1. L&T Finance Holdings asset quality lifts shares to all-time high: 5 key points

L&T Finance Holdings asset quality lifts shares to all-time high: 5 key points

L&T Finance Holdings, the sister concern of the engineering conglomerate L&T, yesterday reported a rise of 49% in the consolidated net profit for the April-June quarter mainly due to higher advances and better asset quality.

By: | Published: July 27, 2017 12:24 PM
Over the period of last one month, the stock has returned almost 22% to its record high price of Rs 167.45. (Image: Reuters)

L&T Finance Holdings, the sister concern of the engineering conglomerate L&T, yesterday reported a rise of 49% in the consolidated net profit for the April-June quarter mainly due to higher advances and better asset quality. Shares of L&T Finance Holdings rose as much as 7.75% to the 52-week high since from the Tuesday’s closing price. Over the period of last one month, the stock has returned almost 22% to its record high price of Rs 167.45 on NSE.  The consolidated net profit grew 49% to Rs 309 crore for the quarter ended June 2017 driven by higher advances that clipped at 96.4%.

“We cut almost all the flabs. We got every little thing right and did not cry over external factors instead resolved the problems. We’ve one of the best risk management systems in place and also one of the highest provision coverage ratios. We’ve moved into the 90-day NPA reporting structure three-quarters ahead of the RBI mandate,” PTI reported citing Dinanath Dubhashi in a post-earnings conference call.

Improved ROI:

This is the fifth successive quarter in series for the company after many quarters of headwinds wherein it has been improving its return on investment (RoE), for which it has set a target of 18%-20% by 2020.

Reduction in bad loans:

In line with RBI guidelines, the company has proactively moved to the recognition of GNPA at 90-days past due (DPD). From the fourth quarter of the FY 2017 to the first quarter of FY 2018, the gross NPA has come down by 18% from Rs 4,519 crore to Rs 3,698 crore or to 5.71% from 7.11% of the total asset size. While net NPA at 3.31% or Rs 2,092 crore for the April-June quarter of the FY 2018.

Enhanced contingencies and workforce:

The company’s provision coverage ratio improved to 43.43% from 31% during the period. On the cost front he clarified that the company did not give pink slips to many but in fact hired 900 more in the quarter taking the total headcount to 11800 as of end June.

Strengthened lending portfolio:

Lending businesses of L&T Finance Holdings grew 22% driven by a strong growth in disbursements in all its businesses. Rural finance disbursement grew 65.3% to Rs 11,500 crore its tractor financing arm disbursal soared 118% to Rs 4,500 crore. Housing finance grew 118% Rs 13,500 crore, while wholesale finance has more than doubled to Rs 42,000 crore, taking the total asset book to Rs 66,000 crore, PTI reported citing Dinanath Dubhashi, Managing Director & Chief Executive of the financial firm.

Amplified investment businesses:

Under its investment & wealth management businesses, the average assets under management increased 57% to Rs 44,484 crore. Average assets under service in wealth management business increased 71% to Rs 16,531 crore.

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