L&t Finance Ltd · NSE:LTF
L&t Finance — Q1 FY2020 Earnings Presentation
59 slides from L&t Finance's earnings presentation, Jul 19, 2019
Slide 1: Submission of Investor / Analyst Presentation
S L&T Financial Services » July 19, 2019 National Stock Exchange of India Limited BSE Limited Exchange Plaza, Corporate Relations Department, Plot No. C/1, G Block, 1st Floor, New Trading Ring , Bandra - Kurla Complex, Bandra (East), P. J. Towers, Dalal Street, Mumbai - 400 051 . Mumbai - 400 001 .
Slide 2: Strategy & Results Update – Q1FY20
Strategy & Results Update – Q1FY20 1
Slide 3: Disclaimer
Disclaimer The information in this presentation is provided by L&T Finance Holdings Limited (the “Company”) for information purpose only. This presentation or any information therein may not be used, reproduced, copied, photocopied, duplicated or otherwise reproduced in any form or by any means; or
Slide 4: LTFH 2.0
LTFH 2.0 Our Commitment TO BE A COMPANY WHICH: Sustainably delivers top quartile RoE Has a clear Right to Win in each of the businesses Grows fearlessly with strong balance sheet and robust systems Uses Data Intelligence as a key to unlock RoE Has a culture of “Results” not “Reasons”
Slide 5: Q1FY20 in perspective
Q1FY20 in perspective Industry challenges LTFH Response • ALM continues to be positive in all buckets upto 1 year • Maintaining Rs.4,855 Cr in the form of cash, FDs and other liquid instruments • Proactively diversified funding sources Tough liquidity conditions • Raised Rs. 1,000 Cr through retail
Slide 6: Q1FY20 in perspective
Q1FY20 in perspective Industry challenges LTFH Response • In line with our stated strategy, our primary focus is on portfolio quality and profitability by consistently strengthening the risk profile • Protecting and further building strengths in our core businesses Enhanced strength by investing i
Slide 7: LTFH Response
LTFH Response 1 Liability management 2 Update on specific accounts 3 Building business strengths 6
Slide 8: Liability Management - Summary
Liability Management - Summary • Prudent ALM: Strategy followed since Apr’17 Maintained positive liquidity gaps in all buckets till 1 year Positive gaps maintained consistently even under ‘1 in 10’ scenario in 1 month bucket • Liquidity: Maintained liquidity of Rs. 13,133 Cr. including Rs. 4,855
Slide 9: 1.1 Credit rating – LTFH and subsidiaries
1.1 Credit rating – LTFH and subsidiaries L&T FINANCE HOLDINGS (LTFH) India Ratings & Research AAA (Long Term) CARE A1+ (Short Term) ICRA CRISIL A1+ (Short Term) L&T Infrastructure L&T Infra Debt Fund L&T Finance L&T Housing Finance Finance India Ratings & Research CRISIL AAA (Long Term) CARE AAA (L
Slide 10: 1.2 Prudent ALM
1.2 Prudent ALM As on 30th June, 2019 Structural Liquidity statement 46,738 Cumulative Inflows (Rs. Cr) Cumulative Outflows (Rs. Cr) 31,700 29,024 22,759 20,404 20,249 14,600 18,315 15,447 11,872 2,610 5,979 1 to 14 days Over 14 days to one Over one month to 2 Over 2 months to 3 Over 3 Months upto O
Slide 11: 1.3 Structural Liquidity - Stress scenario
1.3 Structural Liquidity - Stress scenario 1 month positive gap in stress scenario 6,865 7,294 6,199 6,259 3,985 Jun'18 Sept'18 Dec'18 Mar'19 Jun'19 Positive gaps maintained consistently even under ‘1 in 10’ scenario in 1 month bucket As of Jun’19, Rs.13,133 Cr of liquidity is maintained through
