L&t Finance Ltd · NSE:LTF
L&t Finance — Q3 FY2019 Earnings Presentation
54 slides from L&t Finance's earnings presentation, Jan 21, 2019
Slide 1: Submission of Investor/Analyst Presentation to exchanges
e L&T Financial Services » January 21, 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 - 400 001:
Slide 2: Strategy & Results Update – Q3FY19
Strategy & Results Update – Q3FY19 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: Update on Liquidity
UPDATE ON LIQUIDITY ® L&T Financial Services
Slide 6: 1.1 Timelines – Liquidity situation
1.1 Timelines – Liquidity situation CP market eased for high rated NBFCs with strong parentage Money market dried up for NBFCs/HFCs. Limited allocations from Pension Funds/ Insurance companies Major source of funding was provided by banks Availability of the long term NCDs in smaller quant
Slide 7: 1.2 Prudent ALM Management
1.2 Prudent ALM Management As on 31st December, 2018 Structural Liquidity statement Cumulative Inflows (Rs. Cr) Cumulative Outflows (Rs. Cr) 52,325 31,620 30,878 25,037 22,861 20,251 21,866 17,391 10,540 10,875 7,824 2,537 1 to 14 days Over 14 days to one Over one month to 2 Over 2 months to 3 Over
Slide 8: 1.3 Structural Liquidity – Stress scenario
1.3 Structural Liquidity – Stress scenario 1 month positive gap in stress scenario 6,199 6,259 3,985 Jun'18 Sept'18 Dec'18 • Positive gaps maintained consistently even under ‘1 in 10’ stress scenario in 1 month bucket • As of 31st December, 2018, Rs. 15,662 Cr of liquidity is maintained through the
Slide 9: 1.4 Well managed liability cost
1.4 Well managed liability cost Q-o-Q movement in WAC 9.20% 8.93% 8.71% 8.58% 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 Differentiated performance and strong pedigree were instrumental in raising ~Rs. 29,800 Cr i
Slide 10: 1.5 LTFH liquidity strategy
1.5 LTFH liquidity strategy Maintained positive structural liquidity and interest rate sensitivity gaps Raised adequate liquidity to build sufficient liquidity buffer and support growth of our core businesses Clearly articulated fund deployment waterfall for businesses Rural & retail housing Unaffec
Slide 11: Update on IL&FS SPV Exposure
UPDATE ON IL&FS SPV EXPOSURE 10
Slide 12: 2.1 IL&FS SPV exposure & NCLAT order
2.1 IL&FS SPV exposure & NCLAT order LTFH – IL&FS exposure Name of IL&FS entity Structure Nature LTFH exposure Subsidiary of IL&FS Infrastructure SPVs Specific SPVs ~ Rs. 1,800 Cr. Transportation Networks Limited (BOTs and PPP-BOT) LTFH has exposure to 4 Annuity projects and 2 Toll road projects.
Slide 13: 2.2 IL&FS SPV exposure – Key Considerations
2.2 IL&FS SPV exposure – Key Considerations • Our interpretation of NCLAT order o NCLAT order puts a stay on specific punitive actions but does not prohibit normal servicing of interest and principal repayments o LTFH has received an opinion from a retired Chief Justice of India, duly confirming tha
Slide 14: Transform. Focus. Deliver... Redefined
Transform. Focus. Deliver... Redefined TRANSFORM. FOCUS. DELIVER. 1. Sustained increase in market share 2. Retailisation of the portfolio 3. Strong risk framework Sustainably deliver 4. Continue to improve asset quality and increase provision coverage top quartile RoE 5. Concentrate on ‘NIMs + Fees’
Slide 15: Sustainable Delivery – PAT & RoE
