L&T Finance

On the face of it, L&T Finance’s consolidated Q1FY16 results look utterly poor. However, digging a little deep unravels few mysterious facts attached with the quarterly numbers. 72.93% subsidiary of engineering giant L&T, L&T Finance Holdings, providing both retail and wholesale finance, reported 5% QoQ growth in consolidated income from operations to Rs. 1,718 crore mainly on account of higher lending in the B2C segment, as loans and advances grew 4% QoQ to Rs. 49,219 crore, while net interest income rose 4% QoQ to Rs. 733 crore.

Consolidated net profit came in at Rs. 192 crore, which is down 6% QoQ. Optically, net profit is down 33% YoY but quarter ended 30-06-14, had exceptional gain of Rs. 119 crore (post tax) from sale of investment in City Union Bank. Adjusting for one-time gains, consolidated net profit is up 15% YoY during first quarter ended 30-06-15.   

While company’s AUM under investment management business contracted 1% sequentially, portfolio under equity assets actually rose 6% QoQ to Rs. 9,329 crore, accounting for 42% of the total investment portfolio. Larger chunk of equity assets entails higher management fees for the company.

Asset quality however, deteriorated during the June quarter. Gross NPAs rose to 3.05% while net NPAs ballooned to 2% from 2.25% and 1.26% respectively, as of 31-3-15. The management allocates rise in delinquencies to the farm sector, which is to a large extent, gets affected by seasonality.

At current PBV multiple of 1.55x, company is one of the cheapest NBFCs, having a sizeable portfolio.