L&t Finance Ltd · NSE:LTF
L&t Finance — Investor Presentation (May 2022)
57 slides from L&t Finance's investor presentation, May 2, 2022
Slide 1: Submission of Investor / Analyst Presentation
May 2, 2022 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. Symbol: L&TFH Security Code No.:
Slide 2: LTFS – Lakshya 2026
a IM. INNOVATE. CREATE.
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: FY22 Recap
FY22 Recap Retail book share increased from 43% to 51% Retail at all time high disbursements of Rs ~25,000 Cr NIMs + Fees at 7.84% (up 89bps YoY) Lowest ever yearly WAC at 7.50% GS3 stands at 3.80% with a PCR of 48% 3
Slide 5: Transformation Journey
Transformation Journey Lakshya 2026 LTFS 1.0 LTFS 2.0 Retail NBFC (2011-2016) (2016-2022) (2022-2026) Established ‘Right to Win’ across 4 businesses Move forward from ‘Product focus’ to Diversified with marginal presence across Used Digital & Analytics as a differentiator ‘Customer focus’ businesses
Slide 6: Lakshya 2026 Goals
Lakshya 2026 Goals Retailisation Retail growth Asset Quality RoA GS3 <3% >80% >25% CAGR 2.8% - 3% NS3 <1% 5
Slide 7: Agenda
Agenda Journey LTFS 2.0 – Performance recap since FY16 Lakshya 2026 LTFS – Aim. Innovate. Create 6
Slide 8: LTFS 2.0 - In perspective
LTFS 2.0 - In perspective Right Businesses Right Structure Right People • Rationalized businesses from: • Simplified corporate structure to enhance • Increase in ‘tooth to tail ratio’ governance & ensure clarity 12:1 36:1 22 10 7 2 FY16 FY22 FY16 FY22 FY16 Lending FY22 entities • Majority of Executi
Slide 9: LTFS 2.0 - Delivery
LTFS 2.0 - Delivery Strong Retailisation / Prudent Capital Allocation Leadership positions across several businesses Cutting edge liability franchise Strong & well provided balance sheet Transformational Digital & Data Analytics 8
Slide 10: LTFS 2.0 - Strong Retailisation
TOTAL BOOK LTFS 2.0 - Strong Retailisation (1/2) 58,256 66,648 85,354 99,122 98,384 94,014 88,341 FY16 FY17 FY18 FY19 FY20 FY21 FY22 26% 27% 30% 36% 40% 43% 51% RETAIL Consistent book growth; 20% CAGR (26% Rural CAGR) 14,957 17,684 25,917 36,069 39,312 40,824 45,084 FY16 FY17 FY18 FY19 FY20 FY21 FY2
Slide 11: LTFS 2.0 - Prudent capital allocation
LTFS 2.0 - Prudent capital allocation (2/2) In Rs Cr Segment-wise asset size FY16 FY22 Retail 14,957 45,084 20% CAGR since FY16 (Book size) Lending Wholesale 33,389 41,731 Capital light model Proven ability to successfully collect in case of Defocused 9,910 1,526 discontinued businesses Gains from s
Slide 12: LTFS 2.0 - Leadership positions across businesses
LTFS 2.0 - Leadership positions across businesses Strong Customer & Geo presence Gained market positions across businesses (Disbursements in Rs Cr) Farm Two Wheeler Micro Loans 2x 5,152 3x 5,084 4x 9,950 Customer database: 2+ Cr 2,394 1,595 2,536 FY16 FY22 FY16 FY22 FY16 FY22 Market Rank - 1 Market
Slide 13: LTFS 2.0 - Cutting edge liability franchise
LTFS 2.0 - Cutting edge liability franchise Diversified from bank borrowings to Leveraged Priority Sector Loans Upgraded from ‘AA+’ rating to ‘AAA’ ECBs, raised granular liabilities (~60% of incremental long tenor CRISIL, ICRA, CARE, India Ratings through Retail NCDs bank funds since Sep-19) India’s
Slide 14: LTFS 2.0 - Strong & well provided balance sheet
LTFS 2.0 - Strong & well provided balance sheet IGAAP – 120 DPD GS3 IGAAP – 90 DPD NS3 IndAS – 90 DPD Additional Prov 350 664 1,093 1,727 (% of standard - - - book)* (0.4%) (0.7%) (1.3%) (2.1%) 48% PCR 22% GS3 8.7% 490 7.1% bps 5.9% 4.9% 5.0% 5.4% 5.0% 3.8% 3.8% 3.3% 2.4% 2.3% 2.0% 1.6% FY16 FY16 FY
