L&T Finance Holdings Ltd share Price

L&T Finance Holding (LTFH) is a leading NBFC catering to the diverse financing needs of served and underserved customers in urban as well as rural areas. LTFH offers financial assistance in various segments including consumer loans, two-wheeler loans, home loans, micro loans, farm loans and SME loans. Backed by a strong parent, the lender has been assigned “AAA” rating by rating agencies. Its distribution network remains strong with substantial dealer penetration (2500+ dealers in farm equipment and 5500+ tie-ups in two-wheeler segment), 2 crore customers (database) spread across 21 states and one union territory.

In April 2022, LTFH announced “Lakshya 2026”, which was targeted towards retailisation and a shift from product based approach to customer focused approach to pedal business growth as well as improve return ratios. As per the plan, the recalibrated product growth strategy was adopted with customised products in mature markets [farm equipment, rural group loans (MFI) and two wheeler finance] with focus on newer retail segment (consumer loans, home loans, LAP and SME loans) with substantial growth potential.

The management aimed to run down the wholesale book and increase retail share in total loans. Accordingly, in the last four quarters, the share of retail loans has increased from 51% to 75% while the proportion of wholesale book has declined from 49% to 25% (from ₹ 43257 crore to ₹ 19840 crore). Induction of new Chairman SN Subrahmanyan in February 2022 hastened the process of restructuring further.

Going ahead, AUM growth is expected to be driven by the retail segment – newer segments seen driving faster traction while existing mature segments are expected to witness steady growth with a gradual gain in market share. Increase in retail proportion will continue to aid NIMs trajectory (calculated NIMs at 7.5% in FY23 vs. 6.3% in FY22), which is expected to improve to ~8-9% levels.

LTFH has been focusing on accelerating retailisation and, thus, leveraging fintech capabilities through automation in order to make the customer journey hassle free and quick. All this should aid sustainable retail AUM growth (31% YoY in FY24E and 24% YoY in FY25E) and gradual improvement in efficiency. However, CI ratio could remain elevated at ~40-41% in the initial phase and subsequently witness improvement at ~38-39% level.

Holding Company L&T Finance Holdings announced Q1FY24 results:

• Retail portfolio mix now stands at 82% of the total loan book; achieved Lakshya 2026 goal of greater than 80% retailisation almost three years in advance
• Robust Q1FY24 retail disbursements at Rs 11,193 crore, up 25% YoY driven by strong growth across all retail segments coupled with top-notch digital and data analytics
• Accelerated reduction in the wholesale book by 65% YoY, a reduction of Rs 25,992 crore in line with Lakshya 2026 gaining momentum towards becoming a top-notch, retail finance company
• Achieves Lakshya 2026 goal of over 80 percent retailisation much ahead of time
• PLANET app crosses 44 lakh downloads; powering up with digital technology towards becoming a Fintech@Scale
• Progressing well on the proposed merger of entities leading to a 'single entity structure'
• PAT stood at Rs 531 crore, up 103% in Q1FY24 from Rs 262 crore in Q1FY23
• Strong Balance Sheet with a Capital Adequacy Ratio of 25.75% (Tier 1: 23.42%) in Q1FY24 and adequate liquidity buffers in place
• Declared highest final dividend till date of Rs 2 per equity share (face value of Rs 10 per share) for FY23
• Rated ‘AAA’ by CRISIL, ICRA, CARE and India Ratings

Commenting on the financial results, Dinanath Dubhashi, Managing Director & CEO, L&T Finance Holdings said, “It gives me immense pleasure to announce that we have achieved Retailisation of 82% in Q1FY24 itself, much ahead of Lakshya 2026 goal of greater than 80% Retailisation. In fact, we have been able to achieve most of our Lakshya 2026 goals almost 3 years in advance. This achievement is attributed to the twin strategy of strongly growing the retail asset book on one side and ensuring a sharp reduction in the wholesale book on the other, while maintaining best-inclass asset quality. On the fintech front, our customer facing application PLANET has crossed 44 lakh downloads as on date and is constantly evolving to offer exciting features to our customers, while servicing most of their requirements. Going forward, we will sustain our growth momentum and continue to work towards creating a customer-focused and sustainable Fintech@Scale. The Company will continue to develop digital finance delivery as a customer value proposition thereby touching every part of the customer ecosystem through our digital offerings.”

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