L&T Finance Holdings
Estimate change
TP change
Rating change
Motilal Oswal values your support in the
Asiamoney Brokers Poll 2021 for India
Research, Sales, Corporate Access and
Trading team. We
request your ballot.
19 July 2021
1QFY22 Results Update | Sector: Financials
CMP: INR91
TP: INR110 (+22%)
Buy
Transient impact of COVID 2.0; recovery held up well in Jun’21
LTFH reported a 1QFY22 PAT of INR2.7b (35% miss). Additional COVID-19
provisions stood at INR3.7b in 1QFY22. It further restructured INR9.8b
under OTR 2.0. While NII was broadly in line, lower other income, and
higher opex (up 31% YoY) led to a PAT miss.
Loan book fell ~11% YoY in 1QFY22, driven by a QoQ decline in Micro
loans, 2W finance, and Real Estate finance.
Even though LTFH has accounted for most of the asset quality pain, there
will be a moderation in AUM growth and consequent higher cost ratios.
We cut our FY22E/FY23E EPS estimate by 21%/19%. We maintain Buy with
a TP of INR110 per share (1.2x FY23E BVPS).
Disbursements fell 36% QoQ to INR52.2b. In May’21, disbursements were
impacted across product segments, except Infrastructure. Tractors
continued to witness robust demand, with a 9% QoQ growth, and
supported overall rural disbursements, even as 2W and ML disbursements
were impacted by lockdown/collection constraints.
Disbursements in Home Loans/LAP/Real Estate remained muted, with
continued conservatism in financing the SENP segment and no new
sanctions in Wholesale Real Estate lending.
Despite decent disbursements in the Wholesale/Infra segment, the
corresponding loan book fell ~11% QoQ because of strong collections
through sell downs and repayments/prepayments.
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Financials & Valuations (INR b)
Y/E March
2021 2022E
Total Income
71.1
70.7
PPP
51.3
47.4
Adj. PAT
9.5
14.5
EPS (INR)
3.8
5.9
EPS Gr. (%)
-54.7
53.1
BV/Sh. (INR)
76
81
Ratios
NIM (%)
6.6
6.8
C/I ratio (%)
27.8
32.9
RoAA (%)
0.9
1.4
RoE (%)
5.7
7.5
Payout (%)
0.0
12.0
Valuation
P/E (x)
23.7
15.5
P/BV (x)
1.2
1.1
Div. Yield (%)
0.0
0.8
Shareholding pattern (%)
As On
Jun-21 Mar-21
Promoter
63.6
63.6
DII
6.6
5.9
FII
8.8
10.6
Others
21.1
19.9
FII Includes depository receipts
LTFH IN
2,469
223.7 / 3
113 / 52
-1/-16/16
1428
Disbursements impacted in May’21, the situation improved in Jun’21
2023E
75.5
48.9
20.3
8.2
39.6
88
7.0
35.2
1.9
9.7
12.0
11.1
1.0
1.1
Jun-20
63.7
5.5
9.4
21.5
Housing collections most impacted; LTFH again building up a provision buffer
Collection efficiency across product segments showed a lot of promise
after the lifting of lockdown restrictions post the second COVID wave.
Collections (focused business) fell ~5% QoQ to INR132b. Collections were
strong in Infrastructure, decent in rural, but Housing Finance collections
were impacted the most (down 37% QoQ).
LTFH reversed INR7b of COVID-related provisions in 4QFY21. To guard
against contingencies, it made additional provisions of INR3.7b in 1QFY22.
Total additional provision buffer stood at INR14b (1.6% of loans).
GNPL ratio increased by ~80bp QoQ and stood at 5.75%. PCR on Stage 3
assets declined by 400bp to 65.4%. Rural Finance continued to exhibit a
deterioration and the respective GS3 stood at 4.4% (up 40bp QoQ).
Spreads stable; margin sees a QoQ decline; AMC AUM exhibited growth
Spreads (calculated) were stable QoQ at 6.2% as the marginal decline in
blended yields was mitigated by a similar benefit in CoF. NIM (healthy
nonetheless) exhibited a QoQ decline of ~20bp due to the negative carry
from higher liquidity.
Average AUM in the AMC was up 4% QoQ to INR755b, led by a 5% increase
in equity AUM. PAT stood at INR470m in 1QFY22 (v/s INR560m QoQ).