Slide 15: LTFS 2.0 - Transformational Digital & Data Analytics (1/2)
LTFS 2.0 - Transformational Digital & Data Analytics(1/2) TAT AS A VALUE PROPOSITION SOURCING ANALYTICS UNDERWRITING ANALYTICS Asset 45 secs Industry Variables Industry avg: 10-15 min (Login to sanction) Peer Geographic Benchmarking parameters 18 mins Mandi Delinquency trends Customer parameters Ind
Slide 16: LTFS 2.0 - Transformational Digital & Data Analytics (2/2)
LTFS 2.0 - Transformational Digital & Data Analytics (2/2) COLLECTION ANALYTICS RETENTION ANALYTICS Ø Smart allocation of resources based on customer profile 2,292 • Low risk (self cure) - Call centers 1,696 • Medium risk – early on field collection bucket 1st Digitally native product – identificati
Slide 17: Agenda
Agenda Journey LTFS 2.0 – Performance recap since FY16 Lakshya 2026 LTFS – Aim. Innovate. Create 16
Slide 18: LTFS - Lakshya 2026
LTFS - Lakshya 2026 AIM. INNOVATE. CREATE. To be a top class ‘digitally enabled’ retail finance company moving from ‘product-focused’ to ‘customer-focused’ approach 17
Slide 19: Lakshya 2026 Goals
Lakshya 2026 Goals Retailisation Retail growth Asset Quality RoA GS3 <3% >80% >25% CAGR 2.8% - 3% NS3 <1% 18
Slide 20: Path to becoming a top class digitally enabled retail finance company
Path to becoming a top class digitally enabled retail finance company 1 Sustained profit and growth engine 2 Demonstrable strength in risk management 3 Creating Fintech @ Scale 4 Sustainable future growth through ESG 19
Slide 21: Path to becoming a top class digitally enabled retail finance company
Path to becoming a top class digitally enabled retail finance company 1 Sustained profit and growth engine 2 Demonstrable strength in risk management 3 Creating Fintech @ Scale 4 Sustainable future growth through ESG 20
Slide 22: Sustained profit and growth engine
Sustained profit and growth engine Growth Vectors Continued Product Launch of New excellence products Cross-sell and Up- Keeping customer at core App & Digital based sell to existing channel expansion good customers Geo-expansion, Pan - India footprint 21
Slide 23: Growth Vectors (1/6)
Growth Vectors (1/6) Continued Product excellence – making clear choices Portfolio Actions Businesses / Products Farm Equipment Industry attractiveness Two Wheelers Micro Loans Grow Retail Housing Possible Customer Customer Consumer Loans ‘Right centricity to centricity SME Finance win’ Rural Busine
Slide 24: Growth Vectors (2/6)
Growth Vectors (2/6) Continued Product excellence – building leadership across products Farm 2W Micro Loans Retail Housing Consumer Loan SME Maintain Leadership Build Strong Right to Win Built on the foundation of Market Leadership Stable Strong Continued leadership team OEM relationships Product ex
Slide 25: Growth Vectors (3/6)
Growth Vectors (3/6) Cross-sell and Up-sell Rural Urban Warehouse Finance CL Fam Loan High High LTFS Presence / Proposed Income HL Income Farm-Topup SME Individual Loan Micro loan LAP LTFS Presence Micro LAP Mid income Mid income CL Partnership Pragati Agri Input CL / HL top-up Individual Loan TW Lo
Slide 26: Growth Vectors (4/6)
Growth Vectors (4/6) Geo-expansion Parameters Rural Urban LTFS Right to Win LTFS better placed as credit models Income Visibility Cyclical Less Cyclical already created for cyclical businesses • Collection algorithm developed to optimise collection cost Repayment mode Cash based Banking habits more
