) during the financial year ended March 2008 (FY2008), an

increase of 42.3% over 2007. The operating profit of the company was INR36, 237.6 million

(approximately $900.1 million) during FY2008, an increase of 14.5% over 2007. The net profit

was INR22, 312.5 million (approximately $554.2 million) in FY2008, a decrease of 4% over

2007.

A Public Limited Company incorporated under the Companies Act, 1956.The Company,

promoted by L&T, was incorporated in November 1994 as a public limited company under the

Companies Act, 1956, to provide a range of financial products / services.]

The Company was registered with RBI under Section 45-IA of the Reserve Bank of India Act,

1934, as a nonbanking financial institution without accepting public deposits vide Certificate of

Registration No.B-13.00602 dated April 2, 1998. Based on the revised regulatory framework

prescribed by RBI for NBFCs, we were reclassified under the category “Asset Finance

Company-Non Deposit Taking” by RBI vides fresh Certificate of Registration bearing No.B-

13.00602 dated March 21, 2007.

In 2004, L&T Equipment Leasing Company Limited, LTM Limited, L&T Netcom Limited and

L&T Trade.Com Limited, were amalgamated with our Company, pursuant to a Scheme of

Amalgamation under Sections 391 to 394 of the Companies Act, 1956. As part of its corporate

strategy to give a distinct identity to the financial services business, L&T promoted a holding

company for financial services business, namely L&T Capital Holdings Limited. L&T’s

investment, inter alia, in our Company was transferred to L&T CHL on March 31, 2009.

The Company continues to be a subsidiary of L&T - albeit through the latter’s subsidiary

financial services sector holding company, L&T CHL, which itself is also duly registered as a

non-banking financial institution without accepting public deposits with RBI. Our Company

began by financing the small and medium enterprises and later synergized with the opportunities

provided by L&T ecosystem consisting of its subsidiaries and associates along with its large

network of dealers, vendors, suppliers, clients etc. We have now evolved into a multi-product

asset backed finance company with a diversified corporate and retail portfolio. We are a wholly

owned subsidiary of L&T CHL which is in turn a 99.99% subsidiary company of L&T. Our

Company is headquartered in Mumbai and has a presence in major cities in India.

L&T finance assets base has grown from around Rs 923 crore in 2005 to Rs 6274 crore in

September 2009 with a clear retail focus and is projected to grow at a 30% annual clip over the

next five years.

LTF has relationships with over 500 corporate, 8,000 contractors, 1,500 vendors, 900 dealers

10,000 transporters, 40,000 farmers and over 5, 00,000 microfinance clients. LTF’s revenues for

the six month period ending September 30, 2009 stood at Rs. 421.8 cr. LTF has consistently

made profits and generated return on assets of over 1.85% in the past 5 years.

LTF enters the debt capital market on 09 February 2010 with a public issue of Non-Convertible

Debentures (NCDs) aggregating up to Rs. 250 crore with an option to retain over-subscription of

up to Rs. 250 crore for issuance of additional NCDs. aggregating to a total of up to Rs. 500

Crores.

Combining the value of bond issued on August 2009 and February 2010 the company has

successful in raising the amount equal to Rs 1500 crore.

Global Presence

L&TF has a global presence. A thrust on international business over the years has seen overseas

revenues growing steadily. The company has manufacturing facilities in India, China, Oman and

Saudi Arabia. It has a global supply network with offices in 10 locations worldwide, including

Houston, London, Milan, Shanghai and Seoul. Customers include global majors in over 30

countries. Sustainability Reporting: L&T CMD releases the Company's First Corporate

Sustainability Report. L&T’s first Corporate Sustainability Report for 2007-08 was released by

Mr. A. M. Naik, Chairman & Managing Director, in Mumbai today. It communicates L&T’s

sustainability performance to stakeholders and will help in benchmarking with that of its peers

internationally. This is the first corporate sustainability report to be brought out by an

engineering and construction company in India. Sustainability reports disclose performance

along social, environmental, economic parameters. Reporting can go a long way in satisfying

stakeholders' demands for transparency on corporate responsibility issues.

Corporate Social Responsibility

L&T believes that the true and full measure of growth, success and progress lies beyond balance

sheets or conventional economic indices. It is best reflected in the difference that business and

industry make to the lives of people. Through its social investments, L&T addresses the needs of

communities residing in the vicinity of its facilities, taking sustainable initiatives in the areas of

health, education, environment conservation, infrastructure and community development.

The company proactively provides assistance in situations such as natural calamities and assists

victims of nature's fury or social neglect. Many social initiatives are undertaken in partnership

with government agencies and NGOs.