Key highlights from the management commentary
The management’s focus will be on retailization of its book going forward.
It expects NIM + fees to continue its current healthy trajectory.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Research Analyst: Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com)
| Abhijit Tibrewal
(Abhijit.Tibrewal@MotilalOswal.com)
Research Analyst: Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com)|
Divya Maheshwari
(Divya.Maheshwari@Motilaloswal.com)
17 July 2020
1
 Motilal Oswal Financial Services
L&T Finance Holdings
Valuation and view
Rural businesses witnessed improving MoM disbursement/collection trends in Jun-
Jul’21. LTFH has been consolidating its loan book over the past many quarters. We
expect this to continue over the next 2-3 quarters. We expect disbursements in
2W/ML to pick-up as collections improve. Restructured pool (including OTR 2.0) was
contained at 2.6%, with a PCR of 14%. Gradual normalization in excess liquidity on
the Balance Sheet will reduce the negative carry and support margin. We cut our
FY22E/FY23E EPS estimate by ~21%/~19%. We maintain our Buy rating with a TP of
INR110 per share (1.2x FY23E BVPS).
Quarterly performance
Y/E March
Interest Income
Interest Expenses
Net Interest Income
Change YoY (%)
Other Operating Income
Net Operating Income
Change YoY (%)
Other income
Total Income
Change YoY (%)
Operating Expenses
Change YoY (%)
Operating Profit
Change YoY (%)
Provisions
Profit before Tax
Tax Provisions
Profit after tax
Change YoY (%)
Key Operating Parameters (%)
Rep. Net Income (% of Avg. Assets)
Rep. Cost of funds (%)
Cost-to-Income Ratio
Rep. Credit Cost
Tax Rate
Balance Sheet Parameters
Gross Customer Assets (INR b)
Change YoY (%)
Borrowings (INR b)
Change YoY (%)
Customer Assets/Borrowings (%)
Asset Quality Parameters (%)
GS 3 (INR b)
Gross Stage 3 (%)
NS 3 (INR b)
Net Stage 3 (%)
PCR (%)
Return Ratios (%)
RoAA
RoAE
FY21
FY22
2QE
3QE
30,309 30,536
15,541 15,930
14,767 14,606
6.0
-7.6
1,850 2,125
16,617 16,731
9.4
-4.1
664 1,325
17,281 18,056
6.7
-3.1
5,591 5,896
22.0
20.0
11,690 12,160
0.6 -11.3
7,500 6,000
4,190 6,160
1,047 1,540
3,142 4,620
26.9
60.6
FY22E
Var. (%)
1QE
30,624
-2
15,126
0
15,499
-3
17.7
900
46
16,399
-1
16.4
1,250
-51
17,649
-4
7.3
4,592
19
10.0
13,056
-12
6.4
9,500
-5
3,556
-33
854
-29
2,703
-35
83.3
(INR m)
1Q
32,952
19,782
13,170
-5.2
918
14,089
-15.7
2,361
16,449
-6.9
4,175
-5.9
12,275
-7.2
11,282
993
-482
1,474
-73.2
5.78
8.49
25.4
3.63
-48.5
989
-1.0
941
1.3
105
49.4
5.2
15.5
1.7
68.6
0.5
3.9
2Q
32,816
18,888
13,928
-0.3
1,265
15,193
-6.6
1,008
16,201
-6.2
4,583
-4.3
11,618
-7.0
8,328
3,290
813
2,477
42.0
6.49
8.32
28.3
3.29
24.7
988
-1.4
929
3.2
106
49.2
5.2
15.3
1.7
68.9
1.0
7.6
3Q
33,044
17,238
15,806
7.7
1,633
17,439
0.2
1,187
18,627
0.9
4,913
-7.3
13,713
4.2
10,227
3,487
609
2,878
-51.4
7.39
7.82
26.4
4.06
17.5
1,001
0.6
937
0.8
107
49.4
5.1
17.9
1.9
63.7
1.0
7.5
4Q
32,236
16,091
16,145
9.3
1,916
18,060
16.5
1,720
19,781
21.9
6,078
15.5
13,703
25.0
6,520
7,182
4,523
2,660
-30.9
8.17
7.65
30.7
2.70
63.0
940
-4.4
886
-5.7
106
45.0
5.0
13.8
1.6
69.4
1.0
6.3
1Q
30,083
15,089
14,994
13.8
1,318
16,313
15.8
614
16,926
2.9
5,485
31.4
11,441
-6.8
9,062
2,379
609
1,770
20.1
7.51
7.64
32.4
4.01
25.6
884
-10.6
843
-10.5
105
48.8
5.8
16.9
2.1
65.4