Slide 27: Growth Vectors (5/6)
Growth Vectors (5/6) App & Digital based channel expansion Tapping into the digital Geo-agnostic customer sourcing opportunity Use digital, apps & Seamless multi- partnerships to expand channel experience network App & Digital based channel Analytics to deepen expansion reach to preferred Grow Marke
Slide 28: Growth Vectors (6/6)
Growth Vectors (6/6) Product expansion keeping customer at core Rural Urban CUSTOMER PROFILE RURAL BUSINESS FINANCE FARMER FINANCE URBAN FINANCE SME (Small Rural Entrepreneur) (Farmer) (Urban Individual) (Urban Business) • Two-wheeler • Rural Micro Loans EXISTING • Tractor Loans • Consumer Loan • Lo
Slide 29: …thus becoming a dominant player in Retail finance
…thus becoming a dominant player in Retail finance Continue to build on existing strengths Continue to hold on to the advantage we Continue to build on rural franchise have in dealership network & underwriting Build new strengths Establish direct autonomous connect with the Establish urban franchise
Slide 30: Strategising Wholesale Finance
Strategising Wholesale Finance Reduction of overall wholesale portfolio through sale / transfer of assets to drive Retailisation Infrastructure Finance • Leading renewable energy financier (Financed over 20 GW till date) Continue with asset-light model • Strong sell down model with higher churn Expl
Slide 31: Path to becoming a top class digitally enabled retail finance company
LTFS – LTFS – Renew. Evolve. Grow PathAgenda to becoming a top class digitally enabled retail finance company 1 Sustained profit and growth engine 2 Demonstrable strength in risk management 3 Creating Fintech @ Scale 4 Sustainable future growth through ESG 30
Slide 32: Demonstrable strength in risk management
Demonstrable strength in risk management FORTIFYING TO BUILD A ‘FUTURE-PROOF LTFS’ Tech-enabled risk BCP for emergency Sustainability & management scenarios climate risk Develop agility & capability New age portfolio Prepare for future Managing emerging mgmt scenarios risks BUILD FINTECH @ SCALE Ada
Slide 33: New-age portfolio management
New-age portfolio management Risk detection with enhanced and Geo-agnostic underwriting real time data analytics capability Next gen scorecards & risk Analytics based multi-layer controls monitoring dashboards Portfolio to reduce operational risk Management Hyper-personalization of risk EWS based on
Slide 34: Path to becoming a top class digitally enabled retail finance company
Path to becoming a top class digitally enabled retail finance company 1 Sustained profit and growth engine 2 Demonstrable strength in risk management 3 Creating Fintech @ Scale 4 Sustainable future growth through ESG 33
Slide 35: Creating Fintech @ Scale
Creating Fintech @ Scale Data Monetization Develop Deepen Ability to identify Need Ability to identify Customer Ability to Underwrite Ability to Collect Liveness matching Application scorecard Segmentation, Willingness to Understand Propensity to Buy with OCR as KYC for Decisioning Pay model for col
Slide 36: Creating Fintech @ Scale
Creating Fintech @ Scale Digital Channel Expansion Reimagined existing Assisted processes & reduced Channels burden through self- servicing channels Point of Purchase Branches Call centers Field Agents 3rd party partners (Dealership) SHO Portal Chatbot Ecosystem WhatsApp Mobile App Increased interac
