L&t Finance Ltd · NSE:LTF
L&t Finance — Q2 FY2020 Earnings Presentation
59 slides from L&t Finance's earnings presentation, Oct 18, 2019
Slide 1: L&T Financial Services submission of investor presentation
S L&T Financial Services , October 18, 2019 National Stock Exchange of India Limited SSE 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 00
Slide 2: Strategy & Results Update – Q2FY20
Strategy & Results Update – Q2FY20 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 with strengthened risk profile Has a clear Right to Win in each of the businesses Uses Data Intelligence as a key to unlock RoE Has a culture of “Results” not “Reasons” Stable and sustainable organisation built on t
Slide 5: Q2FY20 in perspective
Q2FY20 in perspective Industry challenges LTFH Response • LTFH and all it’s lending subsidiaries have AAA rating from CRISIL, ICRA, CARE and India Ratings Multiple rating Received CRISIL AAA rating in October 2019 downgrades in the NBFC All 3 existing rating agencies ICRA, CARE and India Ratings
Slide 6: Q2FY20 in perspective
Q2FY20 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 Maintained market share by leveraging on business strengths • Protecting and further building stren
Slide 7: Q2FY20 in perspective
Q2FY20 in perspective Regulatory change LTFH Response • LTFH is opting to avail lower tax rate of 25.17% from FY20 • LTFH has built accelerated provisions over last 3 years to enhance Provision Coverage Ratio (PCR). Impact of Taxation Laws This has resulted in creation of Deferred Tax Assets (DTA) @
Slide 8: LTFH Response
LTFH Response 1 Credit ratings 2 Liability management 3 Building business strengths 4 Update on tax amendment 7
Slide 9: 1. Credit rating – LTFH and its subsidiaries
1. Credit rating – LTFH and its subsidiaries Credit Ratings – LTFH and its subsidiaries • LTFH and all it’s lending subsidiaries have been assigned / reaffirmed AAA rating from CRISIL, ICRA, CARE and India Ratings: CRISIL assigned in October 2019 Ratings Update India Ratings reaffirmed in Septem
Slide 10: LTFH Response
LTFH Response 1 Credit ratings 2 Liability management 3 Building business strengths 4 Update on tax amendment 9
Slide 11: 2.1 Prudent ALM
2.1 Prudent ALM As on 30th September, 2019 Structural Liquidity statement 55,042 Cumulative Inflows (Rs. Cr) Cumulative Outflows (Rs. Cr) 32,616 32,088 23,726 18,903 17,698 10,697 13,581 12,710 7,077 1,495 3,123 1 to 14 days Over 14 days to one Over one month to 2 Over 2 months to 3 Over 3 Months up
Slide 12: 2.2 Structural Liquidity - Stress scenario
2.2 Structural Liquidity - Stress scenario 1 month positive gap in stress scenario 6,865 7,294 6,936 6,199 6,259 3,985 Jun'18 Sept'18 Dec'18 Mar'19 Jun'19 Sep'19 Positive gaps maintained consistently even under ‘1 in 10’ stress scenario in 1 month bucket As of Sep’19, Rs.11,607 Cr of liquidity i
Slide 13: 2.3 Well diversified liability mix
2.3 Well diversified liability mix Q2FY19 Q2FY20 5% 3% 3% 10% 18% 36% 6% 42% 3% 36% 38% Bank Loans NCD (ex retail) NCD Retail CP ECB Others* Rs. 86,789 Cr Rs. 90,050 Cr • Reduction in CP from 18% to 10% in the past year, even though ALM allows a higher proportion of CP • Diversified funding profile
Slide 14: 2.4 Incremental long-term borrowing in Q2FY20
2.4 Incremental long-term borrowing in Q2FY20 Incremental Long Term Borrowing Preference Shares 10% Term Loans - Products Rs. Cr PSL 34% Term Loans – PSL 1,425 ECB 16% Term Loans – Non PSL 940 NCD – Private Placement 741 NCD - Private ECBs 686 Placement 18% Term Loans - Preference shares 400 Non PSL
Slide 15: 2.5 Well managed liability cost
2.5 Well managed liability cost QoQ movement in WAC 9.20% 8.93% 8.71% 8.58% 8.53% 8.59% 8.61% 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 Q2 FY20 Effective liability management demonstrated with les
Slide 16: LTFH Response