Larsen & Toubro Limited, in its corporate policy, philosophy and deeds has shown a

commitment to social responsibility, with a range of activities as vast as it is varied - from

environmental preservation, a field in which it has won laurels, to rural and social development.

It has taken giant strides in promoting safety, health and hygiene, both within the corporation and

externally.

CHAPTER-4

Larsen & Toubro Financial Products and Services Limited

Corporate Finance Group accounts for 37% of total assets as on March 31, 2009 and Retail

Finance Group accounted for the balance 63%. Retail Finance Group’s focus on the under

penetrated semi-urban/rural areas and knowledge of the construction equipment business has led

to a CAGR of 63% over the past five years in retail finance. Our core business is that of asset

backed finance, covering a wide range of commercial and farm assets. Asset backed loans

constitute 90.82% of our total loan assets. We also provide loans for meeting the working capital

needs of small and medium enterprise (primarily to vendors and dealers of large corporate) and

loans against capital market assets for corporate. We have recently made a foray into Micro

Finance business further strengthening our commitment towards financial inclusion in the rural

economy. Our client base for asset backed loans includes large corporate, banks, multinational

companies, small and medium enterprises, contractors, commercial vehicle operators and

farmers.

Corporate Finance Group

The business of this group is to provide a wide range of financial products / services to

corporate. This may extend from providing asset backed finance for acquisition of a range of

equipments and also short-term working capital finance, as well as non-fund based arrangements

for establishment of Letters of Credits, Guarantees, etc. The finance may be provided through

diverse products including term loan, operating lease, finance lease, purchase of receivables,

channel financing, tie-up for providing financing to employees of the corporate. Some of the

major businesses that we undertake in this category are as follows:-

Finance Lease:

Finance Lease as a product is less attractive today as a result of higher costs arising out of

certain tax issues. However, depending on the customer’s requirements, we offer this product for

financing of cars, computers and plant & machinery. Our major customers include several large

companies.

Channel Finance:

Vendor Finance: This product primarily caters to the requirements of vendors / suppliers of large

corporate. Currently a substantial part under this product is for the vendors of L&T group. Under

this product, we provide a short term working capital finance facility to the vendors of L&T and

its subsidiaries and associates. This is mainly in the form of discounting of invoices raised by

vendors / suppliers on L&T’s various operating divisions / subsidiaries/ associates. Recently, the

product coverage has been expanded to include vendors of other large corporate. The tenor of

such financing extends from 1 month to 6 months.

Dealer Finance:

This division focuses on dealers of various operating divisions of L&T and its subsidiaries and

associate companies. It offers short term financing with automatic revolving credit to dealers

who contribute substantially towards sale of L&T’s finished products. We are preferred by the

dealers due to our transparency, faster turnaround time in sanctioning limits and disbursements

and also easier co-ordination with L&T. It is our plan to extend this facility to channel partners

of other companies as well.

Receivable Discounting:

This refers to the discounting of receivables from large corporate. It is an asset-backed facility,

where operating lease runs in the back-end and the periodic rentals are assigned to us. We have a

tie-up with large IT equipment & service providers involved in leasing of IT equipments,

furniture & fixtures to large corporate. We have the option of choosing the agreements to be

financed through this product. Typically, in such cases, the lesser assigns the rentals arising from

the operating lease in our favor and a suitable confirmation from the lessee is also obtained.

Additionally, charge on the asset is also created in our favor.

Asset Backed Term Loan:

We provide the term loan for financing of plant & machinery, IT equipments, furniture &

fixtures. The charge on the asset is created in our favour as security. Target customers for this

product include large corporate as well as the SMEs having specific linkage to a large corporate.

Presently, large corporate constitute a majority of the outstanding book of asset backed term

loans. Our transparent functioning and quick processing, ensures that the customers preference

for our company is maintained

Capital Market Products:

We continue to retain our small but Strategy portfolio of the Loan against Securities (LAS)

business. Based on opportunities available, the business selectively provides finance to high net

worth individuals and promoters against pledge of shares and other securities.

As of March 31, 2009, the LAS business had a book-size of Rs.36, 417 lacs and the NPAs stand

at less than 0.30%. In the current year, based on the market conditions, we shall continue to

selectively provide finance against shares and securities and additionally shall also consider

financing of subscription to IPOs, which is a high yielding product.

