L&t Finance Ltd · NSE:LTF
L&t Finance — Q3 FY2020 Earnings Presentation
55 slides from L&t Finance's earnings presentation, Jan 17, 2020
Slide 1: Submission of Investor / Analyst Presentation
9 L&T Financial Services J January 17, 2020 National Stock Exchange of India Limited SSE Limited Exchange Plaza, Corporate Relations Department, Plot No. C/1, G Block, 1s1 Floor, New Trading Ring, Bandra - Kurla Complex, Bandra (East), P J. Towers, Dalal Street, Mumbai - 400 051. Mumbai - 400 001. S
Slide 2: Strategy & Results Update – Q3FY20
Strategy & Results Update – Q3FY20 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: Strategy Update
Strategy Update 1 Liability management 2 Building business strengths 3 Financial update 4
Slide 6: 1.1 Credit rating – LTFH and its subsidiaries
1.1 Credit rating – LTFH and its subsidiaries L&T FINANCE HOLDINGS (LTFH) CRISIL AAA (Long Term) CARE India Ratings & Research A1+ (Short Term) ICRA L&T Infrastructure L&T Infra Debt Fund L&T Finance L&T Housing Finance Finance CRISIL AAA (Long Term) CRISIL AAA (Long Term) CARE CARE A1+ (Short Term)
Slide 7: 1.2 Prudent ALM
1.2 Prudent ALM As on 31st December, 2019 Structural Liquidity statement 57,654 Cumulative Inflows (Rs. Cr) Cumulative Outflows (Rs. Cr) 34,549 34,823 25,602 21,726 21,223 16,997 12,386 13,897 12,232 8,562 1,663 4,214 477 1-7 days 8-14 days 15 days-1 month 1-2 months 2-3 months 3-6 months 6-12 month
Slide 8: 1.3 Structural Liquidity - Stress scenario
1.3 Structural Liquidity - Stress scenario 1 month positive gap in stress scenario 8,580 6,936 6,199 6,259 Sep'18 Dec'18 Sep'19 Dec'19 ❖ Positive gaps maintained consistently even under ‘1 in 10’ scenario in 1 month bucket ❖ As of Dec’19, Rs.13,911 Cr of liquidity is maintained through the following
Slide 9: 1.4 Well diversified liability mix
1.4 Well diversified liability mix Q3FY19 Q3FY20 3% 2% 6% 9% 16% 36% 7% 43% 3% 36% 39% Bank Loans NCD (ex retail) NCD Retail CP ECB Others Rs. 87,818 Cr Rs. 92,997 Cr • Reduction in CP from 16% to 9% in the past year, even though ALM allows a higher proportion of CP • Diversified funding profile thr
Slide 10: 1.5 Incremental long-term borrowing in Q3FY20
1.5 Incremental long-term borrowing in Q3FY20 Preference shares ECB 4% 4% Incremental Long Term Borrowing NCD - Public Products Rs. Cr Issue 14% Term Loans - Term Loans – Non PSL 4,350 Non PSL 42% NCD – Private Placement 2,012 Term Loans - PSL 17% Term Loans – PSL 1,818 NCD – Public Issue 1,408 NCD
Slide 11: 1.6 Well managed liability cost
1.6 Well managed liability cost Q-o-Q movement in WAC 8.71% 8.53% 8.59% 8.61% 8.58% 8.54% 8.50% 8.36% 8.33% 8.24% 8.23% 8.29% 8.16% Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 FY17 FY17 FY18 FY18 FY18 FY18 FY19 FY19 FY19 FY19 FY20 FY20 FY20 Effective liability management is demonstrated through stable WA
Slide 12: Strategy Update
Strategy Update 1 Liability management 2 Building business strengths 3 Financial update 11
Slide 13: 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 12
Slide 14: Building Business Strength: Market Share