Sustainable Delivery – PAT & RoE PAT & RoE 18.45% 18.47% 18.34% 17.45% 16.04% 17.19% 538 560 580 338 314 321 Q1 FY18 Q2 FY18 Q3 FY18 Q1 FY19 Q2 FY19 Q3 FY19 Maintaining top quartile RoE RoE The numbers in bar graph denote PAT numbers ( Rs. Cr) 14
Slide 16: 1.1 Responsible Growth
1.1 Responsible Growth Q3FY18 Q3FY19 INVESTMENT WEALTH RURAL HOUSING WHOLESALE MANAGEMENT MANAGEMENT Growth Y-o-Y 40%# 23% 44%* Disbursements 15% 34% 64% 34% 5%* AAuM^ AuS Book Note: # Rural finance disbursement excludes Trade advance * Wholesale finance disbursement and book excludes IPO financing
Slide 17: 1.2 Our Delivery – Financial Performance
1.2 Our Delivery – Financial Performance Q3FY19 vs Q3FY18 Defocused Focused Book Overall Book Book Rs. 93,708 Cr Rs. 1,794 Cr Rs. 94,711 Cr 23% 44% 22% Rs. 75,948 Cr Rs. 1,004 Cr Rs. 77,742 Cr AAuM^ AuS# Rs. 69,080 Cr Rs. 22,887 Cr 15% 34% Rs. 60,313 Cr Rs. 17,102 Cr Q3FY18 Q3FY19 ^ Investment Manag
Slide 18: 2. Our Delivery – Increasing Retailisation
2. Our Delivery – Increasing Retailisation Q3FY18 Q3FY19 2% 1% A S 19% 25% S E 41% T 49% 22% M I 25% X 8% 8% In line with our stated goal of retailisation, we have completed the sale of supply chain portfolio : ~Rs. 650 Cr (part of Wholesale book) to Centrum Rural Housing IDF Wholesale Excl. IDF Run
Slide 19: 3.1 Risk management strategy – Rural Finance
3.1 Risk management strategy – Rural Finance Lending approach Early Warning Signals Review mechanism • Calibrated geography • Macro-economic factors • Detailed portfolio review selection • Deterioration in customer 3 • Scorecard upgrades • Dynamic target allocation credit score • Hind-sighting • Sco
Slide 20: 3.2.1 Risk management strategy – Home Loans and LAP
3.2.1 Risk management strategy – Home Loans and LAP Lending approach Early Warning Signals Review mechanism • Thrust on direct sourcing • Micro-market trends • Detailed portfolio review • Digital platform for credit • Customer behaviour • Hind-sighting 3 decisioning • Movement of non-starters • Risk
Slide 21: 3.2.2 Risk management strategy – Real Estate
3.2.2 Risk management strategy – Real Estate Lending approach Early Warning Signals Review mechanism • Calibrated geography selection • Project-level parameters • On-site monitoring • Rigorous developer selection • Micro-market trends 3 • Detailed portfolio review • Effective risk guardrails • Marke
Slide 22: 3.3 Risk management strategy – Wholesale Finance
3.3 Risk management strategy – Wholesale Finance Lending approach Early Warning Signals Review mechanism • Deep domain expertise • Regular cash flow tracking • On-site monitoring • Down-selling capabilities • Market intelligence 3 • Detailed portfolio review • Effective risk guardrails • Project-lev
Slide 23: 4. Strengthening Balance sheet – Asset Quality
4. Strengthening Balance sheet – Asset Quality LTFH Consolidated – Asset Quality Rural - Asset Quality 57% 62% 62% 56% 66% 66% 7,513 13% 10.40% 6,119 6,033 11% 1,155 10% 8.18% 7.10% 9% 894 902 6.74% 7% 7% 3,222 4.29% 510 3.83% 5% 4.74% 2,296 2,263 3.79% 2.79% 4% 1.50% 306 3% 304 2.64% 1.33% 1% 1% -1
Slide 24: 5. Steady state NIMs + Fees
5. Steady state NIMs + Fees TOTAL INCOME (NIMs + FEES) % of average book 6.58% 6.86% 6.79% 5.77% 5.74% 5.62% Q1FY18 Q2FY18 Q3FY18 Q1FY19 Q2FY19 Q3FY19 • Rising interest rates were passed on judiciously to the customers, to maintain healthy NIMs • ‘NIMs + Fees’ remained steady Q-o-Q despite decline i