0.7
3.8
4QE
31,395 1,31,049 1,22,323
16,804 71,999 63,364
14,591 59,049 58,959
-9.6
3.0
-0.2
2,449
5,732
7,668
17,040 64,782 66,627
-5.6
-1.7
2.8
1,424
6,276
4,026
18,464 71,058 70,654
-6.7
2.0
-0.6
6,262 19,749 23,234
3.0
-0.2
17.6
12,203 51,309 47,420
-10.9
2.9
-7.6
5,434 36,357 27,996
6,768 14,952 19,423
1,699
5,463
4,895
5,070
9,489 14,528
90.6
-44.2
53.1
FY21
FY22E
32.4
25.0
902
-8.7
809
-12.9
112
32.7
25.0
920
-8.1
825
-11.9
112
33.9
25.1
903
-4.0
827
-6.6
109
27.8
36.5
940
-4.4
886
-5.7
106
32.9
25.2
-2.0
25.4 704 BPS
19.1 -350 BPS
19 July 2021
2
 Motilal Oswal Financial Services
L&T Finance Holdings
Highlights from the management commentary
Business updates
LTFH saw the least impact on volumes in the Tractor segment.
The Infra book witnessed prepayments, leading to a decline in the book. Peers
are offering loans at competitive rates.
The company disbursed INR7.19b/INR200m/INR500m in micro loans in
Apr’21/May’21/Jun’21.
It did not finance any new developer projects in 1QFY22. It may look at new
projects in 2Q/3QFY22.
LTFH will launch end-use based products (such as Education, etc.) under its
Consumer loan business segment by FY22 end.
It gained market share gains across OEMs (gained market share in M&M and the
Tata group). Its market share in M&M/Tata/Sonalika/Swaraj stands at
45%/15%/29%/46%.
Around 60% of MFI disbursements in 1QFY22 is to existing customers, currently
leading to higher ATS. Yields are the same for new and existing customers.
Asset quality
LTFH saw 90% collection efficiency in Tractors and is back to pre-COVID levels.
MFI collections were impacted severely in Jun’21 v/s May’21. CE stood at 94% in
Jul’21.
CE to return back to pre-COVID levels in 2QFY22 for micro and 2Ws, provided
the impact of the third wave is not meaningful.
Cheque bounce rates have improved in 2Ws.
In Infra finance, Stage 2 assets have slipped in 1QFY22 (these will be rolled
forward to 2Q). Exposure stands at INR1.5b for each of its Road projects. One of
them is a legacy project (underwritten 8-10 years back) and the other was written
around five years ago. Credit costs have M2M on certain SRs. Total credit costs
have provisions as well as M2M (marked down or marked up) on SRs.
Of the total restructuring in OTR 2.0, it would be one-third each in ML/HL/2W.
There was no restructuring in the Salaried/Farm segment.
There were no write-offs in 1QFY22.
In FY21, INR25b of
Real Estate
repayments have been escrow collections or
repayments to take advantage of cheaper interest rates. Collections in escrow
accounts in 1QFY22 were 77% of pre-COVID levels (v/s 23% in 1QFY21), but still
nowhere close to pre-COVID levels.
Total additional provision buffer stood ~INR14b (1.6% of the loan book).
Guidance
19 July 2021
The management expects 2Q to be better than 1QFY22 in terms of
disbursements and collections.
It expects NIM + fees to continue its current healthy trajectory.
Stage 2 Retail portfolio stood ~7.5% in 2QFY22 (without the restructured
portfolio). PCR in the Stage 2 Retail portfolio stood at 37%.
The management expects 10% YoY growth in Tractor disbursements in FY22.
Its focus will be on retailization of its book going forward.
It expects other operating expenses to inch up with a pick-up in the business.
LTVs to be lower than most NBFCs in Farm financing.