Slide 12: 1.4 Well diversified liability mix
1.4 Well diversified liability mix Q1FY19 Q1FY20 2% 2% 3% 20% 13% 35% 38% 6% 3% 38% 40% Bank Loans NCD (ex retail) NCD Retail CP ECB Others Rs. 77,234 Cr Rs. 92,887 Cr Diversified funding profile through: • Retail NCD - Raised Rs. 1,000 Cr (in addition to Rs. 1,500 Cr in Q4FY19) • ECB - Raised USD
Slide 13: 1.5 Incremental long-term borrowing in Q1 FY20
1.5 Incremental long-term borrowing in Q1 FY20 Preference share 4% Incremental Long Term Borrowing NCD - Private Products Rs. Cr Placement 15% Term Loans 2,250 Term Loans 35% ECBs 1,902 NCD - Public Issue NCD – Public Issue 1,000 16% NCD – Private Placement 929 Preference shares 274 ECB 30% Total 6,
Slide 14: 1.6 Well managed liability cost
1.6 Well managed liability cost Q-o-Q movement in WAC 9.20% 8.93% 8.71% 8.58% 8.53% 8.59% 8.50% 8.36% 8.33% 8.24% 8.29% 8.23% 8.16% Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY18 Q1 FY19 Q2 FY19 Q3 FY19 Q4 FY19 Q1 FY20 Successfully raised the desired quantum and quality of funds at
Slide 15: LTFH Response
LTFH Response 1 Liability management 2 Update on specific accounts 3 Building business strengths 14
Slide 16: 2.1 IL&FS – Validation of our business model
2.1 IL&FS – Validation of our business model Break up of LTFH’s exposure 31st March 2019 Current Status Exposure (Rs. Cr) SPVs Exposure (Rs. Cr) SPVs Green Entities 178 2 Green Entities 1,696 5 Amber Entities 1,612 4 Amber Entities 120 1 Red Entities No exposure NIL Red Entities No exposure NIL Time
Slide 17: 2.2 Exposure to a specific HFC – Downgraded to D
2.2 Exposure to a specific HFC – Downgraded to D • Exposure to securities of a specific HFC was taken as part of DCM business when it was rated AAA • Subsequently, the HFC was downgraded to “D” • LTFH has principal outstanding investment exposure of Rs.525 Cr to the HFC with interest accrued of Rs.
Slide 18: LTFH Response
LTFH Response 1 Liability management 2 Update on specific accounts 3 Building business strengths 17
Slide 19: Building Business Strength
Building Business Strength Market Maintained market share by building and protecting strength in our core businesses Share Portfolio Improved portfolio quality by strengthening the risk profile Quality Right to Business realignment with focus on ‘Right to Win’ Win 18
Slide 20: 1.1 Building and protecting strength
1.1 Building and protecting strength Market Share Rural Finance Industry LTFH • Industry sales down by 10% - 15% • De-growth in disbursement by 5% while book grew by 20% • Higher inventory level on account of overstocking • Maintained market share by increasing business presence Farm • Delayed and u
Slide 21: 1.2 Building and protecting strength
1.2 Building and protecting strength Market Share Housing Finance Industry LTFH • Disbursement growth of 12% with growth in salaried segment • Steady retail sales in top cities by 49% • Reduction in GST and increase in limit of interest deduction for • Higher share of sourcing in projects of Cat A d
Slide 22: 1.3 Building and protecting strength
1.3 Building and protecting strength Market Share Infrastructure Finance Industry LTFH • Stable disbursement with focus on sell down • Focus on key sectors: Road, Renewable and • Sustained momentum in renewable sector (solar and Transmission wind) Infrastructure • Continue to maintain market share i