Retail Finance Group

The major businesses that we undertake in this category are as follows:

Construction Equipment Finance

We provide financing for a wide range of equipment like earthmoving equipment, heavy-duty

cranes, road construction equipment, mining equipment, etc. We have, in this industry in

particular, extensive knowledge and experience. This knowledge of the industry provides us with

a competitive edge both in terms of sourcing as well as assessment of business. Further, our

understanding of the industry and of the clients enables us to provide our services in a manner

that meets the requirements of the client and hence helps us retain our client base. The

construction equipment industry consists of a variety of products, such as, hydraulic excavators,

wheel loaders, loader backhoes, vibratory compactors, cranes, stone crushing machine and

others. These products are widely used in industries like power, national highway development,

mining, transportation and earthworks for urban infrastructure.

Keeping in view the growth potential for infrastructure in India and the parentage of L&T, which

has been in this sector for the last 50 years, construction equipment finance would continue to be

one of the major thrust areas of business.

We have already made our presence felt in the equipment finance sector over last few years.

Major foreign banks and private sector banks have entered this segment in the last few years.

Despite severe competition from banks and other major NBFCs in this segment, we have

expanded our asset base through our experience and knowledge base developed during the last

few years. Further, our Company plans to expand its geographic presence to some of the major

markets where we have limited presence thus helping us grow our book size and Expand market.

It should be noted that total market of our country is Rs30000cr and for north region it is

approximately Rs. 4000cr – Rs. 5000cr. In Delhi the market is approx. about Rs. 1296 cr. (We

have provided finance for Rs 234 crore comprising of 1175 no. of assets in year 2009-2010. For

the year 2008-2009 we have provided finance for Rs. 214 crore comprising of 914 no. of assets

taking north region as whole).

Talking Delhi NCR region the company has financed Rs. 99 crore in year 2009-2010 and target

set for year 2010-2011 is Rs. 200crore. The portfolio mix strategy will be 70% finance new

assets and rest 30% finance to used assets or refinance.

TYPES OF STRATEGIES

• INTEGRATION STRATEGIES: - Backward integration

• INTENSIVE STRATEGIES: - Market development

• DIVERSIFICATION STRATEGIES: - Conglomerate diversification

Portfolio Mix Strategy:

TYPE OF ASSET % Contribution to sales

New Asset 70%

Refinance/Used Asset 30%

Category of asset % Contribution to Sales Examples

Standard Asset 60% Excavator, Backhoe Loader, Tipper, Cranes,

Pilling Rigs, Paver , Compactors, Graders ,Boom

Pumps,Dozers,Transit Mixer etc.

Non Standard Asset 40% Compressor, HDD Machines, Batching Plants,

Hot mix Plant, Stone Crushers,DG Sets, Jetting

Machine, Heavy Duty/Vintage-Imported Cranes etc.

Transportation Equipment Finance

In 1996, we made a foray in financing of commercial vehicles to the transporters of the erstwhile

L&T Cement. However, this segment was not the main focus since there were already

established players in the market. We had already built a network for its construction equipment

and farm equipment segments. In order to leverage on their network and get into another

important sector of the economy,

CV Finance was launched in FY 2004-05. The slowdown in the economy in the second half of

FY 2008-09 had resulted in lower disbursements, but with the relative recovery in the economy

this business is growing again.

The CV market in India comprises of four segments namely:

Heavy commercial vehicles (Gross vehicles weight 25200 to 40000).

Medium commercial vehicles (Gross vehicles weight 16200)

Intermediary commercial vehicle (Gross vehicles weight 11700-11800)

Light commercial vehicles (Gross vehicles weight 4000)

Small commercial vehicles

The Company is present in all the segments and is involved in financing commercial vehicles of

all makes. We also undertake funding of the body of the CV on a selective basis. Major

manufacturers with whom we have a tie-up include Tata Motors, Ashok Leyland, Volvo, Eicher

Motors, Force Motors and M&M.

As on March 31, 2009, 95% of our commercial vehicles portfolio comprised of new vehicles.

However, we plan to finance more number of pre-owned vehicles in the near future in order to

have a well balanced portfolio with right mix of first time users, retail customers, fleet owners

and used vehicles. We are adding manpower and setting up infrastructure across the country, so

that volumes are ramped up and the market is diversified. Our vision is to emerge as a leading

player in this industry, while at the same time maintaining good portfolio quality

Rural Finance

The Government of India has classified farm mechanization amongst its priorities. To exploit

this opportunity, the rural finance group was launched with its focus on rediscovering the rural

potential.

We started financing farm equipment from 2004, under the name of Kisan Gaurav® retail

finance scheme. The scheme was well received in the market by dealers and retail customers on

account of competitive terms, tailors made schemes and quick processing. With more feeder

roads being developed in rural areas under Prime Minister’s Gram Sadak Yojna, new business

opportunities have opened up in this segment.

