The consolidated income from operations fell 2% Rs 3304.44 crore in Q3FY2021, while other income declined 16% to Rs 317.72 crore. The total income declined 3% to Rs 3622.16 crore for Q3FY2021. Interest expenses dipped 9% to Rs 1723.82 crore. Operating expenses eased 1% to Rs 602.69 crore, supporting 5% rise in the operating profits to Rs 1295.65 crore. The cost-to-income ratio eased to 31.2% in Q3FY2021 from 33.1% in Q3FY2020.

Depreciation declined 26% to Rs 21.01 crore, while provisions surged 92% to Rs 925.97 crore. Profit before tax dipped 52% yoy basis at Rs 348.67 crore. Effective tax rate eased to 17.5% in Q3FY2021 from 18.4% in Q3FY2020. Net Profit of the company, after share in profit of associates and non-controlling interest, declined 51% to Rs 290.66 crore for Q3FY2020.

Book value per share of the company stood at Rs 77.3 per share at end December 2020. Adjusted book value (net of NNPA) per share of the company stood at Rs 68.4 per share at end December 2020.

Business performance

Loans and Advances rose 1% to cross Rs 1 lakh mark at Rs 100099 crore end December 2020 as compared to Rs 99453 crore at end December 2019. Loans & Advances in the focused businesses moved up 3% to Rs 96459 crore end December 2020 compared with Rs 93956 crore end December 2019. In the de-emphasized portfolio, the loans & advances dipped 34% to Rs 3640 crore end December 2020.

Within the focused lending book, the Rural Finance book grew by 4% yoy, aided by growth in Farm Equipment Finance book by 18%, and the Two-Wheeler Finance book by 9%. The Home Loan segment grew by 3% yoy.

The Average Assets under Management (AAUM) of the Investment Management business stood at Rs 68976 crore in Q3FY21. The AUM for Equity and Fixed Income asset classes as on 31 December 2020 stood at Rs 38906 crore and Rs 22483 crore, with a growth of 9% and 20%, respectively, qoq basis.

With the strong economic recovery across sectors led by Rural and Infrastructure, the company posted highest quarterly disbursements since Q1FY20, up by 51% qoq with highest quarterly disbursement in Farm Equipment and Two-Wheeler Finance since FY17. Farm Equipment disbursements jumped 43% qoq to Rs 1554 crore in Q3FY21 from Rs 1089 crore in Q2FY21. Two-Wheeler disbursements galloped 50% qoq at Rs 1652 crore in Q3FY21 from Rs 1102 crore in Q2FY21.

NIMs + Fees improved to 7.39%, led by highest quarterly fees & other income in Rural, outcome of judicious treasury management and abundant market liquidity which led to a reduction in cost of borrowing. The company has also exhibited significant reduction in cost of borrowing by 50 bps qoq from 8.32% in Q2FY21 to 7.82% in Q3FY21.

The asset quality has improved with the decline in GS3 to 5.12%, while NS3 stood at 1.92% end December 2020. The company has continued to carry additional provisions (over and above PCR and standard asset provisions) of Rs 1739 crore (1.90%) on standard book end December 2020.

Rural Finance: The quarter witnessed steady qoq & yoy improvements in disbursements across Farm Equipment Finance and Two-Wheeler Finance.

1. Farm Equipment Finance: Disbursements grew at 43% qoq (13% yoy), which was the highest quarterly disbursement since FY17. It witnessed increased business from top dealers on the back of strengthened Trade Advance (TA) proposition
2. Two-Wheeler Finance: Disbursement growth was at 50% qoq (10% yoy) and the business continues to see growth momentum
3. Micro Loans (ML): Strong pickup in ML disbursements qoq, up 53%, owing to improved collection efficiency. However, disbursements were down 19% yoy as focus remained on existing customers

1. The Home Loan business which is focused largely on the salaried segment and direct sourcing, witnessed moderate pickup in disbursements. Home loans to the salaried segment constituted 94% of Q3FY21 disbursements, standing at approx. 93% of Q3FY20 levels
2. Real Estate: Continued to be selective in disbursements with focus on providing support to existing projects to ensure project completion

Infrastructure Finance: Highest quarterly disbursement since Q1FY19. The business continues to maintain strong emphasis on portfolio monitoring and disbursement focus towards existing projects completion.

B. Liquidity:

Better treasury management and abundant market liquidity has helped in reducing cost of borrowing, leading to increase in NIMs + Fees to reach 7.39% with the reduction in cost of borrowing by 50 bps qoq from 8.32% in Q2FY21 to 7.82% in Q3FY21. The company has maintained lower average liquid assets during the quarter. As of December 2020, the company maintained Rs 16442 crore of liquidity including assets in the form of cash, FDs and other liquid investments of Rs 7709 crore.

Balance Sheet:

The company continues to maintain a strong capital adequacy of 21.82%. Furthermore, the ongoing traction in our analytics-based collection efforts augurs well with objective of building a strong balance sheet.

Asset quality

The Gross Stage 3 assets of the company stood at 5.12% in Q3FY21 of its book, showing a reduction of 82 bps yoy. The company strengthened the PCR on Stage 3 assets from 57% in Q3FY20 to 64% in Q3FY21.Period Q3FY20 Q2FY21 Q3FY21

Commenting on the financial results Dinanath Dubhashi, Managing Director & CEO, LTFH, said, Post Covid, the rural economy has performed better than urban and this trend is reflected in our disbursements, which are almost at pre-covid levels. The festive season uptick and a steady recovery in collection volumes also underline our rural performance. Our strong performance in Infra disbursements should be seen alongside the sell-down volumes, which have increased on a yoy basis. It allows us to generate more fee income while proportionately reduces the need for allocating higher capital.

In the long term, structural changes such as government initiatives, normal monsoons and better infrastructure will continue to improve financial health in rural. We will maintain focus on capitalizing on our market leadership position in Farm Equipment and Two-Wheeler Finance to drive business volumes.

Financial Performance 9MFY2021

The consolidated income from operations eased 1% to Rs 9881.24 crore for the nine-months ended December 2020, while other income of the company dipped 45% to Rs 647.36 crore. The total income declined 5% to Rs 10528.60 crore for 9MFY2021. Interest expenses fell 2% to Rs 5590.80 crore. Operating expenses increased 12% to Rs 1847.68 crore, causing 18% decline in the operating profits to Rs 3090.12 crore. The cost-to-income ratio rose to 37.4% in 9MFY2021 from 30.4% in 9MFY2020.

Depreciation rose 8% to Rs 64.76 crore, while provisions surged 66% to Rs 2474.01 crore. Profit before tax declined 65% yoy basis at Rs 776.96 crore. Effective tax rate dipped to 12% in 9MFY2021 from 40.9% in 9MFY2020. Net Profit of the company, after share in profit of associates and non-controlling interest, declined 46% to Rs 704.09 crore for 9MFY2020.

L&T Finance Holdings: Consolidated Results

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