L&T Finance Ltd · NSE:LTF
L&T Finance — Q2 FY2017 Earnings Presentation
41 slides from L&T Finance's earnings presentation, 2016
Slide 1: Strategy Update & Results – Q2FY17
Strategy Update & Results – Q2FY17 1
Slide 2: Disclaimer
Disclaimer This presentation does not constitute or form part of any offer or invitation or inducement to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities of L&T Finance Holdings Limited (the “Company”), nor shall it or any part of it or the fact of its di
Slide 3: Strategy Highlights
Strategy Highlights Performance and Outlook – By Business Appendix 3
Slide 4: Strategy Highlights
Strategy Highlights Performance and Outlook – By Business Appendix 4
Slide 5: Transform. Focus. Deliver.
Transform. Focus. Deliver. Roadmap to continuous improvement in RoE TRANSFORM. FOCUS. DELIVER. Rural Business Short Term Re-orient strategy to focus on select products and deliver steady improvement in RoE Farm Equipment • Drive efficiency to lower Cost to Two wheeler Income ratio Microfinance • Sel
Slide 6: Key metrics to measure LTFH performance
Key metrics to measure LTFH performance Continuous Improvement In ROE Q1 FY16 Q1 FY 17 9.09% 9.78% Q2 FY16 Q2 FY17 9.84% 11.72% Growth In Focused Improvement In Cost To Progress On Specific Businesses Income Ratio Initiatives Y-o-Y Q-o-Q Q1 FY16 Q1 FY 17 • Short term initiatives Disbursement 28% 45%
Slide 7: LTFH Consolidated – Financial Performance Highlights
LTFH Consolidated – Financial Performance Highlights Q2FY17 v/s Q2FY16 Cost to Income Ratio Consolidated PAT RoE* Overall Book 33% Rs 248 Cr 11.72% Rs 60,898 Cr 500 PAT to Equity bps Shareholders* 15% Rs 216 Cr 188 18% bps 28% Rs 215 Cr 9.84% Rs 51,411 Cr Focused Biz Book Defocused Biz Book 33% Gros
Slide 8: LTFH Consolidated – Capital Allocation & ROE Bridge
LTFH Consolidated – Capital Allocation & ROE Bridge Q2FY16 Business Segments Q2FY17 PAT PAT Net Worth RoE (Rs Cr) PAT Net Worth RoE Y-o-Y (%) 58 1,176 20.26% Rural Business 76 1,312 23.84% 31% 28 777 15.47% Housing Business 61 1,163 21.89% 114% 139 4,171 13.41% Wholesale Business 121 4,828 10.19% (1
Slide 9: Status of key initiatives (1/2)
Status of key initiatives (1/2) Initiative Status Impact on RoE Tree RISK • Articulated key risk parameters with defined overarching limits at enterprise level CREDIT COST FRAMEWORK • Harmonisation of pricing and rating models across businesses with built in LGD* Grid • Identified and implemented st
Slide 10: Status of key initiatives (2/2)
Status of key initiatives (2/2) Initiative Status Impact on RoE Tree • Identification and mapping sell-down potential in our lines of businesses for optimum capital usage COE – SELLDOWN INCOME • Re-orientated processes and policies in sync with the sell-down strategy • 47% growth in sell down betwee
Slide 11: Culture as a Competitive Advantage
Culture as a Competitive Advantage Execution design and method Employee value proposition 11
Slide 12: Culture as a Competitive Advantage
Culture as a Competitive Advantage Execution design and method PRIMARY MONITORING REWARDS & METRICS RESPONSIBILITY MECHANISM CONSEQUENCES LTFH ROE and Weekly ExCom Wealth creation linked to Formulating strategy and strengthening “Right to Project SteerCo shareholder value guiding implementation Lead