3
 Motilal Oswal Financial Services
L&T Finance Holdings
Liabilities and margin
LTFH prepaid high cost funds and replaced it with several low cost funds (mid to
small term) to lock in lower interest rates.
It raised INR6.5b of PSL funds in 1QFY22.
Others
Repayments are healthy in Real Estate.
The sell down does not impact fee line items. Fee income is booked only on
underwriting.
No EMI holiday was offered in the MFI portfolio.
The company is not carrying out any disbursements in Assam currently.
Most POS in rural areas were functional and only urban POS were largely
impacted.
Consumer loans are completely cross-sell loans at present. It expects this to
become open marked by the end of FY22.
There were no one-offs in opex during 1QFY22.
Key exhibits
Loan book fell 11%
YoY/6% QoQ
Exhibit 1: Loan book growth (%)
16
10
Loans (INR b)
5
-1
-1
-1
Change YoY (%)
1
-4
-11
Source: MOFSL, Company
Exhibit 2: Slowdown in Housing Finance continues
35
24
28
14
24
14
4
4
1
8
6
7
9
8
Rural (YoY %)
Housing (YoY %)
Exhibit 3: Defocused book fell 48% YoY (%)
Wholesale (YoY %)
3
2
-2
4
-4
-15
-48 -48
4
14
-28
13
-45
13
-2 -11
-15
-55
-50
-45
-35
-34
Source: MOFSL, Company
Source: MOFSL, Company
19 July 2021
4
 Motilal Oswal Financial Services
L&T Finance Holdings
Exhibit 4: Share of the rural segment in business mix up
154bp sequentially (%)
Rural
9
39
26
26
7
39
27
27
6
40
27
28
Housing
5
40
27
28
Wholesale
5
40
27
28
5
39
28
29
4
41
26
29
Defocused
3
40
25
32
3
38
26
34
Exhibit 5: Share of bank borrowings fell 400bp QoQ (%)
NCD (Ex Retail) NCD Retail
3
2
1
3
13
38
10
42
9
43
6
44
TL+WC etc
2
9
43
7
36
1
9
39
7
40
CP
2
11
36
7
40
ECBs
1
7
38
6
43
Others
5
7
2
34
7
45
38
36
36
38
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 6: Net income (NIM + fee margin, %)
Overall (%)
13.5
13.0
7.1
6.3
4.0
5.9
3.8
13.3
7.3
6.0
3.4
13.7
7.3
5.3
3.5
Rural(%)
13.7
Housing(%)
12.0
5.8
4.5
2.4
5.0
3.0
13.3
Wholesale (Infra) (%)
15.1
14.6
8.2
5.2
4.5
3.4
13.7
7.5
4.8
6.8
6.8
2.7
6.9
6.5
5.2
4.0
7.4
Source: MOFSL, Company, *4QFY20 onwards wholesale business represents infrastructure finance (ex-IDF), 1QFY22 Wholesale finance
represents infrastructure finance.
Exhibit 7: RoA across segments (%)
4.6
3.9
3.0
2.3
2.1
3.4
2.4
2.0
2.7
2.2
1.7
2.5
1.5
1.8
1.5
1.4
0.5
0.2
0.3
1.0
0.8
1.4
0.5
1.0
1.7
1.5
1.2
2.4
1.0
0.7
2.6
1.3
0.9
0.4
0.7
4.1
Overall (%)
Rural (%)
Housing (%)
Wholesale (%)
Source: MOFSL, Company; *Wholesale business excludes IDF from 4QFY20 onwards. 1QFY22 Wholesale finance represents infrastructure
finance
19 July 2021
5
 Motilal Oswal Financial Services
L&T Finance Holdings
Exhibit 8: GS3 deteriorates by ~80bp sequentially (%)
5.7
6.0
Consol. GNPA (INR b)
5.9
5.4
5.2
Overall GS3%
5.2
5.1
5.0
5.8
Exhibit 9: NS3 up 50bp QoQ (%)
2.5
2.8
Consol. NNPA(INR b)
2.7
2.3
1.7
1.7
Overall NS3%
1.9
2.1
1.6
54.6
57.5
56.6
50.4
49.4
49.2
49.4
45.0
48.8
22.9
26.3
24.6
20.8
15.5
15.3
17.9
13.8
16.9
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 10: Rural GS3 (%) up ~45bp sequentially…