LTFH Response 1 Credit ratings 2 Liability management 3 Building business strengths 4 Update on tax amendment 15
Slide 17: 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 16
Slide 18: 3.1.1 Building and protecting strength – Rural Finance
3.1.1 Building and protecting strength Market Share Rural Finance Industry LTFH • Disbursement in line with market while book grew by 15% • Industry sales down by ~10% • Maintained market share by capturing higher counter share at • Higher inventory level on account of overstocking chosen dealers th
Slide 19: 3.1.2 Building and protecting strength – Housing Finance
3.1.2 Building and protecting strength Market Share Housing Finance Industry LTFH • Disbursement growth of 7% with increase in the share of • Overall housing credit growth declined to 14%, lower than the salaried segment from 50% to 58% YoY average of past three years • Higher share of sourcing in p
Slide 20: 3.1.3 Building and protecting strength – Infrastructure Finance
3.1.3 Building and protecting strength Market Share Infrastructure Finance Industry LTFH • Sustained momentum in renewable sector (solar and wind) • Stable disbursement with focus on sell down • Uptick in solar capacity addition: 6.3 GW solar capacities allotted till August 2019* • Focus on key sect
Slide 21: 3.2.1 Strengthened risk profile – Rural Finance
3.2.1 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 areas of business growth with preferred OEMs; classification of geogra
Slide 22: 3.2.2 Strengthened risk profile – Real Estate
3.2.2 Strengthened risk profile Portfolio Quality Real Estate Market Impact LTFH Risk Mitigation Strategy Developments Demonetisation, • Affected smaller developers • Focus on funding to Category A developers GST & RERA • Higher impact in Tier II and Tier III cities • Present in 6 cities with presen
Slide 23: 3.2.3 Strengthened risk profile – Infrastructure Finance
3.2.3 Strengthened risk profile Portfolio Quality Infrastructure Finance Under Construction Projects: Key Risk and Mitigants 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 i
Slide 24: 3.3.1 Rapid reduction in Defocused book
3.3.1 Rapid reduction in Defocused book Right to Win Defocused book (Rs. Cr) 13,198 9,403 7,203 Q2FY19 Q1FY20 Q2FY20 Strong execution by SSG team in successfully running down the book to Rs. 7,203 Cr in Q2FY20 (reduction of 45% YoY & 23% QoQ) 23
Slide 25: 3.3.2 Sale of Wealth business
3.3.2 Sale of Wealth business Right to Win LTFH has built a profitable business model over the past 3 years with AUS of ~Rs. 25,000 Cr by having clear focus on employee productivity With recent changes in regulations, consolidation in the industry and considering the fact that business contribut
Slide 26: LTFH Response
LTFH Response 1 Credit Ratings 2 Liability management 3 Building business strengths 4 Update on Tax amendment 25
Slide 27: 4. Update on Tax amendment
4. Update on Tax amendment Tax Amendment Ordinance • Corporate Tax Rate (CTR) reduced from 34.94% to 25.17%, option given to avail lower CTR of 25.17% • Major deductions of Bad Debts write off, Special Reserve, dividend Income exemption etc. continue to be allowed • Profit Linked Exemptions /Incenti
Slide 28: Financial Update
Financial Update 7 ® L&T Financial Services
Slide 29: Our Delivery – PAT & RoE
Our Delivery – PAT & RoE PAT RoE (Rs. Cr) 647* 18.47% 18.13% 560 549 15.99% Q2 FY19 Q1 FY20 Q2 FY20 Q2 FY19 Q1 FY20 Q2 FY20 28 * PAT of Rs.174 Cr post considering one-time impact of Rs. 473 Cr on reversal of DTA
Slide 30: Financial Performance
Financial Performance Q2FY20 vs Q2FY19 Focused Book Overall Book Rs. 93,055 Cr Rs. 1,00,258 Cr 19% 10% Rs. 78,003 Cr Rs. 91,201 Cr AAuM1 AuS2 Rs. 73,754 Cr Rs. 26,309 Cr 6% 25% Rs. 69,213 Cr Rs. 21,065 Cr Q2FY19 Q2FY20 Steady growth in focused businesses 1 Investment Management – AAuM (quarterly ave