Slide 23: 2.1 Strengthened risk profile
2.1 Strengthened risk profile Portfolio Quality Rural Finance Actions taken to ensure quality portfolio • Focus on under penetrated states with better macro-economic indicators • Use of data analytics for OEM classification and to identify areas of business growth with preferred OEMs Farm • Periodic
Slide 24: 2.2 Strengthened risk profile
2.2 Strengthened risk profile Portfolio Quality Real Estate Market Developments Impact LTFH Risk Mitigation Strategy Demonetisation, GST & • Affected smaller developers • Focus on funding to Category A developers RERA • Higher impact in Tier II and Tier III cities • Present in 6 cities with presence
Slide 25: 2.3 Strengthened risk profile
2.3 Strengthened risk profile Portfolio Quality Infrastructure Finance Under Construction Projects: Key Risk and Mitigant Operational Projects Equity Risk Promoter equity brought upfront Cash Flow Risk Land Risk Majority of land acquired upfront • Projects with established cashflow PPA Risk PPA in p
Slide 26: 3.1 Focus on 'Right to Win'
3.1 Focus on ‘Right to Win’ Right to Win WHOLESALE FINANCE FOCUSED BUSINESS Infrastructure Finance Infrastructure Finance Infra Debt Fund (IDF) Infra Debt Fund (IDF) TRANSITION DEFOCUSED PORTFOLIO Structured Corp Finance Structured Corp Finance Debt Capital Market (DCM) Supply Chain Finance EXITED D
Slide 27: 3.2 Book composition
3.2 Book composition Right to Win FY16 to FY19: Successful rundown of defocused book Mar-16 Mar-19 8% 1% 15% 26% 39% 17% A 56% 26% S 4% 8% S Rural Housing IDF Wholesale Defocused E T FY20 onwards: SFG and DCM have now been moved to defocused book M Q4FY19 Q1FY19 Q1FY20 I 15% 10% 9% X 22% 26% 26% 30%
Slide 28: Financial Update
Financial Update ) L&T Financial Services
Slide 29: Our Delivery – PAT & RoE
Our Delivery – PAT & RoE PAT RoE (Rs. Cr) 548 549 538 18.45% 16.57% 15.99% Q1 FY19 Q4 FY19 Q1 FY20 Q1 FY19 Q4 FY19 Q1 FY20 Q1 FY20 results include one time adjustment of the following: • Rs. 84 Cr of interest income for IL&FS that was deferred in Q4FY19 is now recognised • Mark down of Rs 284 Cr tow
Slide 30: Financial Performance
Financial Performance Q1FY20 vs Q1FY19 Focused Book Overall Book Rs. 90,500 Cr Rs. 99,904 Cr 24% 16% Rs. 73,278 Cr Rs. 86,321 Cr AAuM1 AuS2 Rs. 73,497 Cr Rs. 25,589 Cr 3% 36% Rs. 71,118 Cr Rs. 18,866 Cr Q1FY19 Q1FY20 Steady growth in focused businesses 1 Investment Management – AAuM (quarterly avera
Slide 31: Growth in focused businesses
Growth in focused businesses Lending Businesses Non Lending Businesses Rural Housing Infrastructure Investment Wealth Finance Finance Finance Management Management Q1FY19 Q1FY20 Book AAuM1 AuS2 35% 28% 14% 3% 36% Disbursements 6% 14% 3% 1 Investment Management – AAuM (quarterly average) 30 2 Wealth
Slide 32: NIMs + Fee Income
NIMs + Fee Income TOTAL INCOME (NIMs + FEES) % of average book 6.95%* 6.76%* 6.58% Q1FY19 Q4FY19 Q1FY20 Steady ‘NIMs + Fees’ by maintaining positive interest rate gaps * Normalising for the impact of IL&FS 31 Actuals without normalization: Q4FY19 - 6.77% | Q1FY20 – 7.10%
Slide 33: Strengthening Balance sheet – Asset Quality
Strengthening Balance sheet – Asset Quality LTFH Consolidated – Asset Quality 62% 61% 58% 6,480 5,549 5,460 10% 7.93% 5.90% 7% 5.72% 2,463 2,174 2,287 4% 3.17% 2.40% 2.48% 1% Q1 FY19 Q4 FY19 Q1 FY20 GS3 (Rs. Cr) NS3 (Rs. Cr) GS3 (%) NS3 (%) PCR (%) Macro-prudential provisions of Rs. 350 Cr for unant
