MOSL: L&T FINANCE HOLDINGS (Buy)-2Q performance robust; Asset quality trends to be key monitorable
L&T Finance Holdings: 2Q performance robust; Asset quality trends to be key monitorable
(LTFH IN, Mkt Cap USD3.2b, CMP INR117, TP INR175, 50% Upside, Buy)
- L&T Finance Holdings’ (LTFH) 2QFY19 PAT grew 66% YoY to INR5.6b, in line with our estimate. The quarter was marked by a strong AUM growth (+24% YoY), ‘retailization’ of the balance sheet and improving asset quality for LTFH.
- LTFH’s focused loan book grew 6% QoQ/26% YoY to INR900b. The growth across segments was similar to that in the prior quarters – 71% YoY in rural finance, 40% YoY in housing finance and 8% YoY in wholesale finance. LTFH’s microfinance book has now crossed the INR100b mark.
- The company has an exposure of ~INR18b to infrastructure SPVs owned by IL&FS Transportation Networks (ITNL). This exposure is against four annuity projects and two toll road projects. It does not have any exposure to the parent.
- LTFH also has an INR8b exposure as a sole lender to three projects of Supertech. The projects are in the construction phase (75% completed), clocking monthly sales of INR370m. While this exposure is currently standard, it remains a key monitorable.
- Across all buckets in the sub-one year time frame, LTFH is well-placed on the ALM front. The company has INR62b in cash and liquid investments, as well as undrawn bank lines of INR42b and a back-up line of INR20b from L&T.
- LTFH’s gross stress loan ratio improved from 7.93% in 1QFY19 to 7.1% in 2QFY19. The sequential decline was due to an improvement of 100bp+ in wholesale GNPLs to 10.9%. PCR remained stable sequentially at 64%.
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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