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 Q2FY19 Q2FY20 Book AAuM1 AuS2 24% 24% 13% 6% 25% Disbursements 2% 21% 19% 1 Investment Management – AAuM (quarterly average) 30 2 Wealth
Slide 32: Increasing Retailisation
Increasing Retailisation Q2FY19 Q2FY20 14% 7% 23% A 26% S S 31% E T 30% 24% M 27% I 9% 9% X Rural Housing IDF Infrastructure Finance Defocused • Rural + Housing contribute to 53% of portfolio in Q2FY20 as compared to 47% in Q2FY19 • IDF would continue to remain as the hold book in the infrastructure
Slide 33: NIMs + Fee Income
NIMs + Fee Income Total Income (NIMs + Fee) % of average book 6.86% 6.76%* 6.86%* Q2FY19 Q1FY20 Q2FY20 Steady ‘NIMs + Fee’ by maintaining leadership position and pricing power across businesses * Normalising for one-time impact 32 Actuals without normalization: Q1FY20 – 7.10%, Q2FY20 – 7.33%
Slide 34: Strengthening Balance sheet – Asset Quality
Strengthening Balance sheet – Asset Quality LTFH Consolidated – Asset Quality 62% 58% 54% 10% 6,119 5,745 5,460 7.10% 7% 5.72% 5.98% 2,296 2,632 2,287 4% 2.48% 2.83% 2.79% 1% Q2 FY19 Q1 FY20 Q2 FY20 GS3 (Rs. Cr) NS3 (Rs. Cr) GS3 (%) NS3 (%) PCR (%) Built macro-prudential provisions of Rs. 350 Cr, ov
Slide 35: LTFH consolidated – Capital allocation and RoE bridge
LTFH consolidated – Capital allocation and RoE bridge Q2FY19 Q2FY20 PAT Business Segments (Rs. Cr) PAT Net Worth RoE PAT Net Worth RoE Y-o-Y (%) 218 3,108 28.62% Rural Finance 309 4,245 30.25% 42% 197 2,884 28.19% Housing Finance 244 4,118 24.49% 24% 67 4,236 7.01% Infrastructure Finance 196 5,142 1
Slide 36: Conclusion
Conclusion LTFH and all it’s lending subsidiaries have been assigned / reaffirmed AAA rating from CRISIL in Oct’19, India Ratings in Sep’19 and ICRA & CARE in Aug’19 Prudent Liability Management: Positive Structural Liquidity gaps maintained across all buckets Diversified funding through ECB
Slide 37: Appendix
Appendix Z) L&T Financial Services
Slide 38: LTFH Consolidated – Summary financial performance
LTFH Consolidated – Summary financial performance Performance summary Q2FY19 Summary P&L (Rs. Cr) Q1FY20 Q2FY20 Y-o-Y (%) 2,777 Interest Income 3,287 3,254 17% 1,651 Interest Expense 1,918 1,891 15% 1,126 NIM 1,369 1,362 21% 415 Fee & Other Income 396 470 13% 1,542 Total Income 1,765 1,833 19% 368 O
Slide 39: LTFH Consolidated – Key ratios
LTFH Consolidated – Key ratios Key ratios Q2FY19 Key Ratios Q1FY20 Q2FY20 12.35% Yield 13.22% 13.01% 5.01% Net Interest Margin 5.51% 5.45% 1.85% Fee & Other Income 1.59% 1.88% 6.86% NIM + Fee & Other Income 7.10% 7.33% 1.64% Operating Expenses 1.70% 1.79% 5.22% Earnings before credit cost 5.40% 5.53
Slide 40: Lending Business – Business wise disbursement split
Lending Business – Business wise disbursement split Disbursement Q2FY19 Segments (Rs. Cr) Q1FY20 Q2FY20 Y-o-Y (%) 812 Farm Equipment 874 686 -16% 1,107 2W Finance 1,090 1,113 1% 2,790 Micro Loans 2,268 2,839 2% 4,709 Rural Finance 4,232 4,638 -2% 610 Home Loans 661 652 7% 341 LAP 188 142 -58% 1,632
Slide 41: Lending Business – Business wise book split
Lending Business – Business wise book split Book Q2FY19 Segments (Rs. Cr) Q1FY20 Q2FY20 Y-o-Y (%) 6,736 Farm Equipment 7,463 7,747 15% 4,272 2W Finance 5,857 6,009 41% 10,425 Micro Loans 12,524 12,841 23% 21,433 Rural Finance 25,845 26,597 24% 5,268 Home Loans 6,615 7,024 33% 4,300 LAP 4,217 4,076 -
Slide 42: Rural Finance – Summary financial performance
Rural Finance – Summary financial performance Performance summary Q2FY19 Summary P&L (Rs. Cr) Q1FY20 Q2FY20 Y-o-Y (%) 948 Interest Income 1,195 1,240 31% 343 Interest Expense 469 485 41% 605 NIM 726 756 25% 98 Fee & Other Income 109 118 20% 702 Total Income 835 873 24% 176 Operating Expense 258 263
Slide 43: Rural Finance – Key ratios
Rural Finance – Key ratios Key ratios Q2FY19 Key ratios Q1FY20 Q2FY20 18.56% Yield 18.54% 18.92% 11.84% Net Interest Margin 11.32% 11.47% 1.91% Fee & Other Income 1.70% 1.79% 13.76% NIM + Fee & Other Income 13.02% 13.25% 3.46% Operating Expenses 4.02% 3.99% 10.30% Earnings before credit cost 9.00% 9
