continued disbursements momentum which should cushion earnings ahead, we remain circumspect on asset quality. Status-quo on SC order is masking the true asset quality picture; we maintain 6.6%-6.7% NPA forecasts over FY21-22 with credit costs uptick to 240bps for FY21. As return profile for FY22-23 stands weak at ~10% RoE/ 1.2% RoA, we reiterate SELL, valuing...

With improvement in collections and reduction in moratorium accounts, we value the stock at 0.77x on FY22E BVPS of Rs. 91, with a revised target price of Rs. 70 and retain our ACCUMULATE rating. Loan book continued to grow; Disbursements moderated LTFH's focused loan book stood at Rs. 93,706 cr, (+3.5% YoY), driven by steady growth in Rural Finance (+6.3% YoY), Housing Finance (+3.5% YoY), and Infrastructure Finance (+1.7% YoY). The disbursements reached Rs. 2,318cr (-75.9% YoY), due to drop in Housing, Rural, and Infrastructure disbursements by 85.1% YoY, 78.4% YoY...

17 July 2020 L&T; Finance Holdings (LTFH) reported 1QFY21 PAT of INR1.47b. However, excluding the INR2.25b one-time gain on the sale of the Wealth Management business to IIFLWAM, the company reported net loss of INR780m (v/s our PAT estimate of INR1.8b). As a result, the total contingency provision buffer (over and above NPA provisions) stands at INR12.4b (i.e. 1.4% of standard loans). As the company maintained higher liquidity on the balance sheet, it experienced a drag of INR850m net income. Reported fees and other income halved YoY to INR1.9b on lower rural/corporate disbursements. The share of customers who were granted moratorium as of 30th 33%; and RE, Infra, and IDF ~40%. In corporate lending, performance has been divergent toll collections / builder loan collections reached 80%/33% of pre-COVID-19 levels in June.

projects, 83% of which lie under morat (b) 13% micro finance book that witnessed pull back in center meetings, albeit morat down to 48% from 100% in Mar'20 (c) 40% infra business segment that continues to experience underlying pressures (tepid traffic drivers, weakened supply chain and inconsistent labor availability). While moratorium today is masking the de facto asset quality stress, morat delinquencies cannot be ruled out. We, therefore, build in higher NPA (6.5%+) and elevated credit costs (150-22bps+) over FY21-22E. Consequently, RoEs settle to structurally lower levels of ~10%...

18 May 2020 LTFH reported 4QFY20 PAT of INR3.8b (-30% YoY), ~20% below our estimates. The miss was largely on account of lower-than-expected total income (8% miss) while opex and credit costs were in line. LTFH reported INR844m in net loss on fair value changes, which led to the topline miss. While as of Mar20, ~36% of AUM was under moratorium, a modest increase was seen in April. Disbursements in Rural finance declined ~20% QoQ, compared with 69% decline witnessed in other segments. The plunge in Rural lending was largely attributed to the Auto segment (Tractors and 2Ws). While NIM on a consolidated basis came in steady at 5.7%, lower disbursements led to ~50bp decline in the fee income margin to 1.2%. CoF declined 10bp QoQ to 8.4%. The share of CPs was down 300bp QoQ / 1,000bp YoY to 6%. The GNPL ratio improved 60bp QoQ to 5.

shocks, we build in weak collection trends and higher provisions on rural & retail business side. Against this backdrop, we incorporate subdued growth (4-12%), high 6.5% NPA translating into structurally lower RoEs of 7% by...

We revise our estimates for FY20-22E and now value the stock at 0.64x FY22E BVPS, with a revised target price of Rs. 62 and continue to recommend ACCUMULATE rating on the stock. Corona update and impact on industry Corona virus pandemic continues to disrupt economy throughout the world, as the number of infected people globally reached +1.4mn (~75k deaths) spread across 120 affected nations. IMF cut the CY20 world growth estimates by 40bps to 2.9%. Moody's reduced their GDP forecasts for India to 2.5% from 5.3% earlier for CY20 and S&P;...

We value the stock at 1.35x on FY22E BVPS, with a target price of Rs. 136 and recommend ACCUMULATE rating. Loan book continued to grow; Disbursements moderated LTFH's focused loan book registered a healthy 13.7% YoY growth, driven by a steady Rural Finance and Housing Finance loan book growth of 14.4% and 14.5% YoY, respectively. However, overall disbursements reduced further (-30.1% YoY), with infrastructure finance declining by 46.9%, primarily due to industry wide de-growth. On housing front, the group remained cautious and maintained tight credit policy...

L&T; Finance Holdings (LTFH) saw moderated loan growth of 14% YoY in focused business book. NIMs+Fees have remained steady at 7.29% (7.33% in 2QFY20). LTFH reported marginal rise in consolidated net profit to `591 Cr vs. `580 Cr in corresponding quarter last...

20 January 2020 LTFH reported 3QFY20 PAT of INR5.9b (+2% YoY), in line with our estimate of INR6.0b. The quarter was characterized by early teens loan growth across focused segments, stable asset quality and core RoE of ~16%. LTFH is expected to report moderate loan growth (7-8%), dragged by the defocused and wholesale book. With stability on cost of funds and growth in high-yielding assets, net income (NIM + fees) is expected to be healthy at ~7%. Overall PAT CAGR is expected to be ~12% with a robust RoE of ~17%. De-focused book declined ~55%/25% YoY/QoQ as the company sold off some DCM bonds without meaningful P&L; impact. LTFH raised INR104b in the quarter, of which ~50% came from term loans and ~35% via NCDs. Cost of funds was largely stable at 8.5%. Disbursements in microfinance have been range-bound at INR25-28b for the past eight quarters, while those in 2W and tractors picked up sharply on a QoQ basis due to the festival season.

