The consolidated income from operations was flat at Rs 3281.56 crore in Q2FY2021, while other income dipped 46% to Rs 227.35 crore. The total income declined 5% to Rs 3508.91 crore for Q2FY2021. Interest expenses were steady at Rs 1888.78 crore. Operating expenses increased 18% to Rs 661.42 crore, causing 23% decline in the operating profits to Rs 958.71 crore. The cost-to-income ratio increased to 40.8% in Q2FY2021 from 30.9% in Q2FY2020.

Depreciation jumped 58% to Rs 25.16 crore, while provisions increased 26% to Rs 604.52 crore. Profit before tax dipped 56% yoy basis at Rs 329.03 crore. Effective tax rate dipped to 25% in Q2FY2021 from 76.9% in Q2FY2020. The tax rate was higher for Q2FY20 due to impact of DTA at Rs 647 crore. Net Profit of the company, after share in profit of associates and non-controlling interest, improved 52% to Rs 265.12 crore for Q2FY2020.

Business performance

Loans and Advances declined 1% to Rs 98823 crore at end September 2020 as compared to Rs 100258 crore at end September 2019. Loans & Advances in the focused businesses rose 1% to Rs 94172 crore end September 2020 compared with Rs 9355 crore end September 2019. In the de-emphasized portfolio, the loans & advances dipped 35% to Rs 4651 crore end September 2020.

The company has posted 27% decline in loan disbursements to Rs 7129 crore in Q2FY2021. The disbursements in the infrastructure finance segment declined 6% to Rs 2908 crore in Q2FY2021. The rural business disbursements also fell 22% to Rs 3607 crore and housing finance business dipped 70% to Rs 614 crore in Q2FY2021.

The Average Assets under Management (AAUM) of the Investment Management business stood at Rs 63057 crore in Q2FY21. The AUM for Equity and High-Quality Fixed income asset classes as on 30 September 2020 stood at Rs 35635 crore and Rs 13783 crore, with a growth of 7% and 11% respectively on QoQ basis.

GS3 is reduced from 5.98% end September 2019 to 5.19% end September 2020, while NS3 is also reduced from 2.83% to 1.67%. PCR has improved sharply from 54% to 69%.

Rural Finance: witnessed steady MoM improvements in disbursements with highest ever ‘September' disbursement.

a) Farm Equipment Finance: focus on new tractor business and increased refinance helped to gain market share to become No.1 Farm Equipment financer for Q2FY21 with 59% surge in disbursements.

b) Two-wheeler Finance: witnessed increased momentum; among top 3 financiers in August & September

c) Micro Loans: substantially ramped up disbursements on the back of improved collection efficiency MoM, with additional provisions to address any moratorium related risk

Housing Finance:

a) Witnessed moderate pick-up in Home Loan & Loan against Property (LAP), led by slower pick up in Industry fundamentals. 87% of Home Loans disbursed were to the salaried segment. Furthermore, salaried home loan disbursements reached 88% in September 2020 against September 2019

b) No new real estate projects were sanctioned, and the company continued to support developers in fast tracking existing construction progress leading to improved collections and sales as the economy gradually opened up

c) Infrastructure Finance: strong pick up in disbursements, especially in renewables, with the highest ever quarterly sell down of Rs 4073 crore. The focus continued on projects with strong sponsors and off-takers with proven track record helped to maintain market leadership position in identified sectors.

Liquidity:

With availability of ample liquidity in the system for AAA rated NBFCs with good parentage, LTFH's focus will be on reducing excess liquidity and cost of borrowing. As of September 2020, the company has maintained Rs 17449 crore of liquidity through the following:

a. Liquid Assets in the form of cash, FDs and other liquid investments of Rs 8660 crore

b. Undrawn bank lines of Rs 6789 crore and back up line from L&T of Rs 2000 crore

c. Received the first tranche of $50 million of the total $100 million ECB loan from Asian Infrastructure Investment Bank (AIIB); AIIB's first loan to a non-banking financial company (NBFC) in India

With easing of market condition, the focus now would be to reduce excess liquidity and bring down the cost of borrowing

Balance Sheet:

The focus on further strengthening the balance sheet remains even though there is a strong on-ground recovery in the rural economy. The company continues to maintain strong capital adequacy of 21.37%.

The Gross Stage 3 assets of the company stood at 5.19% of its book, showing a reduction of 79 bps YoY. The company also strengthened the PCR on stage 3 assets from 54% in Q2FY20 to 69% in Q2FY21.

The company has made additional provisions of Rs 512 crore in Q2FY21 to strengthen the balance sheet, even though there is strong on-ground recovery. The company carries Rs 1757 crore of provisions on account of macro prudential provisions, COVID-19 and accelerated Expected Credit Losses (ECL) provisions on stage 1 & 2 assets, which are over and above the ECL model on GS3 and Stage 1 & 2 assets. The additional provisions of Rs 1 757 crore translate to 1.95% of the standard book. Out of this, Rs 1079 crore of provisions are towards Micro Loan book (9.2% of standard Micro Loan book). Moratorium related risks have been largely addressed through these additional provisioning.

Focused Lending Book:

The focused lending book improved marginally, owing to the increase in disbursements in the quarter. Within the focused lending book, the Rural Finance book grew by 7%, suitably aided by growth in Farm Equipment Finance book by 19% and the Two-Wheeler Finance book by 12%. The Home Loan book grew by 11%.

NIMs+Fees at 6.49% (Q2FY21) against 6.86% (Q2FY20). With normalcy returning, NIMs+Fees have reached the desired range of 6.5%-7% despite carrying a negative carry of Rs 64 crore on additional liquidity

Book value per share of the company stood at Rs 75.5 per share at end September 2020. Adjusted book value (net of NNPA) per share of the company stood at Rs 67.9 per share at end September 2020.

Commenting on the financial results Mr. Dinanath Dubhashi, Managing Director & CEO, LTFH, said, "As anticipated, Q2 saw a revival in the rural economy, which we believe will also drive the economic growth of the country for the next few quarters. In Q2, our rural business witnessed significant growth momentum backed by our market leading position and strong digital and data analytics infrastructure for the lending business. The performance was also boosted by excellent pick up in disbursements in our renewable energy portfolio. Furthermore, with the incremental macro prudential provisions made in the quarter we have a well provided for balance sheet. AAA rated NBFCs like LTFH are seeing a gradual easing out of liquidity conditions and our focus now would be to reduce excess liquidity and bring down the cost of borrowing."

Financial Performance H1FY2021

The consolidated income from operations was flat at Rs 6576.80 crore for the half year ended September 2020 (H1FY2021), while other income of the company slipped 58% to Rs 329.64 crore. The total income declined 7% to Rs 6906.44 crore for H1FY2021. Interest expenses rose 1% to Rs 3866.98 crore. Operating expenses increased 20% to Rs 1244.99 crore, causing 29% dip in the operating profits to Rs 1794.47 crore.

The cost-to-income ratio jumped to 41.0% in H1FY2021 from 29.0% in H1FY2020. Depreciation moved up 38% to Rs 43.75 crore, while provisions galloped 53% to Rs 1548.04 crore. Profit before tax dipped 71% yoy basis at Rs 428.29 crore. Effective tax rate declined to 8% in H1FY2021 from 51.7% in H1FY2020. Net Profit of the company, after share in profit of associates and non-controlling interest, fell 43% to Rs 413.43 crore for H1FY2020.