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L&T Finance Holding Ltd. (LTFHL) | Q2FY14 Result Update




IndiaNivesh Securities Pvt Ltd


24 Oct 2013





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L&T Finance Holding Ltd. (LTFHL) | Q2FY14 Result Update Numbers as per expectations but stress on asset quality continue to increase LTFHL’s (cons) loan book growth remained healthy at 28% y-o-y (3% q-o-q). L&T Infra Finance (LTIF – Infrastructure Finance) registered 31% y-o-y loan growth, while L&T Finance (LTF – Retail & Corporate Finance) witnessed 21% y-o-y loan growth. Disbursements on the other hand, grew at a slower pace of 13% y-o-y (down 5% q-o-q) to Rs 55.4 bn due to muted growth of 5% y-o-y in Retail & Corporate Finance segment. NIMs (cons) were stable with marginal increase of 2 bps q-o-q to 5.58% mainly due to company’s ability to pass on the increase in cost of funds. NII (cons) was at Rs 4.6 bn, an increase of 18% y-o-y. Net profit (cons) was up 8% y-o-y to Rs 1.6 bn, cautious approach for maintaining excess provisioning continues with increase of 79% y-o-y (and 10% q-o-q). Asset quality (cons) deteriorated further with increase of 35 / 26 bps q-o-q in Gross / Net NPA to 2.89% / 1.93% respectively. Valuation: LTFHL’s Q2FY14 result was disappointing on asset quality front; however loan book momentum remains healthy driven by disbursals (at a slow pace) in both financing subsidiaries. The management is confident to remain cautious in credit selection with aggressive asset monitoring in H2FY14E. However, we expect asset quality pressure to continue in H2FY14 mainly from LTIF subsidiary. At CMP of Rs 77, the stock is trading at P/ABV of 2.3x and 2.0x for FY14E and FY15E respectively. The

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