L&T Finance Holdings on Tuesday reported a 47% year-on-year (y-o-y) rise in net profit to Rs 262 crore, led by a 19% growth in the retail loan book. The company posted its highest ever net interest margin plus fees of 8.23% during the quarter, up 71 basis points (bps) y-o-y.
The loan book shrank 0.4% y-o-y to Rs 88,078 crore as the lender wound down its exposure to infrastructure and real estate. The retail business saw the highest ever quarterly disbursement at Rs 8,938 crore, up 148% y-o-y. The rural business finance book, aimed at micro-entrepreneurs, grew 27%, while disbursements in farm equipment finance grew 13%. The retail assets accounted for 54% of the loan book in Q1FY23, as against 45% in Q1FY22.
The company’s gross stage 3 loans, representing its bad loans, remained unchanged on a sequential basis at 4.08%. The net stage 3 ratio moderated to 1.87% from 1.98% in Q4FY22.
As a prudent measure, L&T Finance carries additional provisions of Rs 1,450 crore, corresponding to 1.73% of the standard book, in addition to provisions for gross stage 3 loans and expected credit loss (ECL) on standard assets. The additional provisions are aimed at countering a likely deterioration in asset quality with some accounts existing Covid-related restructuring.
“With the existing collection momentum in the one-time restructuring (OTR) pool, the company remains confident that current provisions will be sufficient to counter any future stresses related to OTR accounts,” the company said.
L&T Finance’s overall capital adequacy stood at 23.12%, with the tier-1 capital ratio at 19.98%.
Dinanath Dubhashi, managing director & CEO of L&T Finance Holdings, said that over the past five years, the company has achieved market-leading positions in rural lending businesses by applying data and analytics-based rule engines. “The company is now focused and is confident of building the same value proposition for our urban businesses,” Dubhashi said, adding, “The continued upswing in existing products and increased traction in new products bodes well in our journey to become a top-class, retail finance company with over 80% retail book by 2026.”