Analyst Meet / AGM - Analyst Meet

24-Jul-2014, 06:07
L&T Finance Holdings conducted an analyst meet on 23 July 2014 to discuss the results for the quarter ended March 2014 and way forward. N Sivaraman, President and Wholetime Director of the company addressed the call:

Highlights:

• Loan assets increased 19% yoy to Rs 40764 crore, while disbursement grew 11% to Rs 25959 crore at end June 2014. Thrust was given on rural products, personal vehicle and housing finance with focus on operating projects in infrastructure

• Assets under Management (AAUM) of AMC increased 44% yoy to Rs 19895 crore, while the wealth management business achieved average assets under service of Rs 6139 crore as at end June 2014

• Improved Retail NIMs with change in product mix towards high yielding assets, offset by dip in Wholesale NIMs

• Asset quality remained under stress due to seasonal pressures in the retail portfolio and minor slippage in infrastructure segment. Increase in net restructured assets in wholesale finance also stressed asset quality

• Credit costs remained stable with plateauing of stress in the mid-market segment

• Company sees NPA level to be at peak level at end June 2014, while expects NPAs to decline going forward.

• Company does not any have any significant restructuring proposals. However, Corporate Debt Restructuring (CDR) cells related two restructuring proposals are already classified as NPA, which would be upgraded from NPA category on approval of restructuring package.

• Easing NPAs would help to curbing credit cost. The company expects the credit cost to decline to 1% by Q4FY2015.

• The yield on Loans Against Properties (LAP) stands at 12.5% to 13.5%.

• The company is more interested in universal banking licenses than a small or payment bank license.

• Company expects improvement in lending business ROE to 18% and ROA to 2.2% by Q4FY2015.

Retail & Mid Market Finance

• PAT growth in line with asset growth

• GNPA increased due to seasonality related pressures in retail assets

• Credit costs remain stable, while gradual reduction is expected from Q2FY2015

• As of June 2014, provision over RBI norms is Rs 85 crore with assets of Rs 47 crore lying in repossessed stock

• NIMs continue to show improvement reflecting the shift in product mix towards higher yielding products

• Opex remains stable and impact of integration related activities to lead to reduction in opex

• Segment loan growth would be driven by B2C (Rural Products, Personal Vehicle) and selective lending to B2B (Corporate, CE, CV)

Wholesale Finance

• GNPA increased due to additional slippages, delays in restructuring process

• Company sold assets of net book value Rs 33 crore to ARC at Rs 5 crore, loss to be amortized equally over 8 quarters

• Restructured standard asset (excluding FITL) stands at 6.8% at end June 2014 as compared to 6.4% at end March 2014

• NIMs were impacted by non-accrual of interest on NPAs and restructured cases, which is expected to stabilize at current levels

• Fee income muted in Q1 due to delay in closure of certain large ticket transactions

• Healthy CRAR offers scope to optimize leverage going ahead

• Effective implementation of policy measures key to revival of sector

Housing Finance

• Expansion of sourcing to 20 operational markets by addition of 3 new branches, while serving customers in 68 cities

• Product portfolio diversification continues to be a key focus area

• Continue to focus on enhancing customer service with launch of E-Approval platform

• Sourcing in affordable housing segment begins

• Disbursement growth remains high at 71%, while loan book grew four-times

• Increase in GNPA due to seasoning of acquired portfolio and few home loan cases which are under litigation, expect to stabilize going ahead

Investment Management

• Turnaround in equities with net sales being positive for the quarter with a positive market movement

• AAUM growth for the quarter in line with industry - net inflow in money market and equity segments

• Changes in capital gains and dividend distribution tax for non-equity mutual funds likely to result in significant change in the composition of fixed income funds

Wealth Management - On the growth path

• Continue focus on domestic clients with customized investment solutions

• Launch of Dubai operations with a representative license with focus on NRI Clientele in UAE / Muscat

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