Building Business Strength Market Maintained market share by building and protecting strength in our core businesses Share 13
Slide 15: 2.1.1 Building and protecting strength – Rural Finance
2.1.1 Building and protecting strength Market Share Rural Finance Industry LTFH • Disbursement growth of 6% (highest quarterly disbursement • Market has seen de-growth of 6% in Q3FY20 vis-a-vis 10% ever of Rs. 1,370 Cr); book grew by 13% de-growth in H1FY20 • Conservative LTV maintained around 70% f
Slide 16: 2.1.2 Building and protecting strength – Housing Finance
2.1.2 Building and protecting strength Market Share Housing Finance Industry LTFH • Overall housing credit growth declined to 10% YoY (vs 17% last • Disbursement growth of 8%; book grew by 31% year); banks gaining market share with 13% growth vis-à-vis NBFCs/HFCs growth of only 4% (14% in Q3FY19) •
Slide 17: 2.1.3 Building and protecting strength – Infrastructure Finance
2.1.3 Building and protecting strength Market Share Infrastructure Finance Industry LTFH • Solar, wind, roads and transmission are among the few infra sectors showing significant growth • Government unveiled plan for enhanced investment in • Focus on key sectors: Road, Renewable and Transmission inf
Slide 18: 2.1.4 Building and protecting strength – Mutual Funds
2.1.4 Building and protecting strength Market Share Mutual Funds • Experienced investment team and superior fund performance has resulted in improvement in market ranking and higher growth than industry ➢ On a 5-year performance, 4 out of 10 Equity schemes (69% of equity AUM) are in top quartile whe
Slide 19: Building Business Strength: Portfolio Quality
Building Business Strength Portfolio Improved portfolio quality by strengthening the risk profile Quality 18
Slide 20: 2.2.1 Strengthened risk profile – Rural Finance
2.2.1 Strengthened risk profile Portfolio Quality Rural Finance Actions taken to ensure quality portfolio • Use of data analytics for OEM classification and areas of business growth through classification of geographies (under penetrated states with better macro-economic indicators) into ‘Focus’, ‘C
Slide 21: 2.2.2 Strengthened risk profile – Real Estate
2.2.2 Strengthened risk profile Portfolio Quality Real Estate Market Impact LTFH Risk Mitigation Strategy Developments • Affected smaller developers • Focus on funding to Category A developers (~80% of book) Demonetisation, • Higher impact in Tier II and Tier III cities • Present in 6 cities with pr
Slide 22: 2.2.3 Strengthened risk profile – Infrastructure Finance
2.2.3 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 cash PPA Risk PPA in pl
Slide 23: Building Business Strength: Right to Win
Building Business Strength Right to Business realignment with focus on ‘Right to Win’ Win 22
Slide 24: 2.3.1 Rapid reduction in Defocused book
2.3.1 Rapid reduction in Defocused book Right to Win Defocused book* (Rs. Cr) 12,100 Reduction in book through market sale of DCM 10,365 bonds, refinance / prepayment in SFG book 9,403 without any significant P&L impact 7,203 5,497 Demonstrated strong execution capability by successfully running dow
