L&T Finance Ltd. share price target

An increase in disbursements, collections and adoption of prudent liquidity practices are factors that are likely to protect the company from uncertainties in the long run. This along with improved capital ratios will underpin growth. We therefore upgrade our rating to BUY with a rolled forward target price of Rs. 89 based on 0.9x FY24E BVPS. Improvement in margins will lead to long-term growth In Q3FY22, company's net interest income was Rs. 1,468cr; NIM + Fee margin increased by 71bps YoY, to reach 8.1% in Q3FY22, an increase from 7.6% in previous quarter,...

L&T Financial Holdings (LTFH) has entered into a definitive agreement with HSBC AMC, in which the latter will acquire 100% stake in L&T Investment Management (LTIM), the investment manager of L&T Mutual Fund (LTMF), for USD425m. In addition, LTFH will also be entitled to excess cash (INR57b) in LTIM's books until the completion of this divestment/acquisition. Including the excess cash (except the minimum cash requirement of INR0.5-1b) that LTFH is entitled to, the total sale consideration would be INR37-39b (4.6-4.8% of current AUM). HSBC AMC would merge its existing Asset Management business (Sep'21...

changes (DHFL bonds, sell downs in real estate account), (2) tepid growth traction (AUMs declined 12%/2% YoY/QoQ), (3) lower provisions (PCR down 13bps QoQ to 52%), (4) no improvement in asset quality (5.74% vs 5.75%: Q1FY22; housing NPAs jumped 458bps QoQ led by Rs13bn RE account that...

LTFH reported a PAT of INR2.23b in 2QFY22 (in line). While PPoP stood at INR11b (9% beat), higher provisions/credit costs of INR7.8b (12% higher than our estimate) led to an in line PAT. The loan book continued to consolidate and stood at INR869b (down ~12% YoY/2% QoQ), driven by Infra loans, LAP, and the defocussed business. The Rural Finance book exhibited strength, led by a return to a normalized monthly disbursement run-rate in Micro loans in Sep'21. Additional provisions (including OTR) stood at INR17.5b (2.2% of standard...

Improved capital ratios and provision buffers could protect the company from any near-term uncertainties. However, company's asset quality and recovery from other business segments should be closely monitored. With cautious outlook, we downgrade our rating to HOLD with a revised target price of Rs. 96 based on ~1.0x FY23E BVPS. Efficient liquidity management aids margin expansion In Q1FY22, company's net income grew by 13.9% YoY (-7.1% QoQ) to Rs. 1,499cr. NIM + Fee & other income margin expanded by 174bps YoY to 7.52%, primarily due to...