Slide 37: Digital Channel Expansion
Digital Channel Expansion Ecosystem Deep technical integration through APIs E-aggregators LTFS Systems Web APIs Platforms D2C App End Users Exposable services Access to Use APIs to create App Omni-channel Greater experience & business assets & connect to backend front-end UI/UX direct connect Market
Slide 38: Digital Channel Expansion
Digital Channel Expansion Mobile App Mobile App (Soft-launched) Personalized Offering for every customer Asset cost brackets Income segments Existing Good Customer customers Alternate data Geo-agnostic Customer Application Scorecard Bureau product Personalized Affluence Offers Prospect Delinquent …
Slide 39: Digital Channel Expansion
Digital Channel Expansion Targeted End State Customer initiated sourcing Project details Skill development Rural ecosystem Housing ecosystem Home prices Digital collections Farm products 2W selection+ test drives Customer Two wheeler utility communities Weather patterns Farmer’s marketplace portal D
Slide 40: Path to becoming a top class digitally enabled retail finance company
Path to becoming a top class digitally enabled retail finance company 1 Sustained profit and growth engine 2 Demonstrable strength in risk management 3 Creating Fintech @ Scale 4 Sustainable future growth through ESG 39
Slide 41: Our Progress till now (1/2)
Our Progress till now (1/2) Enhanced disclosures and Disclosures basis existing practices Building ESG conscious organisation certifications 2018 - 19 2019 - 20 2020 - 21 2021 - 22 • Setup board level ESG committee and • Undertook Gap assessment on • Published 1st Sustainability • Adopted ESG target
Slide 42: Our Progress till now (2/2)
Our Progress till now (2/2) ESG ratings highlights FY20 Score FY21 Score YoY Change Highlights • Improvement in score by 20 points 35 55 • In 90th percentile; global industry average: 27 • Remained constituent on the FTSE4Good Index Constituent Constituent Series for last 3 years • Consistently main
Slide 43: Sustainable future growth through ESG
Sustainable future growth through ESG Profitability with ethical, environmental and To be an environmentally and socially social responsibility responsible financial institution built on the foundation of ‘Assurance’, focused on Mainstream ESG practices into business, operations and value chain gene
Slide 44: Sustainable future growth through ESG
Sustainable future growth through ESG Commitment to achieve Carbon and Water Neutrality adopted in FY22 LTFH Carbon Neutral by FY35 Adopt Energy Conservation and efficiency measures Use Renewable Energy solutions in operations Achieve Carbon Sequestration through initiatives such as tree plantations
Slide 45: Why are we confident of achieving Lakshya 2026?
Why are we confident of achieving Lakshya 2026? 44
Slide 46: Why are we confident of achieving Lakshya 2026?
Why are we confident of achieving Lakshya 2026? Execution 2016-2022 (Retail) Lakshya 2026 Goals 26% 51% >80% (FY16) (Mar’22) Retailisation Increased Retail mix 20% CAGR* Growth >25% CAGR Strong Retail growth Retail Growth * 26% CAGR in Rural Launch of new products • Launched ‘Digitally native’ CL in
Slide 47: Thank You
Thank You —————ESEaeae ae eee ® L&T Financial Services
Slide 48: LTFH Consolidated – Capital allocation and RoE bridge: Q4FY22
