The company has strengthened Balance Sheet with the creation of additional provisions of Rs 369 crore in Q1FY22. Total additional provisions currently stands at Rs 1403 crore (1.75% on standard book) to protect against impact of Covid 2.0.

The analytics based collections helped the company to significantly increase in Q1FY22 collections to Rs 13166 crore compared with Rs 4321 crore in Q1FY21 despite lower collections in May 2021.

The company has posted robust disbursements growth of 125% in Q1FY2022.

The company has maintained adequate liquidity buffers as a prudent measure in line with evolving Covid situation. It has continued leading position in Rural and Infrastructure Finance

The weighted average cost of funds reduced by 85 bps to 7.64% in Q1FY22 from 8.49% Q1FY21. The NIM+Fees stood at 7.52% in Q1FY2022.

The GS3 loans rose to 5.75% and NS3 to 2.07%. PCR stood at 65%. In absolute terms, GS3 reduced to Rs 4881 crore from Rs 4939 crore a year ago.

The company has continued the process of retailization of loan book with the share of Rural + Retail Housing Book rising to 45% in Q1FY22. Rural book up by 8% end June 2021 over June 2020.

Commenting on the financial results Dinanath Dubhashi, Managing Director & CEO, L&T Finance Holdings, said, "Despite severe impact of Covid 2.0, the learnings from Covid 1.0 held us in good stead in managing short-term challenges and helped maximise positive impact on business metrics. During FY21, LTFH was able to successfully navigate extremely tough conditions and emerge stronger. Our Q1FY22 performance reflects the fact that the Company has built a sustainable business model, one which will enable it to grow in the medium to long-term while dealing with any short-term challenges (including impact of Covid 2.0)."

"Through FY21, as well as in Q1FY22, the company has agilely adapted and calibrated its approach by leveraging on its business strengths. The month-on-month uptick in collection efficiencies post unlock in the last quarter is a result of our concerted efforts and in recent past we have shown our ability to quickly turn around the disbursement volumes as macro factors open up. Our inherent strengths allow us to remain prepared for any short-term disruptions, including those arising from a potential third wave of Covid. We remain steadfast in continuing to be of service to our customers and helping to finance their livelihoods and aspirations."

Quarterly performance

The consolidated income from operations declined 9% to Rs 2008.30 crore for the quarter ended June 2021, while other income of the company jumped 89% to Rs 193.19 crore. The total income declined 6% to Rs 3201.49 crore for Q1FY2022.

Interest expenses dipped 24% to Rs 1508.86 crore. Operating expenses increased 10% to Rs 640.32 crore, allowing the operating profits to improve 26% at Rs 1052.31 crore. The cost-to-income ratio declined to 37.8% in Q1FY2022 from 41.1% in Q1FY2021.

Depreciation rose 24% to Rs 22.97 crore, while provisions declined 16% to Rs 791.46 crore. Profit before tax surged to Rs 237.88 crore from loss of Rs 126.35 crore. There were nil exception item compared with gains of Rs 225.61 crore in Q1FY2021. Tax provision were at Rs 60.86 crore against write back of tax provisions of Rs 48.18 crore in Q1FY2021.

Net Profit of the company, after share in profit of associates and non-controlling interest and prior period adjustments, moved up 20% to Rs 177.85 crore for Q1FY2022.

Book value per share of the company stood at Rs 76.8 per share at end June 2021. Adjusted book value (net of NNPA) per share of the company stood at Rs 70.0 per share at end June 2021.

Business performance

Loans and Advances declined 11% to Rs 88440 crore end June 2021 as compared to Rs 98879 crore at end June 2020. Loans & Advances in the focused businesses fell 8% to Rs 85758 crore end June 2021 compared with Rs 93706 crore end June 2020. In the de-emphasized portfolio, the loans & advances dipped 48% to Rs 2682 crore end June 2021.

Disbursements: In Q1FY22, Covid related partial lockdowns in April and May had an impact on a few businesses. With gradual unlock of economy in June, disbursements bounced back, led by faster pickup in economic activity across Farm Equipment Finance (FE), Two-Wheeler Finance (2W), Consumer Loans (CL) and Infrastructure Finance businesses. Due to slower Industry pick-up, the Micro Loans (ML), Housing and Real Estate Business saw moderate uptick in collections and disbursements. Infrastructure Finance portfolio continued to see strong sectoral performance leading to high collections on account of sell-down and repayments/ pre-payments. Rural Finance franchise continued to remain one of the leading financiers with increased market share in FE.

a. Farm Equipment Finance: The company has established itself as among the leading financiers in this segment with an increase in market share. The business was least impacted due to Covid 2.0 with farm cashflows remaining robust. This quarter saw the highest ever quarterly ‘Q1' disbursement in the business, up 130% YoY at Rs 1357 crore. (Rs 590 crore in Q1FY21)

b. Two-Wheeler Finance: In Q1FY22, there was a gradual pickup since unlock, with sales impacted in May 2021 on account of dealership closures. However, the business leveraged analytics to increase counter share across select dealers, with disbursements in the quarter up 165% YoY.

