L&T Finance Holding Result Analysis Q1 FY20-21

L&T Finance Holding Result Analysis Q1 FY20-21

CMP Rs 61.45 (As on 17-07-2020 at 03:00 PM) 

Net Interest Income down 15.7% at Rs 1,408.9 crore (Est Rs 1,347 crore) 

Net profit down 73% at Rs 148.3 crore (Est Rs 242 crore) 

Incremental provision of Rs 577 crore out of which for Covid-19 it is Rs 277 crore, in current quarter 

Exceptional gain of Rs 225.6 crore on the divestment of entire stake in the subsidiary company, L&T Capital Market.

Reduction in Moratorium on Retail lending book at 44% versus 79% QoQ. Overall moratorium for Infrastructure finance, IDF and Real Estate borrowers remained close to 40%. 

Disbursements momentum expected to pick up especially in rural portfolio Raised Rs 3,200 crore till July 15

Company has  reported PAT of Rs 147 cr. However, excluding the Rs 225 cr one-time gain on sale of the wealth management business to IIFLWAM, the company reported net loss of Rs 78 (vs our PAT estimate of Rs 180 cr)

Net Interest Income declined 16% YoY to Rs 1410 cr driven by the drag due to excess liquidity (2% above our est. of Rs 1380 cr)

Finance cost grew 3% YoY to Rs 1980cr (4% above our est. of Rs 1910 cr)

Opex declined 6% YoY and 21% QoQ to Rs 420 cr (18% below our est. of Rs 510 cr).

PPoP declined 24% YoY to Rs 1000 cr (8% above our est. of Rs 930 cr)

Moratorium rate in retail lending declined from 79% in March to 44% in June

GNPL ratio down ~10bp to 5.24%. PCR up from 59% to 69% QoQ.

Loan book largely flat both QoQ and YoY at Rs 99000 cr

However, provisions at Rs 1120 cr were above our estimate of Rs 700 cr. In our view, the company may have used the Rs 225 cr one-off gains to enhance provisions on the balance sheet.

Impact and Analysis: Results are below expections, may be due to Impact of COVID 19 and lock down in Q1, moreover this is a NBFC and we have seen presusure on entire banking and NBFC space. We have seen good correction in this stock, hence it can be purchased as a portfolio stock for long term. We hould not forget that it has a backing (Promoter) as L&T.

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