Slide 34: LTFH consolidated – Capital allocation and RoE bridge
LTFH consolidated – Capital allocation and RoE bridge Q1 FY19 Q1 FY20 PAT Business Segments (Rs. Cr) PAT Net Worth RoE PAT Net Worth RoE Y-o-Y (%) 193 2,986 28.04% Rural Finance 252 3,962 26.20% 30% 166 2,700 25.70% Housing Finance 208 3,874 22.07% 25% 77 3,426 9.03% Infrastructure Finance 230 4,945
Slide 35: Conclusion (1/2)
Conclusion (1/2) Liquidity and liability management AAA rating with strong parentage and diversification strategy has helped LTFH to raise adequate liabilities at a competitive rate Prudent ALM policy and adequate high quality liquid assets serves as an assurance of liquidity Budget measures c
Slide 36: Conclusion (2/2)
Conclusion (2/2) Building business strengths While we saw market slowdown in many of the business segments in Q1FY20, we have achieved the following: Maintained market share Invested more in our core businesses Moved SFG and DCM, where we didn’t have ‘Right to Win’, into defocused book with
Slide 37: Appendix
Appendix Z) L&T Financial Services
Slide 38: LTFH Consolidated – Summary financial performance
LTFH Consolidated – Summary financial performance Performance summary Q1FY19 Summary P&L (Rs. Cr) Q4FY19 Q1FY20 Y-o-Y (%) 2,564 Interest Income 3,046 3,287 28% 1,512 Interest Expense 1,832 1,918 27% 1,052 NIM 1,215 1,369 30% 359 Fee & Other Income 403 396 10% 1,411 Total Income 1,618 1,765 25% 330 O
Slide 39: LTFH Consolidated – Key ratios
LTFH Consolidated – Key ratios Key ratios Q1FY19 Key Ratios Q4FY19 Q1FY20 11.95% Yield 12.75% 13.22% 4.90% Net Interest Margin 5.08% 5.51% 1.67% Fee & Other Income 1.69% 1.59% 6.58% NIM + Fee & Other Income 6.77% 7.10% 1.54% Operating Expenses 1.70% 1.70% 5.04% Earnings before credit cost 5.07% 5.40
Slide 40: Lending Business – Business wise disbursement split
Lending Business – Business wise disbursement split Disbursement Q1FY19 Segments (Rs. Cr) Q4FY19 Q1FY20 Y-o-Y (%) 915 Farm Equipment 845 874 -5% 952 2W Finance 1,262 1,090 14% 2,613 Micro Loans 2,705 2,268 -13% 4,480 Rural Finance 4,812 4,232 -6% 590 Home Loans 808 661 12% 295 LAP 227 188 -36% 1,572
Slide 41: Lending Business – Business wise book split
Lending Business – Business wise book split Book Q1FY19 Segments (Rs. Cr) Q4FY19 Q1FY20 Y-o-Y (%) 6,199 Farm Equipment 7,362 7,463 20% 3,771 2W Finance 5,739 5,857 55% 9,109 Micro Loans 12,476 12,524 37% 19,079 Rural Finance 25,577 25,845 35% 4,913 Home Loans 6,243 6,615 35% 4,195 LAP 4,249 4,217 1%
Slide 42: Rural Finance – Summary financial performance
Rural Finance – Summary financial performance Performance summary Q1FY19 Summary P&L (Rs. Cr) Q4FY19 Q1FY20 Y-o-Y (%) 823 Interest Income 1,155 1,195 45% 316 Interest Expense 421 469 48% 507 NIM 734 726 43% 74 Fee & Other Income 90 109 48% 581 Total Income 824 835 44% 137 Operating Expense 222 258 8
Slide 43: Rural Finance – Key ratios
Rural Finance – Key ratios Key ratios Q1FY19 Key ratios Q4FY19 Q1FY20 18.33% Yield 18.85% 18.54% 11.28% Net Interest Margin 11.97% 11.32% 1.64% Fee & Other Income 1.48% 1.70% 12.93% NIM + Fee & Other Income 13.45% 13.02% 3.05% Operating Expenses 3.62% 4.02% 9.87% Earnings before credit cost 9.83% 9.