The “KISAN GAURAV” retail finance scheme does not operate in DELHI.

We have identified this segment as a focus area and launched the Kisan Bandhu™ scheme in

2008 targeting customers who are rural entrepreneurs in need of finance for acquisition of small

sized transport vehicles. Such as MAHINDRA MAXI PIC UPS, TATA ACE etc. These are 4

wheeler cars. These vehicles provide the last mile connectivity to the villages and are a backbone

for rural transportation infrastructure. We have made a foray in financing the dealers of Farm

Equipment as well as the small sized transport vehicles in accordance with our strategy of

increasing rural penetration. The financing is being done under a scheme named

“TracFin”®. This market has a high potential with a large customer base, since their access to

other means of finance is limited and if available, is at onerous cost and terms. We plan to

explore this market with our USP of transparency in credit appraisal, pricing and documentation.

Going forward, we want to identify ourselves as a game changer in the rural segment. This

initiative shall also contribute towards achieving the Government’s objective of financial

inclusion.

Distribution

We recently commenced our insurance distribution business for both life and non-life insurance

products. In addition to the insurance distribution business, we are also in the business of

distributing mutual fund products and plans to pursue this business further as a focus area for

growth and profitability. Distribution of third party products presents a significant business

opportunity, and is a logical extension to our current product range as it facilitates leveraging the

existing retail customer base and widens the range of service offerings to customers.

Micro Finance

This segment is integral to our aim of achieving financial inclusion in a commercially viable

manner. We commenced operations in this business in late 2008. This business is spread over

four states, namely, Andhra Pradesh, Tamil Nadu, Maharashtra, West Bengal, Orissa, Gujarat

and Karnataka. We follow the model of direct lending through joint liability groups. We

currently have a client base of around 5 lakhs customers which we are looking to expand in this

segment

Micro Finance Products offered by our Company are categorized into –

• Gram Bandhu™ – Micro Loans to joint liability groups of 4-6 individuals ranging from

Rs.5,000/- to Rs.50, 000/-; and

• Udyog Bandhu™ – Small Loans to rural businesses ranging from Rs.50,000/- to Rs.2,00,000/-

SWOT ANALYSIS

Strengths

1. L&T-Ites have strong mainframe

capabilities.

2. First to Market advantage

3. Cost Leadership

4. A broad portfolio of infrastructure related

offerings.

Weaknesses

1. Capital goods have been an overvalued

2. Long Delivery period of certain financing

products.

3. Weak presence in Global delivery

management.

4. Weak help desk threatens to invite new

clients.

Opportunities

1. Diverse range of financial products and

services

2. L&T Finance has a highly diversified business

3. A strong credit check and asset valuation

framework

4. Telecom infrastructure management.

Threats

1.Banking license: challenges and prospects

2. Loan growth strong, asset quality woes

3. Paucity of certified staff to support and

disaster recovery offerings may become

threat in long term for its expansion program

in Europe to support mission-critical work.

Strengths

A strong Brand name: L&T being in the financing product and services market for the last 40

years has a strong market name. Their financial products and services has the largest market

share and used by almost all investor across the country. Even before other financing company

came into India during the early 90s L&TF has established its name strongly. It had the added

advantage of first to the Market.

Cost Leadership: L&TF comparatively to competition its financial products and services which

is a key strength to the price sensitive investor especially in the times of recession

Weakness:

Capital goods have been an overvalued: L&T will see as much strength as it has seen in the

next six to twelve months. Capital goods have been an overvalued segment and there has been

concern from management about the order book and order flows coming in. On L&T particularly

after it was disqualified from the NTPC tender, that would have contributed significantly towards

order flow, so that a big knock against the stock. So you are going to see some weakness in the

next couple of months.

The company's trailing 12-month (TTM) EPS was at Rs 72.54 per share. (Mar, 2010). The

stock's price-to-earnings (P/E) ratio was 25.93. The latest book value of the company is Rs

278.76 per share. At current value, the price-to-book value of the company was 6.75. The

dividend yield of the company was 0.56

Opportunities:

Diverse range of financial products and services: L&T Finance Holdings Ltd, which is

coming out with an initial public offering (IPO), is a financial holding company offering a

diverse range of financial products and services across sectors, as well as mutual fund products

and investment management services through its direct and indirect wholly owned subsidiaries.

The company is promoted by Larsen and Toubro Ltd (L&T).

L&T Finance has a highly diversified business: model covering a variety of high growth

business segments across its core business groups, including infrastructure finance, construction

equipment finance, transportation equipment finance, rural products finance, microfinance,

corporate loans and leases, supply chain finance, capital markets finance, the distribution of

financial products and investment management products and services.