c. Micro Loans: While disbursements were normal in April, there was a severe business impact in May and June, due to restrictions in field movements. In the quarter, the business adopted a calibrated disbursement approach based on on-ground collection trends which led to Rs 797 crore of disbursements

d. Consumer Loans: The business-maintained momentum with ~Rs. 100 crore per month disbursed in Q1FY22. This business is focused on cross-selling to existing customers with good credit history and leverages end-to-end digital service proposition and analytics led sourcing to scale up with a quality book

a. Home Loan/LAP: In Q1FY22, though business was severely impacted due to widespread lockdown in major city centres, there was an increase in disbursements on YoY basis. The business continued to focus on salaried segment and remained cautious on Self Employed Non-Professional (SENP) segments

b. Real Estate: LTFH maintained focus on funding existing projects with no new sanctions during the quarter

Infrastructure Finance:

The business showed robust disbursement momentum post unlock and continued sell-down with Rs 1480 crore disbursed in the quarter. The business continues to see robust performance backed by higher sell-down volumes and refinancing

Liability Management:

Liquidity remained comfortable in Q1FY22 despite pandemic led disruptions, OTR, etc., on the back of proactive measures instituted from Covid 1.0 onwards. The Company has a well-diversified liability profile and also has demonstrated astute treasury management to diversify funding sources at a lower cost of borrowing. The focus on raising low-cost incremental long-term borrowings through desired sources, continued in Q1FY22.

Reduction in cost of borrowing by 85 bps YoY (from 8.49% in Q1FY21 to 7.64% in Q1FY22) Q1FY22 borrowing cost is lowest ever. This has led to increase in NIM+Fees to 7.52%

As of June 2021, the Company maintained liquid assets in the form of cash, FDs and other liquid investments to the tune of Rs 12073 crore.

Highest Credit Ratings:

A diversified business presence, strategic importance to L&T, strong resource raising ability and adequate capitalization resulted in LTFH and all its lending subsidiaries' long-term ratings being rated ‘AAA' by all four rating agencies:

Subsequent to the merger of L&T Infrastructure Finance Company and L&T Housing Finance into L&T Finance (L&T Finance) becoming effective, all the Rating agencies have reviewed the ratings of L&T Finance and have assigned / reaffirmed the ‘AAA' rating in April 2021.

Focused Lending Book:

The share of retail portfolio in the overall book grew to 45% in Q1FY22, with the rural book growing 8% YoY. While the rural book remained resilient, a calibrated approach in select portfolios led to a reduction in the overall book. Farm Equipment finance book grew 27% YoY and Two-Wheeler Finance by 8%. The asset size of our salaried home loans portfolio also grew by 5% in the same period.

Focused Book witnessed robust collections of Rs 13166 crore in Q1FY22 against Rs 4321 crore in Q1FY21 and Rs 13880 in Q4FY21, despite lower collections in May 2021.

In the Investment Management business, overall AUM has increased from Rs 60056 crore end June 2020 to Rs 76552 crore end June 2021, up 27% YoY, on account of higher inflows in pure equity and hybrid category.

Financial Performance FY2021

The consolidated income from operations eased 1% to Rs 13104.85 crore for the nine-months ended March 2021, while other income of the company dipped 25% to Rs 975.25 crore. The total income declined 3% to Rs 14080.10 crore for FY2021.

Interest expenses fell 4% to Rs 7199.92 crore. Operating expenses increased 8% to Rs 2457.47 crore, causing the operating profits to decline 7% at Rs 4422.71 crore. The cost-to-income ratio was higher at 37.4% in FY2021 from 30.4% in FY2020.

Depreciation rose 7% to Rs 87.09 crore, while provisions jumped 49% to Rs 2978.03 crore. PBT before exceptional item declined 49% yoy basis at Rs 1357.59 crore.

There is exceptional income of Rs 137.61 crore. PBT after exceptional income dipped 44% yoy basis at Rs 1495.20 crore.

Effective tax rate declined to 30.1% in FY2021 from 36.6% in FY2020. Net Profit of the company, after share in profit of associates and non-controlling interest and prior period adjustments, declined 43% to Rs 970.94 crore for FY2020.

Note:

Exceptional item during the year ended March 2021 represents net gain of Rs 225.61 crore on the divestment of entire stake in the subsidiary company. L&T Capital Markets Limited. The transaction was concluded on 24 April 2020.

One-time impact of tax for L&T IDF pertaining to earlier years (FY15, FY16 and FY17) of Rs 73 crore and Rs 88 crore related to Stamp duty expense on LTF merger cost in Q1FY2022.