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Equities, Markets, Research, Research Reports, Result Updates - October 21, 2024

LTFH Q2FY25: Strong Retail Loan Growth, NIM Expands, CoF Remains Stable

LTFH Q2FY25: Strong Retail Loan Growth, NIM Expands, CoF Remains Stable

Company Name: L&T Finance Ltd | NSE Code: LTF| BSE Code: 533519 | 52 Week high/low: 194 / 127 | CMP: INR 167 | Mcap: INR 41,591 Cr | P/BV – 1.71

About the stock
➡️LTFH is leading NBFC cater diversified financial lending prodcut in both rural and urban areas. Its offer consumer loan, 2W loan, home loan, MFI, farm and SME loans. Distribution network remain strong with 13,200+ distribution touch point, pan India presence in 2 lakh villages/100+ citiesand cover 18 states in India.

Reatil book shine up (28% YoY) led by 2W, HLand MFI segment
➡️LTF retail loan book has been contributing 95%> of overall loan book, company achieveing its FY2026 lakshya goal. Retail book grew 28% YoY (+5% QoQ) to 88,975 Cr driven by 2W, HL and MFI segment. 2W book contribute 14% of retail book, growing 33% YoY and MFL contribute 30% of retail book, growing 22% YoY and Home loan contribute 20% of retail book, growing 39% YoY in Q2FY25.
The total book increased by 22% YoY (+5% QoQ) to 93,015 Cr led bt strong growth in retail book.
➡️Whole sale book report 56% YoY growth but its weight has been reduce to only 4% in overall loan book in Q2FY25.
➡️Retail disbursement grew 12% YoY (+2% QoQ) to 15,092 Cr led by 2W and home loan segment. While MFL shake the disburesement growth down by 5% YoY and its contribute 35% of retail disbursement.
➡️Company’s borrowing lagging in line with credit growth. Borrowing grew half of loan book growth at 11% YoY to 84,912 Cr during the quarter.

Key metrics  Q2FY25 Q2FY24 YoY (bps) Q1FY25 QoQ (bps)
Yield 15.38 15.23 15 15.54 -16
CoF 7.8 7.79 1 7.85 -5
NIMs 8.94 8.62 32 9.31 -37
Credit Cost 2.59 2.58 1 2.37 22
ROA 2.6 2.42 18 2.68 -8
ROE 11.65 10.81 84 11.58 7
PCR 71 76 -500 75 -400
CAR 22.16 25 -284 22 16

NII grew on book growth, yield expansion and stable CoF
➡️Interest income grew 15% YoY (+6% QoQ) to 3,654 Cr driven by robust retail book growth and expansion in yield by 15 bps YoY. NII increased 18% YoY (+4% QoQ) to 2,178 Cr attributed to NIMs expansion by 32 bps YoY and stable CoF at 7.8%. PPOP grew robust at 25% YoY (+14% QoQ) to 1,490 Cr thanks to higher other income and stable other OpEx. Profitability comes in line with topline, grew 17% YoY (+2% QoQ) to 697 Cr due to higher provision expense (up 40% YoY).

All figures are in Cr.

Years  Q2FY25 Q2FY24 YoY (%) Q1FY25 QoQ (%) Commentry
Interest income  3,654.41 3,168.54 15% 3,452.62 6% Driven by book growth and yield expansion
Interest expenses 1,476.28 1,324.91 11% 1,351.41 9%
NII 2,178.13 1,843.63 18% 2,101.21 4% led by stable CoF and Nims jump by 32 bps YoY
Other income  369.61 313.53 18% 331.99 11%
Total Net income 2,547.74 2,157.16 18% 2,433.20 5%
Employee expenses 548.78 448.62 22% 519.34 6%
Other OpEx 508.88 515 -1% 601.41 -15%
Total Opex  1057.66 963.62 10% 1120.75 -6%
PPOP 1,490.08 1,193.54 25% 1,312.45 14% Grew by other income and stable other Opex
Provision 550.51 396.15 39% 390.18 41%
PBT 939.57 797.39 18% 922.27 2%
Tax expenses  242.89 203.17 20% 237.02 2%
Tax rate  26% 25% 1% 26% 1%
PAT  696.68 594.22 17% 685.25 2% Kick in opEx efficiency offset by higher provision,
PAT grew in line with NII
PAT% 17% 17% 1% 18% -4%
EPS 2.79 2.39 17% 2.75 2%
No. of equity shares  249.26 248.3 0% 248.98 0%

Asset quality dissapoint on QoQ basis
➡️LTF asset quality has maintain on YoY basis but decline sequentailly. GNPA down 8 bps YoY but jump 5 bps QoQ to 3.19% while NNPA dissapoint YoY as well as sequentially by 14 bps/17 bps to 0.96%. Its normal effect due to the lower base on last quarter while NNPA below the management target of 1% till FY26.