Slide 25: 2.3.2 New product launch - Consumer Loans
2.3.2 New product launch - Consumer Loans Right to Win PRODUCT CHARACTERISTICS Database Data Analytics Digital Proposition Existing ‘Prime+’ customers • Offering based on internal & • Rich database of 2 Cr+ market view of customer • End to end digital platform customers (~1.2 Cr active behaviour cus
Slide 26: Strategy Update
Strategy Update 1 Liability management 2 Building business strengths 3 Financial update 25
Slide 27: Our Delivery – PAT & RoE
Our Delivery – PAT & RoE PAT RoE (Rs. Cr) 647 * 18.34% 18.13%* 580 597 591 16.74% 16.51% Q3FY19 Q2FY20 Q2FY20 Q3FY20 Q3FY19 Q2FY20 Q2FY20 Q3FY20 Normalising for the impact of tax rate change of Rs.50 Cr pertaining to Q1FY20, Q2FY20 PAT stands at Rs.597 Cr | RoE stands at 16.74% 26 * PAT of Rs.174 Cr
Slide 28: Financial Performance
Financial Performance Q3FY20 vs Q3FY19 Focused Book Overall Book Rs. 93,956 Cr Rs. 99,453 Cr 14% 5% Rs. 82,612 Cr Rs. 94,711 Cr AAuM1 AuS2 Rs. 71,587 Cr Rs. 25,405 Cr 4% 11% Rs. 69,080 Cr Rs. 22,887 Cr Q3FY19 Q3FY20 Steady growth in focused businesses 1 Investment Management – AAuM (quarterly averag
Slide 29: Growth in focused businesses
Growth in focused businesses Lending Businesses Non Lending Businesses Rural Housing Infrastructure Investment Wealth Finance Finance Finance Management Management Q3FY19 Q3FY20 Book AAuM1 AuS2 14% 14% 13% 4% 11% Disbursements 5% 14% 47% 1 Investment Management – AAuM (quarterly average) 28 2 Wealth
Slide 30: NIMs + Fee Income
NIMs + Fee Income Total Income (NIMs + Fee) % of average book 7.29% 6.79% 6.86%* Q3FY19 Q2FY20 Q3FY20 Steady ‘NIMs + Fee’ by maintaining leadership position and pricing power across businesses * Normalising for one-time impact 29 Actuals without normalization: Q2FY20 – 7.33%
Slide 31: Strengthening Balance sheet – Asset Quality
Strengthening Balance sheet – Asset Quality LTFH Consolidated – Asset Quality 62% 54% 57% 10% 6,033 5,745 5,662 6.74% 5.98% 7% 5.94% 2,263 2,632 2,458 4% 2.83% 2.67% 2.64% 1% Q3 FY19 Q2 FY20 Q3 FY20 GS3 (Rs. Cr) NS3 (Rs. Cr) GS3 (%) NS3 (%) PCR (%) Built macro-prudential provisions of Rs. 350 Cr, ov
Slide 32: LTFH consolidated – Capital allocation and RoE bridge
LTFH consolidated – Capital allocation and RoE bridge Q3FY19 Q3FY20 PAT Business Segments (Rs. Cr) PAT PAT Net Worth RoE Y-o-Y (%) Net Worth RoE 233 3,664 27.54% Rural Finance 290 4,555 26.45% 25% 209 3,150 27.75% Housing Finance 203 4,320 19.34% -3% 70 4,141 6.71% Infrastructure Finance 172 6,150 1
Slide 33: Conclusion
Conclusion LTFH remains on the path of consistent financial performance through steady profit margins, stable asset quality and growth in focused businesses ➢ Continue to deliver top quartile RoE at 16.51% ❖ ➢ Continue to maintain steady ‘NIM + Fees’ in a steady range (7.29% in Q3FY20 vs 6.79% in Q3
Slide 34: Appendix
Appendix G L&T Financial Services
Slide 35: LTFH Consolidated – Summary financial performance
LTFH Consolidated – Summary financial performance Performance summary Q3FY19 Summary P&L (Rs. Cr) Q2FY20 Q3FY20 Y-o-Y (%) 3,039 Interest Income 3,254 3,307 9% 1,865 Interest Expense 1,891 1,884 1% 1,174 NIM 1,362 1,423 21% 416 Fee & Other Income 470 418 1% 1,590 Total Income 1,833 1,841 16% 396 Oper