LTFH Consolidated – Capital allocation and RoE bridge: Q4FY22 Q4FY21 Q4FY22 PAT Business Segments (₹ Cr) Y-o-Y (%) PAT Net worth RoE PAT Net Worth RoE 236 6,293 15.83% Retail Finance 299 8,319 14.51% 27% 223 10,018 8.94% Wholesale Finance 42 9,086 1.86% (81%) 459 16,311 11.51% Lending Business 341 1
Slide 49: LTFH Consolidated – Capital allocation and RoE bridge: FY22
LTFH Consolidated – Capital allocation and RoE bridge: FY22 FY21 FY22 PAT Business Segments (₹ Cr) Y-o-Y (%) PAT Net worth RoE PAT Net Worth RoE 449 6,293 7.43% Retail Finance 739 8,319 9.51% 65% 838 10,018 8.74% Wholesale Finance 383 9,086 4.23% (54%) 1,287 16,311 8.23% Lending Business 1,122 17,40
Slide 50: Lending Business – Business wise disbursement split
Lending Business – Business wise disbursement split Disbursement Q4FY21 Q3FY22 Q4FY22 Y-o-Y (%) Segments (Rs Cr ) FY21 FY22 Y-o-Y (%) 1,244 1,492 1,154 (7%) Farm Equipment 4,477 5,152 15% 1,372 1,637 1,380 1% 2W Finance 4,436 5,084 15% 3,181 3,157 3,881 22% Micro Loans 6,613 9,950 50% 229 650 798 24
Slide 51: Lending Business – Business wise book split
Lending Business – Business wise book split Book Q4FY21 Segments (Rs Cr) Q3FY22 Q4FY22 Y-o-Y (%) 10,261 Farm Equipment 11,210 11,317 10% 7,122 2W Finance 7,306 7,462 5% 12,207 Micro Loans 11,955 13,278 9% 490 Consumer Loans 1,696 2,301 369% 7,333 Home Loans 7,463 7,837 7% 3,411 LAP 2,957 2,827 (17%)
Slide 52: Retail Finance – Summary financial performance
Retail Finance – Summary financial performance Performance Summary Q4FY21 Q3FY22 Q4FY22 Y-o-Y % Summary P&L (Rs Cr ) FY21 FY22 Y-o-Y (%) 1,636 1,630 1,729 6% Interest Income 6,453 6,565 2% 632 607 624 (1%) Interest Expense 2,755 2,435 (12%) 1,004 1,023 1,104 10% NIM 3,697 4,130 12% 177 160 157 (11%)
Slide 53: Retail Finance – Key ratios
Retail Finance – Key ratios Key Ratios Q4FY21 Q3FY22 Q4FY22 Key Ratios FY21 FY22 16.15% 15.33% 16.06% Yield 16.12% 15.74% 10.05% 9.62% 10.26% Net Interest Margin 9.24% 9.90% 1.78% 1.51% 1.46% Fee & Other Income 1.31% 1.26% 11.83% 11.13% 11.72% NIM + Fee & Other Income 10.55% 11.16% 3.93% 4.13% 4.50%
Slide 54: Retail Finance - Asset quality
Retail Finance - Asset quality Retail - Asset Quality 71% 68% 69% 1,615 1,539 1 3 % 1,457 1 1 % 9 % 7 % 5 % 488 498 3.63% 3.68% 3.65% 426 3 % 1.09% 1.20% 1.16% 1 % -1 % Q4FY21 Q3FY22 Q4FY22 GS3 (Rs Cr) NS3 (Rs Cr) GS3 (%) NS3 (%) Carrying additional provision at Rs 1,496 Cr (Macro, enhanced and OTR
Slide 55: Wholesale Finance – Summary financial performance
Wholesale Finance – Summary financial performance Performance Summary Q4FY21 Q3FY22 Q4FY22 Y-o-Y % Summary P&L (Rs Cr ) FY21 FY22 Y-o-Y (%) 1,450 1,106 1,038 (28%) Interest Income 5,984 4,577 (24%) 913 762 747 (18%) Interest Expense 4,038 3,143 (22%) 536 345 291 (46%) NIM 1,946 1,434 (26%) 146 113 8
Slide 56: Wholesale Finance – Key ratios
Wholesale Finance – Key ratios Key Ratios Q4FY21 Q3FY22 Q4FY22 Key Ratios FY21 FY22 10.85% 10.57% 10.00% Yield 10.97% 10.44% 4.02% 3.29% 2.81% Net Interest Margin 3.57% 3.27% 1.10% 1.08% 0.86% Fee & Other Income 0.71% 0.82% 5.11% 4.37% 3.66% NIM + Fee & Other Income 4.28% 4.10% 0.49% 1.00% 0.99% Ope
Slide 57: Wholesale Finance - Asset quality
Wholesale Finance – Key ratios Wholesale - Asset Quality 71% 38% 27% 2,861 1 3 % 1 1 % 2,288 9 % 1,774 7.31% 1,627 7 % 1,181 4.68% 4.66% 5 % 4.03% 653 3 % 2.95% 1.38% 1 % -1 % Q4FY21 Q3FY22 Q4FY22 GS3 (Rs Cr) NS3 (Rs Cr) GS3 (%) NS3 (%) 56 GS3 - Gross Stage 3; NS3 - Net Stage 3; PCR – Provision Cove
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