Asset Quality Q2FY25 Q2FY24 YoY (bps) Q1FY25 QoQ (bps)
GNPA 3.19 3.27 -8.00 3.14 5
NNPA 0.96 0.82 14.00 0.79 17

Valuation and key metrics
➡️Currently the stock is trading at multiple of 1.71 Price to book value. Yield on loan jump 15 bps to 15.38% while CoF remain stable at 7.8% YoY. This result in expansion in NIMs by 32 bps to 8.94% as of Q2FY25. credit cost remain stable at 2.59% YoY while increased by 22 bps QoQ.

The image added is for representation purposes only

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LTFH Q1FY24: Retail Portfolio Grows 31% YoY, Reaches ₹84,444 Cr
Research, Research Reports, Result Updates - August 20, 2024

LTFH Q1FY25: Retail Portfolio Grows 31% YoY, Reaches ₹84,444 Cr

LTFH Q1FY24: Retail Portfolio Grows 31% YoY, Reaches ₹84,444 Cr

Company Overview:

L&T Finance Ltd., formerly known as L&T Finance Holding Ltd., is a Non-Banking Financial Company (NBFC) offering a diverse range of financial products and services. In March 2024, the company underwent a name change and applied for registration as a Systemically Important Non-Deposit Accepting Core Investment Company. As a subsidiary of Larsen & Toubro, which holds a 65.86% stake, L&T Finance benefits significantly from its parent company’s technical expertise and capital support.

Q1FY25 Results Update:

L&T Finance reported a robust financial performance for Q1FY25, with a 29% year-over-year (YoY) increase in Profit After Tax (PAT) to ₹686 Cr, and a 55 basis points YoY improvement in Return on Assets (RoA) to 2.68%. The company’s retail-focused strategy continued to deliver strong results, with the retail book comprising 95% of the overall portfolio and growing 31% YoY to ₹84,444 Cr. Consolidated book growth reached 13% YoY, the highest since Q1FY20. Net Interest Margins (NIMs) and fees remained steady at 11.08%, with NIMs increasing by 125 basis points YoY to 9.31%. Credit cost stability was maintained at 2.37% YoY.

Key Ratios Q1FY24 Q4FY24 Q1FY25
Yield 14.74% 15.53% 15.54%
Net Interest Margin 8.06% 9.14% 9.31%
Fee & Other Income 1.58% 2.11% 1.77%
NIM + Fee & Other Income 9.64% 11.25% 11.08%
Operating Expenses 3.81% 4.69% 4.45%
Pre-provision Operating Profit 5.83% 6.56% 6.63%
Credit Cost 2.33% 2.39% 2.37%
Return on Assets 2.13% 2.19% 2.68%
Debt / Equity (Closing) 3.42% 3.27% 3.41%
Debt / Equity (Average) 3.50% 3.22% 3.21%
Return on Equity 9.72% 9.53% 11.58%

L&T Finance introduced several strategic initiatives, including the beta launch of ‘Cyclops,’ an advanced credit underwriting engine, and a revamped home loan product. Additionally, the company partnered with PhonePe to expand its reach and broaden its sourcing channels. L&T Finance also achieved the ‘Great Place to Work-Certified®’ designation, underscoring its focus on employee satisfaction.