Slide 36: LTFH Consolidated – Key ratios
LTFH Consolidated – Key ratios Key ratios Q3FY19 Key Ratios Q2FY20 Q3FY20 12.97% Yield 13.01% 13.09% 5.01% Net Interest Margin 5.45% 5.63% 1.78% Fee & Other Income 1.88% 1.66% 6.79% NIM + Fee & Other Income 7.33% 7.29% 1.69% Operating Expenses 1.79% 2.01% 5.09% Earnings before credit cost 5.53% 5.28
Slide 37: Lending Business – Business wise disbursement split
Lending Business – Business wise disbursement split Disbursement Q3FY19 Segments (Rs. Cr) Q2FY20 Q3FY20 Y-o-Y (%) 1,291 Farm Equipment 686 1,370 6% 1,647 2W Finance 1,113 1,495 -9% 2,796 Micro Loans 2,839 2,561 -8% - Consumer Loans - 42 - 5,734 Rural Finance 4,638 5,468 -5% 653 Home Loans 652 706 8%
Slide 38: Lending Business – Business wise book split
Lending Business – Business wise book split Book Q3FY19 Segments (Rs. Cr) Q2FY20 Q3FY20 Y-o-Y (%) 7,306 Farm Equipment 7,747 8,240 13% 5,224 2W Finance 6,009 6,423 23% 11,592 Micro Loans 12,841 12,889 11% - Consumer Loans - 42 - 24,122 Rural Finance 26,597 27,594 14% 5,697 Home Loans 7,024 7,459 31%
Slide 39: Rural Finance – Summary financial performance
Rural Finance – Summary financial performance Performance summary Q3FY19 Summary P&L (Rs. Cr) Q2FY20 Q3FY20 Y-o-Y (%) 1,078 Interest Income 1,240 1,311 22% 409 Interest Expense 485 490 20% 668 NIM 756 821 23% 113 Fee & Other Income 118 121 8% 781 Total Income 873 942 21% 210 Operating Expense 263 29
Slide 40: Rural Finance – Key ratios
Rural Finance – Key ratios Key ratios Q3FY19 Key ratios Q2FY20 Q3FY20 18.77% Yield 18.92% 19.12% 11.64% Net Interest Margin 11.47% 11.90% 1.96% Fee & Other Income 1.79% 1.76% 13.60% NIM + Fee & Other Income 13.25% 13.66% 3.66% Operating Expenses 3.99% 4.29% 9.94% Earnings before credit cost 9.26% 9.
Slide 41: Rural Finance - Asset quality
Rural Finance - Asset quality Rural - Asset Quality 66% 61% 66% 13% 11% 941 970 9% 902 7% 5% 3.83% 3.61% 370 3.59% 306 332 3% 1.33% 1.45% 1.26% 1% -1% Q3FY19 Q2FY20 Q3FY20 GS3 (Rs. Cr) NS3 (Rs. Cr) GS3 (%) NS3 (%) Built macro-prudential provisions of Rs. 235 Cr, over and above expected credit losses
Slide 42: Housing Finance – Summary financial performance
Housing Finance – Summary financial performance Performance Summary Q3FY19 Summary P&L (Rs. Cr) Q2FY20 Q3FY20 Y-o-Y (%) 727 Interest Income 844 857 18% 408 Interest Expense 502 515 26% 319 NIM 341 343 7% 59 Fee & Other Income 53 66 12% 379 Total Income 394 409 8% 47 Operating Expense 74 82 75% 332 E
Slide 43: Housing Finance – Key ratios
Housing Finance – Key ratios Key ratios Q3FY19 Key ratios Q2FY20 Q3FY20 12.81% Yield 12.64% 12.53% 5.62% Net Interest Margin 5.11% 5.01% 1.05% Fee & Other Income 0.80% 0.97% 6.67% NIM + Fee & Other Income 5.91% 5.97% 0.82% Operating Expenses 1.11% 1.20% 5.85% Earnings before credit cost 4.80% 4.78%
Slide 44: Housing Finance - Asset quality
Housing Finance - Asset quality Housing - Asset Quality 27% 30% 28% 3% 219 233 212 167 160 148 0.95% 0.88% 0.79% 0.69% 0.63% 0.56% 0% Q3 FY19 Q2 FY20 Q3 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 45: Infrastructure Finance – Summary financial performance
