L&T Finance Holdings Ltd | Q3FY20 Result Update | Steady focused book growth with stable asset quality

18 Jan
Finance

L&T Finance Holdings Ltd | Q3FY20 Result Update | Steady focused book growth with stable asset quality

Hits­:

·         Net Interest Income (NII) grew by 21% YoY to INR 1,423 cr on back of 62bps YoY improvement in NIM to 5.6%

·         Focus book registered growth of 14% YoY to INR 93,957 cr. However, total AUM increased by only 5% YoY to INR 99,454 cr mainly because of 55% YoY/24% QoQ de-growth in de-focus book.

·         Net revenue registered 16% YoY growth to INR 1,841 cr

·         PAT during the quarter remained flat YoY at INR 591 cr as lower tax rate negated the impact of elevated cost to income ratio and credit cost

·         Asset quality remained stable with GS3 / NS3 for Q3FY20 at 5.94% / 2.67% vs 5.98% / 2.83% sequentially

·         LTFH raised INR 10,429 cr of long term borrowings in the current quarter, its highest quarterly borrowings since FY17, reaffirming the strength of its parentage in the current challenging environment

Miss:

  • Total disbursements de-grew by 30% YoY to INR 9,561 cr mainly on back of de-growth in all segments. Disbursement in Rural / Housing / Wholesale segments decreased by 5% / 14%/ 63% respectively
  • Cost to Income ratio deteriorated by 263 bps YoY to 27.5% resulting to lower growth in operating profits. Operating profit increased by 11.7% YoY to INR 1,334cr
  • Credit cost increased by 60 bps YoY to 2.39% resulting to 5.8% de-growth in PBT to INR 729 cr
  • Cautious stance by the management led to the lowest quarterly disbursement in the wholesale segment and real estate finance segments since start of FY18

Our View:

·         The company registered steady focused book loan growth in the quarter (in-line with consensus), we believe these are stable results in challenging environment mainly because of a) Stable asset quality especially in wholesale and rural book where the company has exposure towards Assam region in its MFI segment, b) Ability to raise the highest quarterly borrowings in a challenging environment and maintain prudent ALM and c) Rapidly run down its de-focused book.

·         Management’s cautious stance in the real estate finance, LAP and infra book coupled with rundown of the de-focused book is likely to loan growth in check compared to historical run rate. However, focused book growth is expected to remain steady backed by rural and housing segment.

Valuation

At the CMP of INR 127, stock is trading at 1.5x FY21 ABPS

INR crs Q3FY20 Q3FY19  %change Q2FY20  %change
Interest income 3,307 3,039 8.8 3,254 1.6
Interest expenses 1,884 1,865 1.0 1,891 -0.4
Net interest income 1,423 1,174 21.2 1,363 4.4
Non-interest income 418 416 0.5 470 -11.1
Net Revenue 1,841 1,590 15.8 1,833 0.4
Operating expenses 507 396 28.0 448 13.2
Operating Profit 1,334 1,194 11.7 1,385 -3.7
Provisions & Contingencies 605 420 44.0 624 -3.0
PBT 729 774 -5.8 761 -4.2
Tax 138 194 -28.9 114 21.1
PAT pre exceptionals 591 580 1.9 647 -8.7
Exceptional Items 0 0 NA 473 NA
PAT 591 580 1.9 174 239.7
Ratio (%)
C/I Ratio 27.5 24.9 263bps 24.4 310bps
Yield 13.1 13.0 12bps 13.0 8bps
NIM 5.6 5.0 62bps 5.5 18bps
Balance Sheet (INR Crs)
Loan & Advances 99,453 94,711 5 1,00,258 -1
Disbursement 9,561 13,682 -30 9,779 -2
Networth 14,606 12,981 13 13,981 4
Asset Quality (%)
GS3 5.94 6.74 -80bps 5.98 -4bps
NS3 2.67 2.64 3bps 2.83 -16bps
Provision Coverage Ratio 57.0 62.0 -500bps 54.0 300bps
AUM Break up (INR crs) Q3FY20 Q3FY19  %change Q2FY20  %change
Rural 27,594 24,122 14 26,597 4
Housing 26,689 23,319 14 26,986 -1
Wholesale 39,674 35,170 13 39,472 1
Total Focused book 93,957 82,611 14 93,055 1
De-Focused Book 5,497 12,100 -55 7,203 -24
Total Book 99,454 94,711 5 1,00,258 -1
Disbursement Break up (INR crs) Q3FY20 Q3FY19  %change Q2FY20  %change
Rural 5,468 5,734 -5 4,638 18
Housing 2,024 2,350 -14 2,032 0
Wholesale 2,069 5,598 -63 3,108 -33
Total Focused book 9,561 13,682 -30 9,778 -2
De-Focused Book 0 0 NA 0 NA

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