Slide 44: Rural Finance - Asset quality
Rural Finance - Asset quality Rural - Asset Quality 66% 62% 64% 13% 917 864 871 11% 9% 7% 4.93% 5% 311 329 314 3.46% 3.42% 3% 1.73% 1.34% 1.26% 1% -1% Q1 FY19 Q4 FY19 Q1 FY20 GS3 (Rs. Cr) NS3 (Rs. Cr) GS3 (%) NS3 (%) PCR (%) Macro-prudential provisions of Rs. 235 Cr for unanticipated future event ri
Slide 45: Housing Finance – Summary financial performance
Housing Finance – Summary financial performance Performance Summary Q1FY19 Summary P&L (Rs. Cr) Q4FY19 Q1FY20 Y-o-Y (%) 597 Interest Income 777 828 39% 343 Interest Expense 428 484 41% 254 NIM 349 344 35% 77 Fee & Other Income 63 62 -19% 331 Total Income 412 407 23% 38 Operating Expense 46 59 57% 29
Slide 46: Housing Finance – Key ratios
Housing Finance – Key ratios Key ratios Q1FY19 Key ratios Q4FY19 Q1FY20 12.12% Yield 12.90% 12.90% 5.16% Net Interest Margin 5.79% 5.36% 1.56% Fee & Other Income 1.05% 0.97% 6.72% NIM + Fee & Other Income 6.84% 6.33% 0.76% Operating Expenses 0.77% 0.92% 5.95% Earnings before credit cost 6.07% 5.41%
Slide 47: Housing Finance - Asset quality
Housing Finance - Asset quality Housing - Asset Quality 23% 30% 31% 3% 208 212 198 152 146 145 0.99% 0.83% 0.82% 0.76% 0.58% 0.56% 0% Q1 FY19 Q4 FY19 Q1 FY20 GS3 (Rs. Cr) NS3 (Rs. Cr) GS3 (%) NS3 (%) PCR (%) Macro-prudential provisions of Rs. 115 Cr for unanticipated future event risk, over and abov
Slide 48: Infrastructure Finance – Summary financial performance
Infrastructure Finance – Summary financial performance Performance summary Q1FY19 Summary P&L (Rs. Cr) Q4FY19 Q1FY20 Y-o-Y (%) 785 Interest Income 835 1,014 29% 617 Interest Expense 697 743 20% 168 NIM 138 272 62% 128 Fee & Other Income 104 111 -14% 296 Total Income 242 383 29% 58 Operating Expense
Slide 49: Infrastructure Finance – Key ratios
Infrastructure Finance – Key ratios Key ratios Q1FY19 Key ratios Q4FY19 Q1FY20 9.29% Yield 9.30% 10.64% 1.99% Net Interest Margin 1.54% 2.85% 1.52% Fee & Other Income 1.16% 1.16% 3.51% NIM + Fee & Other Income 2.69% 4.01% 0.69% Operating Expenses 0.64% 0.57% 2.82% Earnings before credit cost 2.05% 3
Slide 50: Infrastructure Finance - Asset quality
Infrastructure Finance - Asset quality Infrastructure Finance- Asset Quality 63% 59% 55% 18% 4,571 16% 14.10% 3,768 14% 3,569 12% 10.45% 9.68% 10% 8% 1,699 1,532 1,594 6% 5.75% 4% 4.53% 4.57% 2% 0% Q1 FY19 Q4 FY19 Q1 FY20 GS3 (Rs. Cr) NS3 (Rs. Cr) GS3 (%) NS3 (%) PCR (%) 49 GS3 - Gross Stage 3; NS3
Slide 51: Infrastructure Finance – Portfolio wise split
Infrastructure Finance – Portfolio wise split D I Sectors (Rs. Cr) Q1FY19 Q4FY19 Q1FY20 Y-o-Y (%) S Renewable Power 2,658 2,175 1,845 (31%) B U Roads 115 2,106 263 129% R S Power Transmission 49 221 1,030 - E M Others1 526 95 114 (78%) E N T Total 3,348 4,596 3,252 (3%) Q1FY19 Q4FY19 Q1FY20 Sectors
