L&T Finance Holdings

20 Jan

Used data analytics to gain rural market share – L&T Finance

Update on the Indian Equity Market:

 

On Wednesday, Nifty closed 0.9% higher at 14,645. Within NIFTY50, TATAMOTORS (+6.1%), ADANIPORTS (+4.4%), and WIPRO (+3.4%) were the top gainers, while POWERGRID (-2.1%), SHREECEM (-1.8%), and NTPC (-1.6%) were the top losing stocks. Among the sectoral indices, AUTO (+2.3%), IT (+2.2%), and PSU BANK (+2.1%) were the top gainers while FMCG (-0.2%) was the only losing sector.

 

Used data analytics to gain rural market share – L&T Finance

 

Excerpts of an interview with Mr Dinanath Dubhashi, MD & CEO, L&T Finance (L&TFH), aired on CNBC-TV18 on 18th January 2021:

  • L&TFH reported 10% YoY PAT growth in 3QFY21 on the back of good disbursements, good fees, good performance on liquidity and cost of funds, and maintaining asset quality.
  • The industry has seen an uptick in demand from rural India. This is due to a combination of structural as well as seasonal factors. The general wellbeing of farmers due to several government schemes has led to higher discretionary spending ability. Seasonal factors including good rainfall for 3 years, good reservoir levels, excellent Kharif prices, and rabi sowing higher YoY have all contributed to rural demand.
  • L&TFH has used data analytics to benefit from the rural demand surge. It has helped L&TFH to gain market share till 2QFY21 and maintain it in 3QFY21. 
  • In 3QFY21, L&TFH had all-time high disbursements in tractors and 2-wheelers.
  • GNPA has marginally moderated to 5.12% in 3QFY21 vs 5.19% in 2QFY21. NNPA increased to 1.9% in 3QFY21 from 1.6% in 2QFY21.
  • Collection efficiency is better than pre-Covid levels for the farm segment, back to the pre-Covid level for the 2-wheeler segment, good collections are happening even in the wholesale businesses.
  • On provisions, the worry has not ended but new worries are not coming in either. L&TFH has not created more provisions on Stage 1 & 2 assets in 3QFY21.  In 3QFY21, L&TFH has provided Rs 1,440 mn for an HFC exposure to the extent of the entire gap between existing provisions and expected resolution money. 
  • L&TFH is still very much RoE focused, but this year is not the one to be overly concerned about RoE. This year is about remaining liquid, solvent, maintaining excellent asset quality, and maintaining market position.

 

Consensus Estimate (Source: market screener website)

  • The closing price of L&TFH was ₹ 104.2 as of 20-January-2021. It traded at 1.3x/ 1.2x/ 1.1x the consensus BVPS estimate of ₹ 77.7 /85.9 /97.6 for FY21E/ FY22E/ FY23E respectively.
  • The consensus target price of ₹ 103.8/- implies a PE multiple of 1.1x on FY23E BVPS of ₹ 97.6/-.

 

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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21 Jul

Increasing number of borrowers are moving out of moratorium- L&T Finance Holdings

Update on the Indian Equity Market:

 

On Monday, Nifty closed 1.1% higherat 11,022. Within NIFTY50,BRITANNIA (+5.1%), WIPRO (+4.4%), and INFY (+4.4%) were the top gainers, while SUNPHARMA(-3.9%), CIPLA (-2.2%) andZEEL (-1.7%) were the top losers. Among the sectoral indices, IT (+2.6%), FIN SERVICE (+1.6%), and BANK(+1.6%) gained the most.  PHARMA (-1.6%) was the only sector to close in red.

 

Increasing number of borrowers are moving out of moratorium- L&T Finance Holdings

 

Excerpts of an interview with Mr. Dinanath Dubhashi, MD&CEO, L&T Finance Holdings Ltd (L&TFH)published on Economic Times website dated17thJuly2020:

  • In 1QFY21, entire Rs 2,250 mn of exceptional gains have been put towards one-time provisions for COVID-19 impact.
  • In 1QFY21, the three months- April, May and June have been 3 very distinct months. Moving from lockdown to unlock, there was an uptick from April to May to June. The uptick has been very good in rural areas and noticeable everywhere else also. That is reason for being optimistic.
  • In terms of sectors showing revival, tractor is one industry where there is actually positive growth in the month of June 2020 versus June 2019. All disbursements to tractors have grown by 19% YoY in June 2020. The quarterly numbers are negative because April was zero but June has shown the first uptick.
  • There is no concrete answer on how NPAs will be but there are a few noticeable trends in terms of moratorium. For micro loans, loans under moratorium in June have reduced to 48% from 100% in April and May 100%. In the same period, for 2-wheelers, loans under moratorium in June have gone down to 33% from 58-60%. In April, the overall portfolio under moratorium was 75%, it has reduced to 18% in June 2020. Substantial number of accounts under moratorium in June have already paid off in July. So an increasing number of people are paying.
  • L&TFH is holding Rs 90 bn of excess liquidity vs normal levels of around Rs 35-40 bn. As a result of this excess cash, there was a negative carry of Rs 840 mn in 1QFY21. This resulted in NIMs being lower in 1QFY21.

Consensus Estimate: (Source: market screener and investing.com websites)

  • The closing price of L&TFHwas ₹ 62.8/- as of 20-July-2020. It traded at 0.8x / 0.7x the consensus BVPS estimate of ₹ 77.3/ 89.0 for FY21E/ FY22E respectively.
  • Consensus target price of ₹ 72.3/- implies a PE multiple of 0.8x on FY22E BVPS of ₹ 89.0/-.

 

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

 

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