Slide 44: Rural Finance - Asset quality
Rural Finance - Asset quality Rural - Asset Quality 66% 64% 61% 13% 11% 941 9% 894 871 7% 5% 4.29% 3.42% 3.61% 370 304 314 3% 1.50% 1.26% 1.45% 1% -1% Q2FY19 Q1FY20 Q2FY20 GS3 (Rs. Cr) NS3 (Rs. Cr) GS3 (%) NS3 (%) PCR (%) Built macro-prudential provisions of Rs. 235 Cr, over and above expected credi
Slide 45: Housing Finance – Summary financial performance
Housing Finance – Summary financial performance Performance Summary Q2FY19 Summary P&L (Rs. Cr) Q1FY20 Q2FY20 Y-o-Y (%) 661 Interest Income 828 844 28% 372 Interest Expense 484 502 35% 289 NIM 344 341 18% 64 Fee & Other Income 62 53 -17% 354 Total Income 407 394 12% 40 Operating Expense 59 74 84% 31
Slide 46: Housing Finance – Key ratios
Housing Finance – Key ratios Key ratios Q2FY19 Key ratios Q1FY20 Q2FY20 12.47% Yield 12.90% 12.64% 5.46% Net Interest Margin 5.36% 5.11% 1.21% Fee & Other Income 0.97% 0.80% 6.67% NIM + Fee & Other Income 6.33% 5.91% 0.76% Operating Expenses 0.92% 1.11% 5.91% Earnings before credit cost 5.41% 4.80%
Slide 47: Housing Finance - Asset quality
Housing Finance - Asset quality Housing - Asset Quality 26% 31% 30% 3% 208 212 212 154 145 148 0.97% 0.82% 0.79% 0.72% 0.56% 0.56% 0% Q2 FY19 Q1 FY20 Q2 FY20 GS3 (Rs. Cr) NS3 (Rs. Cr) GS3 (%) NS3 (%) PCR (%) Built macro-prudential provisions of Rs. 115 Cr, over and above expected credit losses on GS
Slide 48: Infrastructure Finance – Summary financial performance
Infrastructure Finance – Summary financial performance Performance summary Q2FY19 Summary P&L (Rs. Cr) Q1FY20 Q2FY20 Y-o-Y (%) 821 Interest Income 1,014 989 20% 681 Interest Expense 743 713 5% 140 NIM 272 276 97% 123 Fee & Other Income 111 92 -25% 263 Total Income 383 368 40% 42 Operating Expense 54
Slide 49: Infrastructure Finance – Key ratios
Infrastructure Finance – Key ratios Key ratios Q2FY19 Key ratios Q1FY20 Q2FY20 9.49% Yield 10.64% 10.31% 1.62% Net Interest Margin 2.85% 2.88% 1.42% Fee & Other Income 1.16% 0.96% 3.04% NIM + Fee & Other Income 4.01% 3.84% 0.49% Operating Expenses 0.57% 0.55% 2.55% Earnings before credit cost 3.44%
Slide 50: Infrastructure Finance - Asset quality
Infrastructure Finance - Asset quality Infrastructure Finance- Asset Quality 63% 55% 57% 4,265 18% 16% 3,569 3,494 14% 12.81% 12% 9.68% 10% 9.24% 1,583 1,594 8% 1,510 6% 4% 5.17% 4.57% 4.22% 2% 0% Q2 FY19 Q1 FY20 Q2 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) Q2FY19 Q1FY20 Q2FY20 Y-o-Y (%) S Renewable Power 3,117 1,845 1,534 (51%) B U Roads 168 263 284 69% R S Power Transmission 119 1,030 973 - E M Others1 439 114 317 (28%) E N T Total 3,842 3,252 3,108 (19%) Q2FY19 Q1FY20 Q2FY20 Sectors
Slide 52: AUM disclosure – Investment Management Business
AUM disclosure – Investment Management Business Assets under Management (Rs. Cr) Quarter ended Sept, 2018 Quarter ended June, 2019 Quarter ended Sept, 2019 Fund Type AUM1 Avg. AUM2 AUM1 Avg. AUM2 AUM1 Avg. AUM2 Equity 35,403 37,073 38,293 38,038 37,159 36,356 (Other than ELSS) Equity – ELSS 3,183 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. 3.8 Lacs 46 months Equipment Telangana, Bihar , AP, Haryana Rural Two Kolkata, Pune, Mumbai, Bangalore Rs. 60k 26 months Hyderabad ,Ahmedabad, Delhi Wheeler TN, Bihar
Slide 54: LTFH branch footprint
LTFH branch footprint 9 2 As of 30th September, 2019 11 1 No. of States & Union 21 & 2 Territories 18 14 4 10 No. of branches* 225 3 No. of Micro Loans meeting 17 32 13 1 1,337 centers** 7 8 No. of employees 23,580 29 9 1 12 13 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 5,20,000 community members • Digital
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 – Digital Group Head - Marketing Group Head – Central
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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