Slide 52: AUM disclosure – Investment Management Business
AUM disclosure – Investment Management Business Assets under Management (Rs. Cr) Quarter ended June 2018 Quarter ended March, 2019 Quarter ended June, 2019 Fund Type AUM1 Avg. AUM2 AUM1 Avg. AUM2 AUM1 Avg. AUM2 Equity 35,494 35,443 38,551 36,577 38,293 38,038 (Other than ELSS) Equity – ELSS 3,173 3,
Slide 53: Product profile and Geographies
Product profile and Geographies Average Average BUSINESS Major Geographies Ticket Size Tenor Farm MP, Karnataka, UP, Maharashtra, Rs. 4 Lacs 48 months Equipment Telangana, Bihar , AP, Haryana Rural Two Kolkata, Pune, Mumbai, Bangalore Rs. 58k 26 months Hyderabad ,Ahmedabad, Bhubaneswar Wheeler TN, B
Slide 54: LTFH branch footprint
LTFH branch footprint 9 As of 30th June, 2019 2 11 1 No. of States & Union 21 & 2 Territories 18 14 4 10 No. of branches* 228 3 No. of Micro Loans meeting 17 32 13 1 1,234 centers** 7 8 No. of employees 21,781 31 9 1 12 14 1 6 3 *Also includes 1 branch in Dubai **All these are in rural areas 53
Slide 55: Awards & Recognition
Awards & Recognition Golden Peacock Award for Asian Centre Awards for The CII National HR Circle Competition "Excellence in Corporate Governance“ "Best Audit Committee“ 2018 winner for "Management of Change & Excellence in HRM“ (October, 2018) (October, 2018) (September, 2018) Leading Indian Mandate
Slide 56: Corporate Social Responsibility
Corporate Social Responsibility Directly linked to creating value FOCUS: GENERATION OF SUSTAINABLE RURAL LIVELIHOODS Water resource management Digital financial inclusion 650 Digital Sakhis, 5500+ women entrepreneurs (WE) and Target Group 60,000 farmers directly 5,15,000 community members • 2,119 me
Slide 57: Board comprises majority of Independent Directors
Board comprises majority of Independent Directors Board of Directors S. V. Haribhakti, Non-Executive Chairman, Independent Director Dinanath Dubhashi, Managing Director & CEO o Chairman of Future Lifestyle Fashions Limited, Blue Star Limited & o 29 years of experience across multiple domains in BFSI
Slide 58: Management Team
Management Team Dinanath Dubhashi Managing Director & CEO 29 yrs exp, BNP Paribas, SBI Cap, CARE Kailash Kulkarni Srikanth J Manoj Shenoy Sunil Prabhune CE - Investment Management & CE – Housing & CE - Wealth Management & CE – Rural & Group Head – Group Head - Marketing Group Head – Central operatio
Slide 59: Deliver sustainable RoE
Deliver sustainable RoE Registered Office: L&T Finance Holdings Limited Brindavan, Plot No 177 CST Road, Kalina Santacruz (E), Mumbai 400 098 www.ltfs.com T +91 22 6212 5000/5555 CIN: L67120MH2008PLC181833 58
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