Slide 13: Culture as a Competitive Advantage
Culture as a Competitive Advantage Employee value proposition ENGAGEMENT GROWTH RECOGNITION CARE Place at the decision Large and complex roles The LTFS Excom identity making table Leadership Layer • Respect for individual • Enabling policies Quarterly engagement with Cross functional Star Awards for
Slide 14: Conclusion & Outlook
Conclusion & Outlook Strategy for transformation of LTFS is on course: • Organizational culture re-oriented towards profitable growth • Rigour in implementation of the strategic initiatives leading to visible outcomes • Output oriented performance metrics and rewards mechanism in place ROE stand
Slide 15: Performance and Outlook – By Business
Strategy Highlights Performance and Outlook – By Business Appendix 15
Slide 16: Rural Business – Performance Highlights
Rural Business – Performance Highlights Key Financial Metrics (Q2FY17 v/s Q2FY16) Key Ratios (Q2FY17 v/s Q2FY16) Rs 278 Cr Rs 105 Cr Rs 203 Cr 12.47% 5.45% 9.12% Opex Opex 163 16% 41% 0 Bps Bps NIM 115 NII 9% PPOP PPOP Bps Rs 240 Cr Rs 96Cr Rs 144 Cr 12.47% 4.31% 7.48% Rs 89Cr Rs 76 Cr 3.99% 3.18% 2
Slide 17: Rural Business – Market Scenario and Outlook
Rural Business – Market Scenario and Outlook Q2FY17 v/s Q2FY16 Segment Management Discussion Disbursements Loan Book Rs 1237 Cr Rs 3,091 Cr • Market expected to grow at 30%-40% annually Micro • Customer growth of 60% Finance 128% 105% • Rejection rate of 33% Rs 542 Cr Rs 1,510 Cr Rs 392 Cr Rs 1,809
Slide 18: Rural Business – Asset Quality
Rural Business – Asset Quality Asset Quality Indicators – 120 DPD 13% 24% 25% 9.57% 8.36% 7.50% 7.43% 6.56% 6.42% 592 513 822 623 771 580 Q2 16 Q1 17 Q2 17 GNPA (Rs. Cr.) NNPA (Rs. Cr.) GNPA (%) NNPA (%) PCR (%) • Increase in PCR from 13% to 25% • Additionally, Rs.22 Crs voluntary provision has been
Slide 19: Rural Business – Summary Financials
Rural Business – Summary Financials P&L Summary Comments Q2FY16 Q1FY17 Summary P&L (Rs. Cr. ) Q2FY17 Y-o-Y 390 438 Interest Income 442 13% 150 166 Interest Expense 164 10% 240 272 NIM 278 16% o Smart growth in Fee Income 9 13 Fee Income 21 135% o Digital solution implemented in all the 3 products ha
Slide 20: Rural Business – Key Ratios
Rural Business – Key Ratios Key Ratios Comments Q2FY16 Q1FY17 Key Ratios Q2FY17 20.27% 20.32% Yield 19.86% 9.16% 8.91% Cost of Borrowing 8.52% 12.47% 12.61% Net Interest Margin 12.47% 0.47% 0.62% Fee Income 0.96% - - Other Income - 5.45% 4.27% Operating Expenses 4.31% o Improvement in ROE due to sha
Slide 21: Housing Business – Performance Highlights
Housing Business – Performance Highlights Key Financial Metrics (Q2FY17 v/s Q2FY16) Key Ratios (Q2FY17 v/s Q2FY16) Rs 125 Cr Rs 38 Cr Rs 104 Cr 4.58% 2.02% 3.83% Opex 57% 6% 118% 15 Bps 116 Bps NII Opex PPOP 61 Bps NIM PPOP Rs 79 Cr Rs 36 Cr Rs 48 Cr 4.43% 1.41% 2.67% Rs 11 Cr Rs 61 Cr 0.39% 2.11% 2
Slide 22: Housing Business – Market Scenario and Outlook
Housing Business – Market Scenario and Outlook Q2FY17 v/s Q2FY16 Segment Management Discussion Disbursements Loan Book Rs 862 Cr Rs 7,165 Cr Home • Momentum maintained despite shift to SENP segment Loans & 50% LAP • Redesigned process has improved TAT 3% Rs 835 Cr Rs 4,783 Cr Rs. 1,102 Cr Rs 4,216 C
