L&T Finance may not be able to set up NOFHC

L&T Finance Holdings, which aspires to set up a banking business, may not be able to set up a non-operative financial holding company (NOFHC) as mandated by the Reserve Bank of India (RBI) because its public shareholding is below 51 per cent.

According to the clarification issued by the central bank on new bank license norms, private players aspiring to enter the banking space need to create a NOFHC.

Further, the RBI said not less than 51 per cent of the voting equity shares of NOFHC shall be held by companies in the promoter group, in which the public hold not less than 51 per cent of the voting equity.

However, in L&T Finance Holdings,the holding company of L&T Finance, parent Larsen & Toubro had 82.54 per cent stake at the end of March.

Thus, L&T Finance Holdings has only around 18 per cent float and may find it challenging to directly promote NOFHC, analysts with Kotak Securities said in a note to clients.

Thus, L&T Finance may have to tweak its corporate structure in order to be eligible to promote NOFHC. Another option is that the parent firm Larsen & Toubro may propose to set up NOFHC instead of L&T Finance Holdings to meet the eligibility criteria.