Slide 25: 6. Strong Sell down desk
6. Strong Sell down desk SELL DOWN VOLUMES Rs. Cr 2,169 2,149 1,653 Q3 FY18 Q2 FY19 Q3 FY19 Maintained sell down volumes despite limited participation from banks and other financial institutions Ranked no. 2 (APAC Ex Japan) in mandated lead arranger for green loans by Bloomberg Ranked no. 3 in
Slide 26: 7.1 Using power of digital to unlock RoE
7.1 Using power of digital to unlock RoE INPUT DESIRED STATE CUSTOMER LOCATION TAGGING THROUGH LONGITUDE & LATITUDE 1/10TH TURNAROUND TIME AUTOMATED DATA ENTRY USING ARTIFICIAL INTELLIGENCE & MACHINE LEARNING SCALABLE DIGITAL PLATFORM STRAIGHT THROUGH PROCESSING USING ALTERNATE VALIDATION TECHNIQUES
Slide 27: 7.2 Using power of data analytics to unlock RoE
7.2 Using power of data analytics to unlock RoE Analytics - An integral part of transformation journey Operational efficiency Revenue • Dynamic Target Allocation • Market Sizing • Call Centre Analytics • Cross Sell and Retention • Geo Expansion • Marketing Mix Optimization • Workforce Analytics • Cu
Slide 28: LTFH consolidated Q3FY19 – Capital allocation and RoE bridge
LTFH consolidated Q3FY19 – Capital allocation and RoE bridge Q3FY18 Q3FY19 PAT Business Segments (Rs. Cr) PAT Net Worth RoE PAT Net Worth RoE Y-o-Y (%) 145 1,719 36.38% Rural Business 233 3,664 27.54% 61% 129 1,674 32.81% Housing Business 209 3,150 27.75% 62% 106 4,615 9.14% Wholesale Business 159 6
Slide 29: Conclusion – 1/2
Conclusion – 1/2 LTFH continues to deliver top quartile RoE of 18%+ Consolidated PAT increased by 81% to Rs. 580 Cr in Q3FY19 vs Rs. 321 Cr in Q3FY18 Key Financial parameters Q3FY18 vs. Q3FY19 • Book has increased by 22% from Rs. 77,742 Cr to Rs. 94,711 Cr • ‘NIMs + Fees’ has increased from 5.
Slide 30: Conclusion – 2/2
Conclusion – 2/2 LIQUIDITY Positive Structural Liquidity and Interest Rate gaps Differentiated performance & strong pedigree were instrumental in raising ~Rs. 29,800 Cr in Q3FY19 As on 31st December 2018, liquidity of Rs. 15,662 Cr has been maintained in the form of cash, FDs and other liquid
Slide 31: Appendix
Appendix Z) L&T Financial Services
Slide 32: Business strengths – 1/2
Business strengths – 1/2 BUSINESS KEY DIFFERENTIATORS Dynamic target allocation, preferred OEMs tie up Farm Equipment Rural Driving decision and strategy through data backed algorithms Two-Wheeler Expansion into new untapped geographies, borrower level EWS, analytics based collection Micro Loans Dig
Slide 33: Business strengths – 2/2
Business strengths – 2/2 BUSINESS KEY DIFFERENTIATORS Bouquet of products through project life cycle Leadership in focused infra sectors; renewables, roads and transmission Wholesale Strong credit appraisal, structuring, risk and asset management expertise coupled with industry leading down selling
Slide 34: LTFH Consolidated – Summary financial performance
LTFH Consolidated – Summary financial performance Performance summary Q3FY18 Summary P&L (Rs. Cr) Q2FY19 Q3FY19 Y-o-Y (%) 2,167 Interest Income 2,777 3,039 40% 1,406 Interest Expense 1,651 1,865 33% 761 NIM 1,126 1,174 54% 309 Fee & Other Income 415 416 34% 1,071 Total Income 1,542 1,590 49% 236 Ope
Slide 35: LTFH Consolidated – Key ratios