A strong credit check and asset valuation framework: The workforce has increased more than

three times in order to support this physical and geographic growth, up from a headcount of

1,214 in March 2008 to 4,395 as on 31 May.

For each of its businesses, it has established a strong credit check and asset valuation framework

to evaluate and monitor credit risk at the time of origination. The company does not typically

buy loan portfolios, but rather focuses on originating and retaining its own loan portfolio with the

objective of maintaining asset quality to the highest standards.

Threats:

Banking license challenges and prospects: L&T Finance Holdings’ strong brand name, large

size and diversified loan portfolio make it a leading candidate for a banking licence. Peers such

as Mahindra & Mahindra Financial Services and Shriram Transport Finance Company are also

touted as the front-runners for the banking licence. Currently, the L&T Finance Holdings scrip is

trading at 2.6 times FY14 estimated book value, closer to that of M&M Financial, but higher

than Shriram’s price/book value of 1.9 times.

Loan growth strong, asset quality woes: While L&T Finance Holdings’ loan growth is

expected to moderate from 43 per cent levels witnessed in FY12, it will still be in a healthy range

of 23-25 per cent over FY12-15, say analysts. The company is expected to post earnings growth

of 28 per cent over this period. The return on equity (RoE)s will be driven higher by retail

business at 18 per cent, while that of its corporate business is likely to moderate to 15-16 per cent

levels. L&T Finance Holdings recently acquired two companies - Indo Pacific Housing Finance

(IPHF) and FamilyCredit in the housing and auto lending businesses, respectively. Going

forward, both these acquisitions will drive growth of its retail business subsidiary L&T Finance.

CHAPTER-5

FINDINGS

Better financial product and services should be offered and useful strategy should be made by the

management to keep pace with the changes in the corporate world.

1. The Microfinance business is expected to be a robust, predictable, profitable and scalable

business in the long term, once the regulatory flux is resolved.

2. Retail Finance businesses are carried out through our Wholly-owned subsidiary, L&TF Ltd.

3. Corporate Finance business, in addition to the Retail Finance business, is carried out through

4. Wholly-owned subsidiary, L&T Finance Limited

5. The Infrastructure Finance business is carried out through our wholly-owned subsidiary, L&T

Infrastructure Finance Company Limited

6. Investment Management business, comprising of the Mutual Fund segment and Portfolio

Management Services, is conducted through L&T Investment Management Limited (L&T IM), a

wholly-owned subsidiary of L&T Finance Limited

7. In Retail Finance, scorecards play a vital role in the lending decision.

8. A comprehensive score card is developed by the credit team, and takes into account all

relevant parameters that assist in the evaluation of the creditworthiness of the borrower.

9. We have emerged as one of the leading financiers in world.

10. Concentration risk with respect to single borrower/ promoter groups are low, with the top 10

borrowers/ promoters constituting only 19% and 29% of our infrastructure finance exposure in

FY 2012.

11. LTFH follows a policy of rewards and recognition based on merit, powered by focused

action planning and activities structured towards building an employee friendly organization

CHAPTER-6

References:

1. Larsen and Tubro financing Company’s Vision 2010

2. L&T corporate website- financials – performance analysis etc.

3. Rajesh Jeyachandran, Assistant Manager L&TF Limited (2010) - Market share of the different

financing Companies in India. – Through email dated 17.03.2010.

4. Abbas GM, C&S L&TF Limited, 2010 – L&T Performance over last three years including the

present financial year – 2010 – Through email dated 14.03.2010.

5. Target financing Markets strategies for competitor financing companies in India- Abhishek

Gokhale, Industry Analyst Frost and Sullivan 2009

6.http://www.larsentoubro.com/lntcorporate/LnT_DWS/Downloads.aspx?

resP_CORP_CINV_AFNC_BQUT (Accessed 22.02.2010)

7. http://www.L&TF marketlineinfo.com/library/DisplayContent.aspx?N=4294669489

(Accessed via Metalib 21.02.2010)

http://www.ibef.org/download/larsen_&_toubro

8."L&T Wins the Economic Times ‘Company of the Year Award - 2010’". L&T Corporate

Communications Department. 10 January 2011.

9. L&T History, Larsen & Toubro Corporate website. Retrieved 2010-03-06

10."No.1 Construction Companies in World". No.1 Construction. Retrieved 10 August 2011.

11. AM Naik, Larsen & Toubro, Business Leader of the Year, Economic Times website.

Retrieved 2010-07-27.