Rural GS3%
9.7
9.2
9.1
Housing GS3%
9.0
9.1
9.1
Wholesale GS3%
8.1
Exhibit 11: …with a ~30bp spike seen in rural NS3 (%)
Rural NS3%
4.6
4.2
4.1
Wholesale NS3%
3.9
3.6
Housing NS3%
7.9
7.9
4.4
3.5
2.8
2.3
0.8
1.0
2.9
3.4
0.8
3.6
0.8
3.6
0.9
3.8
1.0
3.4
1.0
3.2
1.2
3.5
1.3
4.0
1.3
0.6
1.5
0.6
0.6
1.3
1.5 1.4
0.9
0.7
0.7
0.3
0.8
0.3
0.4
0.9
1.1
1.0
Source: MOFSL, Company; *Wholesale business excludes IDF from
4QFY20 onwards. 1QFY22 Wholesale finance represents
infrastructure finance
Source: MOFSL, Company; Note: Infrastructure finance excludes IDF
numbers in 4QFY20. 1QFY22 Wholesale finance represents
infrastructure finance
Exhibit 12: Overall credit cost up ~130bp sequentially (%)
Rural
Wholesale
3.6
2.3
6.3
Overall
3.3
4.1
8.0
2.7
5.5
2.9
1.5
1.5
Housing
4.0
7.1
2.4
Exhibit 13: Around 67% of stressed loans are from the
Wholesale and Defocused books (%)
Rural
15
19
18
Housing
24
Wholesale
24
24
Defocused
24
17
50
8
26
16
52
6
26
2.4
3.5
0.9
2.5
3.8
2.4
4.0
1.1
3.0
6.3
8.1
3.1
1.9
65
4
16
61
4
16
61
4
17
51
5
20
52
5
19
52
6
18
50
7
20
1.3
0.0
1.0
0.9
2.1
1.6
Source: MOFSL, Company, *Wholesale business excludes IDF from
4QFY20 onwards. 1QFY22 Wholesale finance represents
infrastructure finance
Source: MOFSL, Company
19 July 2021
6
 Motilal Oswal Financial Services
L&T Finance Holdings
Exhibit 14: Rural PCR fell ~470bp QoQ (%)…
Rural
64
61
57
55
32
57
30
28
Housing
77
60
31
93
92
Wholesale
90
80
65
63
33
64
34
67
33
97
32
75
32
58
54
57
59
69
69
64
69
65
Exhibit 15: …while overall PCR declines by ~410bp (%)
Overall PCR (%)
66
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 16: Second COVID wave impacts micro loan
disbursements
Micro Loans
2W Finance
Farm Equipment
Exhibit 17: Segmental rural loan growth YoY (%)
Micro Loans
55
41
37
20
23
11
15
13
23
0
15
0
-5
15
13
9
19
12
9
-8
-2
8
-15
18
35
22
8
2W Finance
Farm Equipment
Source: MOFSL, Company, INR b
Source: MOFSL, Company
Exhibit 18: Housing disbursements (INR b)
13
Home Loans
12
12
7
2
1
7
2
LAP
12
Real Estate Finance
Exhibit 19: Loan growth YoY (%)
110
70
6
1
3
0
3 3
0
1
30
-10
-50
Home Loans
LAP
Real Estate Finance
7
6
1
10
2
3
12
4
Source: MOFSL, Company
Source: MOFSL, Company
37
Exhibit 20: AUM growth (%) in the AMC segment
Avg. AUM YoY Growth(%)
Avg. Equity AUM YoY Growth(%)
7
3
-2
-6
4
4
7
-5
0
-25
-21
-11
-9
-7
-4
2
29
Source: MOSL, Company
19 July 2021
7
 Motilal Oswal Financial Services
L&T Finance Holdings
Valuation and view
LTFH’s key Retail businesses witnessed improving MoM disbursement/collection
trends in Jun-Jul’21. However, loan growth is unlikely to pick up over the next 2-
3 quarters. We expect AUM growth to remain muted in FY22E.
The company has been able to raise adequate debt capital at competitive prices
on the back of stable operating metrics and strong parentage. Margin and fees
should remain healthy as disbursement volumes improve and LTFH reduces the
excess liquidity on its Balance Sheet.