A key driver of this has been microloans, wherein the company has expanded into 17 states the book now accounts for 48% of the total rural lending book compared to 35% in FY17. run-down of the de-focused wholesale lending book (structured finance and debt capital markets) and stronger growth in 2W finance and microloans, the share of retail lending (rural + retail housing finance) is expected to reach 43% by FY22. In the tough operating environment over past one year LTFH witnessed asset quality improvement with the GNPL ratio declining 110bp to 6.0% which is commendable. The improvement has been driven largely by wholesale and rural finance, while asset quality in housing finance has been largely stable. The GNPL ratio in the wholesale finance book is at 9% largely due to legacy stressed loans in the thermal power finance book. These loans comprise half of the total GNPLs in this book.

Disbursements were in line with the overall market as Rural, Housing and Infrastructure finance disbursements were down 1.6%, 21.3% and 19.0% respectively on account of industry wide de-growth. PAT declined 68.9% YoY to Rs. 174.5cr, due to the adoption of lower...

22 October 2019 LTFH reported a decent second-quarter performance amidst the tough economic environment. PAT (excluding one-off items) grew 16% YoY to INR6.5b (7% of our estimate). LTFH, however, took a one-time hit of INR4.7b on profits from DTA revision DTA under the new tax regime. Overall focused book disbursements declined 12% YoY to INR98b, driven by lower real estate and infra disbursements. Rural disbursements were in line with past trends. As a result, the share of rural lending in the total loan book increased 300bp YoY to 27%. While management expects 2HFY20 to be relatively slower in retail lending, it expects a pickup from FY21 onwards. Spreads were stable QoQ and YoY at 6.1%.Interestingly, GNPL/NNPL ratio increased 25/35bp QoQ due to seasonality in rural NPLs and the impact of floods in some areas. The company continues maintaining INR3.5b floating provisions. Tax rate for the quarter stood at 14% versus our estimate of 22%.

However, in the East India zone, LTFH has managed to increase its market share by 150-200bp over the past year. The company repossesses 400 vehicles pan-India every month; of this, 20% gets released back to the customer due to settlement. LTFH is the second largest financier for the dealer with a financing market share of 27% (narrowly behind Hero Fincorp that has a share of 28%). LTFH started two-wheeler financing via the acquisition of Family Credit, which was a financier based out of Kolkata. LTFH has been able to maintain that and is now the largest financier in East India it has a market share of 40-45% in West Bengal compared to its pan-India average of 10-12%. Its customer application rejection rate stands at 65% in West Bengal v/s 45-50% pan-India.

L&T; Finance Holdings (LTFH)offers financial products & services namely in the area of Rural, Housing & Wholesale, as well as Mutual Fund Products and Wealth Management services. LTFH is focusing more on retailization of book...

4QFY19 PAT almost doubled YoY to INR5.5b, 7% below our estimate. Adjusting for this, PAT would have beaten our estimate by 2%. The focused loan book grew 5% QoQ/ 17% YoY to INR983b driven by strong 2 May 2019 growth in rural and housing finance. strongest growth came from microfinance, 2W finance and real estate finance, while the company scaled back a bit in tractor finance. Excluding impact of the interest reversal, calculated margins (incl. fee income) were stable QoQ at 6.4%. Operating expenses grew 25% YoY to INR6.5b. However, excluding net loss on fair value changes, operating expenses were up only 3% YoY, which is impressive considering investments in the retail franchise. provision buffer currently stands at INR3.5b (INR2.8b in 3QFY19). Note that the IL&FS; exposure is classified as standard.

Net interest income (NII) grew at a robust pace of 54% YoY mainly on the back of 101 bps YoY improvement in net interest margin (NIM) to 5.1%. An increase in the proportion of high-yield business (rural business) and cost increases passed on to customers in wholesale and housing businesses helped to improve NIM. LTFH continued to improve its operating efficiency as cost to income (C/I) ratio declined by 234 bps YoY to 27.8%. Provisions declined by 9% YoY. Notably, LTFH has set aside Rs85cr as macroprudential provisions in Q3FY19, taking overall macroprudential provisions to Rs269cr for unforeseen risks in future. Net profit increased by 78% YoY. We expect net profit to grow at a CAGR of 37% over FY17-21E supported by robust growth in...

22 January 2019 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. LTHF prioritized its rural lending business in the quarter. 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. Over the past two years, LTFH has delivered a turnaround in business, with a strong improvement in RoE from 10% to 18%. It is now well on its journey of retailization of the balance sheet. Notwithstanding the tight liquidity in the past quarter, management has been able to grow its focused products impressively and yet maintain sufficient liquidity. We remain confident that LTFH would continue to generate strong return ratios over the medium term.

INR240b of debt capital since 21 September 2018, the company is well placed on the liquidity front, in our view. In addition, LTFH is comfortable with its builder and IL&FS; exposures. We note that IL&FS; exposures are to SPVs formed by the subsidiaries of IL&FS;, where LTFH has the first right to cash flow. Nevertheless, there has not been any instance of defaults over the past two months. The business transformation story remains on track, with retailization of the balance sheet and sustenance of RoE at 18-19% levels. A lender to SPVs managed by IL&FS; subsidiaries; protected from NCLT proceedings Management explained that there is no exposure to IL&FS; at the holdco level. The...