Slide 23: Housing Business – Asset Quality
Housing Business – Asset Quality Asset Quality * 34% 32% 37% 0.88% 0.77% 0.68% 0.60% 0.45% 0.49% 51 34 92 63 88 55 Q2 16 Q1 17 Q2 17 GNPA (Rs. Cr.) NNPA (Rs. Cr.) GNPA (%) NNPA (%) PCR (%) o NPA’s have decreased on absolute basis from Q1FY17 o PCR increased to 37% o Book quality would continue to re
Slide 24: Housing Business – Summary Financials
Housing Business – Summary Financials P&L Summary Comments Q2FY16 Q1FY17 Summary P&L (Rs. Cr. ) Q2FY17 Y-o-Y 223 307 Interest Income 334 50% 144 197 Interest Expense 209 46% 79 110 NIM 125 57% 5 10 Fee Income 18 288% o Substantial increase in NIM due to 84 120 Total Income 143 70% SENP and Real Esta
Slide 25: Housing Business – Key Ratios
Housing Business – Key Ratios Key Ratios Comments Q2FY16 Q1FY17 Key Ratios Q2FY17 12.46% 12.14% Yield 12.26% 9.23% 8.66% Cost of Borrowing 8.56% 4.43% 4.34% Net Interest Margin 4.58% 0.26% 0.40% Fee Income 0.66% o Marked increase in fee income and improved cost efficiency 2.02% 1.81% Operating Expen
Slide 26: Wholesale Business – Performance Highlights
Wholesale Business – Performance Highlights Key Financial Metrics (Q2FY17 v/s Q2FY16) Key Ratios (Q2FY17 v/s Q2FY16) Rs 356 Cr Rs 43 Cr Rs 356 Cr 4.38% 0.56% 4.29% NIM Opex PPOP 9% 2% 11% 38 Bps 8 Bps 29 Bps NII Opex PPOP Rs 328 Cr Rs 42 Cr Rs 321 Cr 4.00% 0.48% 4.00% Rs 188 Cr Rs 139 Cr 2.11% 1.71%
Slide 27: Wholesale Business – Market Scenario and Outlook
Wholesale Business – Market Scenario and Outlook Q2FY17 v/s Q2FY16 Segment Management Discussion Disbursements Loan Book Rs 3,521 Cr Rs 29,389Cr • Large opportunities available in TOMT model of Roads and in Solar within renewable energy Infra • Strategy of origination and down sell maintained Financ
Slide 28: Wholesale Business – Asset Quality
Wholesale Business – Asset Quality Asset Quality Indicators 25% 40% 38% 20% 23% 24% 3.60% 3.58% 9.63% 3.02% 9.53% 8.69% I 1 M 2 2.73% P 0 A 7.68% 7.37% 2.19% I 6.76% D 1.91% R P E D D 1,059 794 1,014 632 1,224 737 2,800 2,238 2,912 2,248 3,294 2,499 Q2 16 Q1 17 Q2 17 Q2 16 Q1 17 Q2 17 • Provision Co
Slide 29: Wholesale Business – Segment Wise Split
Wholesale Business – Segment Wise Split Sectors (Rs Cr ) Q2FY16 Q1FY17 Q2FY17 Y-o-Y Comments D Renewable Power 1,004 1,188 1,389 38% I S Transport 729 596 564 -23% o 55% of Infra finance disbursements are in B Power – Thermal 52 93 105 104% U renewables, roads in Q2 FY’17 R Power – Corp2 + T&D 595 1
Slide 30: Wholesale Business – Summary Financials
Wholesale Business – Summary Financials P&L Summary Comments Q2FY16 Q1FY17 Summary P&L (Rs. Cr. ) Q2FY17 Y-o-Y 907 1,016 Interest Income 1,033 14% 579 686 Interest Expense 677 17% 328 330 NIM 356 9% 23 26 Fee Income 27 18% 12 10 Other Income 15 26% o Fee income from underwriting, DCM continue to see
Slide 31: Wholesale Business – Key Ratios
Wholesale Business – Key Ratios Key Ratios Comments Q2FY16 Q1FY17 Key Ratios Q2FY17 12.12% 11.68% Yield 11.60% • Reduction in NIMs is reflective of our growth in IDF portfolio and 8.86% 8.87% Cost of Borrowing 8.65% increasing proportion of operational 4.38% 3.80% Net Interest Margin 4.00% assets 0.