Infrastructure Finance – Summary financial performance Performance summary Q3FY19 Summary P&L (Rs. Cr) Q2FY20 Q3FY20 Y-o-Y (%) 884 Interest Income 989 982 11% 696 Interest Expense 713 740 6% 188 NIM 276 242 29% 72 Fee & Other Income 92 92 27% 260 Total Income 368 333 28% 57 Operating Expense 53 52 -
Slide 46: Infrastructure Finance – Key ratios
Infrastructure Finance – Key ratios Key ratios Q3FY19 Key ratios Q2FY20 Q3FY20 10.02% Yield 10.31% 9.92% 2.13% Net Interest Margin 2.88% 2.44% 0.82% Fee & Other Income 0.96% 0.92% 2.95% NIM + Fee & Other Income 3.84% 3.37% 0.64% Operating Expenses 0.55% 0.53% 2.30% Earnings before credit cost 3.28%
Slide 47: Infrastructure Finance - Asset quality
Infrastructure Finance - Asset quality Infrastructure Finance- Asset Quality 63% 57% 57% 4,180 18% 16% 3,494 3,437 14% 12.46% 12% 10% 9.24% 9.05% 8% 1,534 1,510 1,466 6% 4% 4.96% 4.22% 4.07% 2% 0% Q3 FY19 Q2 FY20 Q3 FY20 GS3 (Rs. Cr) NS3 (Rs. Cr) GS3 (%) NS3 (%) PCR (%) 46 GS3 - Gross Stage 3; NS3 -
Slide 48: Infrastructure Finance – Portfolio wise split
Infrastructure Finance – Portfolio wise split D I Sectors (Rs. Cr) Q3FY19 Q2FY20 Q3FY20 Y-o-Y (%) S Renewable Power 3,176 1,534 1,478 -53% B U Roads 413 284 159 -61% R S Power Transmission 164 973 212 29% E M Others1 141 317 220 57% E N T Total 3,894 3,108 2,069 -47% Q3FY19 Q2FY20 Q3FY20 Sectors (Rs
Slide 49: AUM disclosure – Investment Management Business
AUM disclosure – Investment Management Business Assets under Management (Rs. Cr) Quarter ended Dec, 2018 Quarter ended Sept, 2019 Quarter ended Dec, 2019 Fund Type AUM1 Avg. AUM2 AUM1 Avg. AUM2 AUM1 Avg. AUM2 Equity 37,229 35,855 37,159 36,356 37,039 37,176 (Other than ELSS) Equity – ELSS 3,211 3,18
Slide 50: Product profile and Geographies
Product profile and Geographies Average Average BUSINESS Major Geographies Ticket Size Tenor Farm MP, Karnataka, UP, Maharashtra, Rs. 4.1 Lakhs 46 months Equipment Telangana, Bihar, AP, Haryana Two Kolkata, Pune, Mumbai, Bangalore, Rs. 62k 25 months Hyderabad, Ahmedabad, Delhi Wheeler Rural TN, Biha
Slide 51: LTFH branch footprint
LTFH branch footprint 9 2 As of 31st December, 2019 11 1 No. of States & Union 21 & 2 18 Territories 14 4 10 No. of branches* 223 3 No. of Micro Loans meeting 17 32 13 1 1,450 centers** 7 7 No. of employees 24,931 28 9 1 12 13 1 6 3 *Also includes 1 branch in Dubai 50 **All these are in rural areas
Slide 52: 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 • 49,036*
Slide 53: 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 54: Management Team
Management Team Dinanath Dubhashi Managing Director & CEO 29 yrs exp, BNP Paribas, SBI Cap, CARE Kailash Kulkarni Sunil Prabhune Raju Dodti CE - Investment Management & CE – Rural & CE – Infrastructure Finance Group Head - Marketing Group Head – Digital ,IT & Analytics 29 yrs exp, Kotak Mahindra AMC
Slide 55: 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 54
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