After utilizing part of the additional COVID provisions over the last two
quarters, it again strengthened its provision buffer in 1QFY22 to guard against
contingencies from COVID 2.0. Total additional provision buffers now stands at
INR14b (1.6% of loans).
We cut our FY22E/FY23E EPS estimate by ~21%/~19% to factor in lower AUM
growth and higher operating expenses. We maintain our Buy rating with a TP
of INR110 per share (1.2x FY23E BVPS).
New estimates
FY23E
75.5
26.5
48.9
21.9
27.0
6.8
20.3
898
871
Change (%)
FY22E
FY23E
FY24E
-4.7
-6.5
-6.8
9.4
11.6
14.1
-10.3
-14.1
-15.6
-2.3
-9.1
-11.1
-19.8
-17.8
-18.4
-15.8
-14.4
-15.0
-21.1
-18.9
-19.5
-7.5
-10.6
-11.5
-7.5
-10.6
-11.5
Source: MOFSL, Company
Max (x)
-1SD
24.8
23
18.5
14.7
10.9
9
2
7.9
8.5
Exhibit 21: Downgrade our FY22E/FY23E EPS estimate to factor in lower AUM growth and higher operating expenses
INR b
Total Income
Operating Expenses
Operating Profit
Provisions
PBT
Tax
PAT
Loan book
Borrowings
Old estimates
FY22E
FY23E
FY24E
74.1
80.8
89.7
21.2
23.8
26.6
52.9
57.0
63.1
28.7
24.1
23.9
24.2
32.9
39.2
5.8
7.9
9.4
18.4
25.0
29.8
922
1,005
1,118
894
975
1,085
FY22E
70.7
23.2
47.4
28.0
19.4
4.9
14.5
853
827
FY24E
83.6
30.4
53.2
21.2
32.0
8.0
24.0
989
960
Exhibit 22: One-year forward P/B
3.5
P/B (x)
Min (x)
Avg (x)
+1SD
Max (x)
-1SD
3.0
2.1
1.6
1.5
0.6
1.2
1.1
Exhibit 23: One-year forward P/E
30
P/E (x)
Min (x)
Avg (x)
+1SD
2.5
16
0.5
Source: MOFSL, Company
Source: MOFSL, Company
19 July 2021
8
 Motilal Oswal Financial Services
L&T Finance Holdings
Financials and valuations
Income Statement
Y/E March
Interest Income
Interest Expended
Net Interest Income
Change (%)
Other Operating Income
Net Operating Income
Change (%)
Other Income
Total Income
Change (%)
Operating Expenses
Profit before provisions
Change (%)
Provisions/write offs
PBT
Tax
Tax Rate (%)
PAT before pref. dividend
Change (%)
Preference Dividend
PAT to equity shareholders
Change (%)
Proposed Dividend
Balance Sheet
Y/E March
Equity Share Capital
Reserves and Surplus
Net Worth
Borrowings
Change (%)
Other liabilities
Total Liabilities
Loans
Change (%)
Investments
Change (%)
Net Fixed Assets
Other assets
Total Assets
E: MOSL estimates
FY16
68,174
41,241
26,933
15.4
4,714
31,647
20.4
1,849
33,496
14.8
13,129
20,367
10.7
7,810
12,557
3,990
31.8
8,567
-2.4
1,671
6,896
-10.1
2,027
FY16
17,534
54,418
71,952
5,28,291
21.6
37,221
6,37,463
5,64,679
22.6
35,633
34.5
6,962
30,190
6,37,463
FY17
76,614
46,270
30,343
12.7
6,792
37,136
17.3
2,314
39,450
17.8
12,765
26,685
31.0
15,899
10,786
364
3.4
10,422
21.7
1,244
9,177
33.1
1,629
FY17
17,557
52,178
69,735
6,30,852
19.4
10,870
7,11,457
6,03,087
6.8
65,659
84.3
12,369
30,342
7,11,457
FY18
88,692
54,492
34,200
12.7
13,435
47,635
28.3