Slide 32: Lending Business – CRAR Ratios
Lending Business – CRAR Ratios As of June 2016 CRAR Ratios As of September 2016 Tier I Tier II CRAR Entity Tier I Tier II CRAR 14.74% 2.58% 17.33% L&T Finance Ltd. 13.96% 2.42% 16.38% 13.68% 5.64% 19.32% L&T Infra. Finance Ltd. 14.26% 6.53% 20.79% 14.36% 4.87% 19.23% L&T FinCorp Ltd. 16.00% 5.05% 21
Slide 33: Investment Management – Performance Overview
Investment Management – Performance Overview Key Financial Metrics (Q2FY17 v/s Q2FY16) Rs 32,667 Cr Rs 12,875 Cr Rs 12 Cr 31% 35% 140% Avg. Avg Equity PAT AUM1 AUM1 Rs 24,280 Cr Rs 9,817 Cr Rs 5 Cr • AAUM growth of 35% on a sequential quarter basis compared to industry growth rate of 12% Growth le
Slide 34: Wealth Management – On the Path of Profitable Growth
Wealth Management – On the Path of Profitable Growth Key Metrics Rs 10,890 Cr 5,140 Rs 2 Cr 38% 39% AAUS Client PAT Rs 7,878 Cr 3,700 Rs - 7 Cr • Merger and restructuring of Wealth Management business has resulted in structural and operating efficiencies • Increased focus on RM productivity resultin
Slide 35: Appendix
Strategy Highlights Performance and Outlook – By Business Appendix 35
Slide 36: Leadership comprises a seasoned board of directors
Leadership comprises a seasoned board of directors Board Of Directors Y.M. Deosthalee, Chairman Harsh C. Mariwala, Independent Director o Chartered Accountant and Law graduate o Chairman & MD of Marico Limited o 40+ years at L&T Group o 30+ years of experience in building some of the leading Consume
Slide 37: Management Team
Management Team Dinanath Dubhashi Managing Director 26 yrs exp, BNP Paribas, SBI Cap, CARE Kailash Kulkarni Parvez Mulla Virender Pankaj Manoj Shenoy CE - Investment Management CE - Retail Business CE - Wholesale Business CE - Wealth Management Business Business 22 yrs exp, ICICI Bank, ANZ Grindlays
Slide 38: Consolidated Debt Profile - Effective Liability Management
Consolidated Debt Profile - Effective Liability Management Rs Cr 43,554 46,100 47,385 50,894 52,829 54,115 53,689 10.5% 10.0% 9.5% 9.14% 9.16% 9.03% 9.64% 9.48% 9.02% 9.0% 9.03% 8.5% 100% 8% 10% 10% 11% 10.00% 8.60% 9.03% 13% 13% 11% 11.00% 14.70% 11.00% 80% 14% 14% 15% 19% 19.00% 17% 22.90% 27.00%
Slide 39: AUM Disclosure
AUM Disclosure Assets Under Management (Rs. Cr.) Quarter ended Mar, 2016 Quarter ended Jun, 2016 Quarter ended Sep, 2016 Fund Type AUM1 Avg. AUM2 AUM1 Avg. AUM2 AUM1 Avg. AUM2 Income 7,970 8,059 9,053 8,892 11,048 10,987 Equity (Other than ELSS) 9,370 8,884 10,498 9,872 11.679 11,168 Balanced 0 0 0
Slide 40: Product Reclassification
Product Reclassification Product Classification Business Platform Business Segment Key Sub Products Retail Rural Product Finance Farm Equipment, Trade Advance, LCV, SCV, Personal Vehicle Finance Cars, 2 Wheelers Microfinance JLG Loans Housing Finance Home Loan, LAP, Construction Finance Supply Chain
Slide 41: Our aim is to be an admired and inspirational financial institution
“Our aim is to be an admired and inspirational financial institution, creating sustainable value for all our stakeholders.” L&T Finance Holdings Ltd Registered Office T +91 22 6621 7300/400 Brindavan, Plot No 177 L&T House, NM Marg F +91 22 6621 7509 Vidyanagari Marg, CST Road, Kalina Ballard Estate
L&T Finance Holdings — Q2 FY2017 Earnings Presentation on 6ix