LTFH Consolidated– Key ratios Key ratios Q3FY18 Key Ratios Q2FY19 Q3FY19 11.37% Yield 12.35% 12.97% 3.99% Net Interest Margin 5.01% 5.01% 1.62% Fee & Other Income 1.85% 1.78% 5.62% NIM + Fee & Other Income 6.86% 6.79% 1.24% Operating Expenses 1.64% 1.69% 4.38% Earnings before credit cost 5.22% 5.09%
Slide 36: Lending Business – Business wise disbursement split
Lending Business – Business wise disbursement split Disbursement Q3FY18 Segments (Rs. Cr) Q2FY19 Q3FY19 Y-o-Y (%) 1,075 Farm Equipment 812 1,291 20% 855 2W Finance 1,107 1,647 93% 2,179 Micro Loans 2,790 2,796 28% 4,109 Rural Finance 4,709 5,734 40% 417 Home Loans 610 653 56% 559 LAP 341 281 -50% 2,
Slide 37: Lending Business – Business wise book split
Lending Business – Business wise book split Book Q3FY18 Segments (Rs. Cr) Q2FY19 Q3FY19 Y-o-Y (%) 5,479 Farm Equipment 6,736 7,306 33% 2,980 2W Finance 4,272 5,224 75% 6,219 Micro Loans 10,425 11,592 86% 14,678 Rural Finance 21,433 24,122 64% 4,277 Home Loans 5,268 5,697 33% 4,068 LAP 4,300 4,360 7%
Slide 38: Rural Business – Summary financial performance
Rural Business – Summary financial performance Performance summary Q3FY18 Summary P&L (Rs. Cr) Q2FY19 Q3FY19 Y-o-Y (%) 599 Interest Income 948 1,078 80% 233 Interest Expense 343 409 75% 366 NIM 605 668 83% 30 Fee & Other Income 98 113 270% 396 Total Income 702 781 97% 56 Operating Expense 176 210 27
Slide 39: Rural Business – Key ratios
Rural Business – Key ratios Key ratios Q3FY18 Key ratios Q2FY19 Q3FY19 17.48% Yield 18.56% 18.77% 10.67% Net Interest Margin 11.84% 11.64% 0.89% Fee & Other Income 1.91% 1.96% 11.56% NIM + Fee & Other Income 13.76% 13.60% 1.64% Operating Expenses 3.46% 3.66% 9.92% Earnings before credit cost 10.30%
Slide 40: Housing Business – Summary financial performance
Housing Business – Summary financial performance Performance Summary Q3FY18 Summary P&L (Rs. Cr) Q2FY19 Q3FY19 Y-o-Y (%) 499 Interest Income 661 727 46% 293 Interest Expense 372 408 39% 206 NIM 289 319 55% 73 Fee & Other Income 64 59 -19% 279 Total Income 354 379 36% 33 Operating Expense 40 47 43% 2
Slide 41: Housing Business – Key ratios
Housing Business – Key ratios Key ratios Q3FY18 Key ratios Q2FY19 Q3FY19 12.03% Yield 12.47% 12.81% 4.97% Net Interest Margin 5.46% 5.62% 1.76% Fee & Other Income 1.21% 1.05% 6.73% NIM + Fee & Other Income 6.67% 6.67% 0.79% Operating Expenses 0.76% 0.82% 5.94% Earnings before credit cost 5.91% 5.85%
Slide 42: Wholesale Business – Summary financial performance
Wholesale Business – Summary financial performance Performance summary Q3FY18 Summary P&L (Rs. Cr) Q2FY19 Q3FY19 Y-o-Y (%) 1,023 Interest Income 1,139 1,210 18% 813 Interest Expense 888 914 12% 210 NIM 251 295 41% 129 Fee & Other Income 166 85 -34% 339 Total Income 417 381 12% 52 Operating Expense 5
Slide 43: Wholesale Business – Key ratios
Wholesale Business – Key ratios Key ratios Q3FY18 Key ratios Q2FY19 Q3FY19 9.31% Yield 9.77% 10.31% 1.91% Net Interest Margin 2.15% 2.52% 1.17% Fee & Other Income 1.42% 0.73% 3.08% NIM + Fee & Other Income 3.57% 3.24% 0.47% Operating Expenses 0.49% 0.63% 2.61% Earnings before credit cost 3.08% 2.62%
Slide 44: Infrastructure Finance & DCM – Business wise split
