MOSL: L &T FINANCE HOLDINGS (Buy)-Performance encouraging-Outcome of IL&FS saga key monitorable
L&T Finance Holdings: Performance encouraging; Outcome of IL&FS saga key monitorable
(LTFH IN, Mkt Cap USD3.8b, CMP INR137, TP INR185, 35% Upside, Buy)
- L&T Finance Holdings’ (LTFH) 3QFY19 PAT grew 81% YoY to INR5.8b, in line with our estimate, driven by strong AUM growth (+23% YoY), ‘retailization’ of the balance sheet, and improving asset quality.
- The company managed its liquidity situation well with a positive ALM gap of INR60b+ in a stress case scenario as on 31st Dec’18. LTFH has cash and liquid investments of INR42b (~4% of BS) and undrawn lines of INR110b+.
- LTFH has exposure to six SPVs of subsidiaries of IL&FS, of which one SPV paid its dues in Jan’19 (amount unknown). Three SPVs communicated that normal servicing of loans has been stayed by NCLAT, while the other two SPVs are yet to communicate to its lenders. However, management is confident of nil eventual credit losses from the IL&FS exposures.
- LTHF prioritized its rural lending business in the quarter. Disbursements in rural lending were up 40% YoY, while those in housing finance and wholesale finance were down 23% and 44%, respectively. We believe this is a prudent strategy. As a result, the share of rural finance increased 200bp QoQ to 26%.
- Overall asset quality improved marginally, with the GNPL/NNPL ratio declining 35bp/15bp QoQ to 6.7%/2.6%. The reduction in the GNPL ratio has come on the back of an improvement in asset quality in the rural lending book, while the housing finance and wholesale finance books witnessed stable asset quality. The company also added INR850m to its provision buffer during the quarter, taking the outstanding amount to INR2.7b.
L&T Finance Holdings Limited is a non-banking financial institution-core investment company. The Company's segments include Retail and Mid Market Finance, which consists of rural products finance, personal vehicle finance, microfinance, housing finance, commercial vehicle finance, construction equipment finance, loans and leases and loan against shares; Wholesale Finance, which consists of project finance and non-project corporate finance to infra and non-infra segments across power-thermal and renewable; transportation-roads, ports and airports; telecom, and other non-infra segments; Investment Management, which consists of assets management of mutual fund and private equity fund, and Other Business, which consists of wealth management and financial product distribution. It offers a range of financial products and services across retail, corporate, housing and infrastructure finance sectors, as well as mutual fund products and investment management services.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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