  • Retail Disbursement: Retail disbursements stood at ₹14,839 Cr, showing a 33% YoY increase but a slight 1% quarter-over-quarter (QoQ) decrease.
  • Retail Book: The retail book grew to ₹84,444 Cr, a 31% YoY increase and 6% QoQ growth.
  • NIMs+Fees: Consolidated NIMs+Fees were at 11.08%, improving by 144 basis points YoY but declining by 17 basis points QoQ.
  • PAT: Consolidated PAT reached ₹686 Cr, demonstrating strong growth of 29% YoY and 24% QoQ.
  • Profitability Metrics: Consolidated RoA improved to 2.68%, up 55 basis points YoY and 49 basis points QoQ, while consolidated Return on Equity (RoE) increased to 11.58%, up 186 basis points YoY and 205 basis points QoQ.
Lending Business – Business wise book split
Segment (₹ Cr) Q1FY24 Q4FY24 Q1FY25 Y-o-Y (%)
Farmer Finance
Farm Equipment Finance 13125 13892 14204 8%
Rural Business Finance
Rural Group Loans & Micro Finance Loans 19743 24716 25887 31%
Urban Finance
Two-Wheeler Finance 9190 11205 12025 31%
Personal Loans 5995 6440 6667 11%
Home Loans 11274 14550 15690 39%
LAP 2801 3893 4272 53%
SME Finance 1779 3905 4471
Acquired Portfolio 367 1435 1229
Retail Finance 64274 80037 84444 31%
Real Estate Finance 4096 2337 2310 -44%
Infrastructure Finance 9939 3191 1963 -80%
Wholesale Finance 14035 5528 4273 -70%
Focused Business 78309 85565 88717 13%
De-focused 257 – – -100%
Total Book 78566 85565 88717 13%

Retail Disbursement Growth:

  • Overall: Retail finance disbursements totaled ₹14,839 Cr in Q1FY25, a 33% YoY increase but a 1% decrease QoQ.
  • Rural Business Finance: Grew by 28% YoY to ₹5,773 Cr.
  • Urban Finance: Showed the highest growth, increasing by 44% YoY to ₹6,043 Cr.
  • Farmer Finance: Increased by 8% YoY to ₹1,903 Cr, with a 24% QoQ growth.
  • SME Finance: Grew by 61% YoY to ₹978 Cr but saw a 19% decrease from Q4FY24.
Lending Business – Business wise disbursement split
Particulars (Rs Cr ) Q1FY24 Q4FY24 Q1FY25 Y-o-Y (%)
Farmer Finance
Farm Equipment Finance 1757 1530 1903 8%
Rural Business Finance
Rural Group Loans (JLG) 4240 5639 5659 28%
Micro Finance (JLG) 271 129 114
Urban Finance
Two-wheeler Finance 1726 2502 2621 52%
Personal Loans 1162 968 1178 1%
Home Loans 1072 1823 1656 55%
LAP 227 690 588
SME Finance 607 1213 978 61%
Acquired Portfolio 130 549 141 9%
Retail Finance 11193 15044 14839 33%
Infrastructure Finance 1040 320 175 -83%
Real Estate Finance 132 3 4 -97%
Wholesale Finance 1172 323 179 -85%
Total Disbursement 12365 15366 15019 21%

 

Retail Book Growth:

  • Overall: The retail finance book grew to ₹84,444 Cr in Q1FY25, a 31% YoY increase and 6% QoQ growth.
  • Rural Business Finance: Grew by 31% YoY to ₹25,887 Cr, with a 5% QoQ increase.
  • Urban Finance: Increased by 32% YoY to ₹38,653 Cr, with a 7% QoQ growth.
  • Farmer Finance: Grew by 8% YoY to ₹14,204 Cr, with a 2% QoQ growth.
  • SME Finance: Demonstrated remarkable growth of 151% YoY to ₹4,471 Cr, with a 14% QoQ increase.

Asset Quality:

  • Retail Portfolio:
    • Gross Stage 3 (GS3) Assets: Increased from ₹2,063 Cr in Q1FY24 to ₹2,355 Cr in Q1FY25.
    • Net Stage 3 (NS3) Assets: Rose from ₹437 Cr to ₹511 Cr over the same period.
    • GS3 Ratio: Improved from 3.21% to 2.79%.
    • NS3 Ratio: Decreased from 0.70% to 0.62%.
    • Provision Coverage Ratio (PCR): Remained stable at around 78-79%.
  • Consolidated Portfolio:
    • GS3 Assets: Decreased from ₹3,172 Cr in Q1FY24 to ₹2,789 Cr in Q1FY25.
    • NS3 Assets: Decreased from ₹907 Cr to ₹688 Cr over the same period.
    • GS3 Ratio: Improved from 4.04% to 3.14%.
    • NS3 Ratio: Decreased from 1.19% to 0.79%.
    • PCR: Increased from 71% to 75%.

The image added is for representation purposes only

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