Infrastructure Finance & DCM – Business wise split D Sectors (Rs. Cr) Q3FY18 Q2FY19 Q3FY19 Y-o-Y (%) I S Renewable Power 2,803 3,117 3,176 13% B U Roads 286 261 413 44% R S Power Transmission 50 1,057 164 - E M Others1 3,651 3,057 307 -92% E N Total 6,790 7,491 4,060 -40% T L Q3FY18 Q2FY19 Q3FY19 Se
Slide 45: Product profile and Geographies
Product profile and Geographies Average Average BUSINESS Major Geographies Ticket Size Tenor Farm MP, UP, Maharashtra, Karnataka, Rs. 4 Lacs 49 months Equipment Telangana, AP, Bihar Rural Kolkata, Ahmedabad, Surat, Mumbai, 2 Wheeler Rs. 53k 25 months Pune, Bangalore, New Delhi, Hyderabad TN, WB, Ori
Slide 46: LTFH branch footprint
LTFH branch footprint 9 As of 31st December, 2018 2 11 1 No. of States & Union 21 & 2 Territories 21 14 4 10 No. of branches* 234 3 No. of Micro Loans meeting 17 31 13 1 1,181 centers** 8 8 No. of employees 21,177 33 9 1 12 14 1 7 3 *Also includes 1 branch in Dubai **All these are in rural areas 45
Slide 47: Corporate structure & Credit ratings
Corporate structure & Credit ratings L&T FINANCE HOLDINGS (LTFH) AAA (Long Term) India Ratings & Research, CARE, ICRA A1+ (Short Term) LENDING NON LENDING L&T L&T HOUSING L&T INFRA L&T INFRA L&T CAPITAL L&T FINANCE INVESTMENT FINANCE FINANCE DEBT FUND MARKETS MANAGEMENT India Ratings & India Ratings
Slide 48: AUM disclosure – Investment Management Business
AUM disclosure – Investment Management Business Assets under Management (Rs. Cr) Quarter ended Dec, 2017 Quarter ended Sept, 2018 Quarter ended Dec, 2018 Fund Type AUM1 Avg. AUM2 AUM1 Avg. AUM2 AUM1 Avg. AUM2 Equity 30,093 26,177 35,403 37,073 37,229 35,855 (Other than ELSS) Equity – ELSS 2,964 2,77
Slide 49: Consolidated Debt: Well diversified into various instruments
Consolidated Debt: Well diversified into various instruments Q2FY19 Q3FY19 Others Others 5% 6% CP CP 18% Bank 16% Bank Loans Loans 36% 36% NCDs NCDs 41% 42% Rs. 86,789 Cr 8.33% Rs. 87,818 Cr 8.50% Consolidated Debt WAC WAC is including Preference Capital 48
Slide 50: 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) CNBC TV18 MF Award for
Slide 51: Corporate Social Responsibility
Corporate Social Responsibility Directly linked to creating value FOCUS: GENERATION OF SUSTAINABLE RURAL LIVELIHOODS Water resource management Digital financial inclusion 330 Digital Sakhis, 1600 women entrepreneurs and Target Group 30,000 farmers directly 1,50,000 rural population Climate resilient
Slide 52: Board comprises majority of Independent Directors
Board comprises majority of Independent Directors Board of Directors Dinanath Dubhashi, Managing Director & CEO S. V. Haribhakti, Non-Executive Chairman, Independent Director o 28+ years of experience across multiple domains in BFSI such as o Chairman of New Haribhakti Business Services LLP Corporat
Slide 53: Management Team
Management Team Dinanath Dubhashi Managing Director & CEO 28 yrs exp, BNP Paribas, SBI Cap, CARE Kailash Kulkarni Srikanth J Virender Pankaj CE - Investment Management & Sunil Prabhune CE – Housing & CE – Wholesale & Group Head - Marketing CE – Rural & CHRO Group Head – Central operations Group Head
Slide 54: Deliver sustainable RoE
Deliver sustainable RoE Registered Office: Brindavan, Plot No 177 CST Road, Kalina Santacruz (E), Mumbai 400 098 www.ltfs.com T +91 22 6212 5000/5555 CIN: L67120MH2008PLC181833 53
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