535
48,170
22.1
13,867
34,303
28.5
19,845
14,458
1,682
11.6
12,775
22.6
0
12,775
39.2
2,315
FY19
1,16,403
68,600
47,803
39.8
13,494
61,297
28.7
3,118
64,415
33.7
19,215
45,200
31.8
14,681
30,520
8,200
26.9
22,320
74.7
0
22,320
74.7
2,319
FY20
1,32,447
75,136
57,311
19.9
8,594
65,905
7.5
3,726
69,632
8.1
19,785
49,846
10.3
23,046
26,801
9,798
36.6
17,003
-23.8
0
17,003
-23.8
2,093
FY21
1,31,049
71,999
59,049
3.0
5,732
64,782
-1.7
6,276
71,058
2.0
19,749
51,309
2.9
36,357
14,952
5,463
36.5
9,489
-44.2
0
9,489
-44.2
0
FY22E
1,22,323
63,364
58,959
-0.2
7,668
66,627
2.8
4,026
70,654
-0.6
23,234
47,420
-7.6
27,996
19,423
4,895
25.2
14,528
53.1
0
14,528
53.1
1,743
FY23E
1,26,946
65,815
61,131
3.7
9,523
70,653
6.0
4,832
75,485
6.8
26,549
48,936
3.2
21,887
27,049
6,762
25.0
20,287
39.6
0
20,287
39.6
2,434
(INR m)
FY24E
1,39,232
73,250
65,982
7.9
11,835
77,816
10.1
5,798
83,614
10.8
30,401
53,214
8.7
21,239
31,975
7,994
25.0
23,981
18.2
0
23,981
18.2
2,878
(INR m)
FY24E
24,695
2,14,779
2,39,473
9,59,792
10.1
26,950
12,26,215
9,89,476
10.1
1,18,088
10.0
13,453
1,05,198
12,26,215
FY18
FY19
FY20
FY21
FY22E
FY23E
19,957
19,988
20,048
24,695
24,695
24,695
94,111 1,14,498 1,26,876 1,63,038 1,75,823 1,93,675
1,14,067 1,34,486 1,46,924 1,87,732 2,00,517 2,18,370
7,52,483 9,15,070 9,38,945 8,85,558 8,26,980 8,71,464
19.3
21.6
2.6
-5.7
-6.6
5.4
11,220
10,995
9,577
16,427
19,318
22,787
8,77,770 10,60,551 10,95,447 10,89,717 10,46,815 11,12,621
7,70,883 9,13,246 9,14,625 8,70,303 8,52,557 8,98,417
27.8
18.5
0.2
-4.8
-2.0
5.4
53,015
86,408
59,793
88,721
97,593 1,07,353
-19.3
63.0
-30.8
48.4
10.0
10.0
11,701
11,660
11,621
11,621
12,202
12,812
42,171
49,237 1,09,408 1,19,071
84,462
94,039
8,77,770 10,60,551 10,95,447 10,89,717 10,46,815 11,12,621
19 July 2021
9
 Motilal Oswal Financial Services
L&T Finance Holdings
Financials and valuations
AUM Mix
AUM Details
Assets Under Management
Change (%)
Rural
Housing
Focused - Wholesale
Defocused - Wholesale
Ratios
Y/E March
Spreads Analysis (%)
Avg. Yield on Loans
Avg. Cost on Int. Bear. Liab.
Loan Spreads
NIM on loans
Profitability Ratios (%)
Int. Expended/Int. Earned
Other Inc./Net Income
Op. Exps./Net Income
Empl. Cost/Op. Exps.
Provisions/PPOP (%)
Asset Quality (%)
Gross NPAs
Gross NPA to Adv.
Net NPAs
Net NPA to Adv.
PCR (%)
Return ratios and
Capitalization (%)
RoE
RoA
Debt-to-Equity (x)
Average Assets/Equity (x)
Valuation
Book Value (INR)
Price-to-BV (x)
EPS (INR)
EPS Growth YoY
Price-to-Earnings (x)
Dividend per share (INR)
Dividend yield (%)
FY16
FY17
6,66,500
15.1
18.8
45.5
20.6
FY18
8,53,540
28.1
20.0
22.4
39.8
17.9
FY19
9,91,220
16.1
25.8
25.7
38.0
10.5
FY20
9,83,850
-0.7
28.1
27.0
39.5
5.3
FY21
9,40,140
-4.4
32.0
25.2
39.9
2.9
FY22E
9,21,683
-2.0
34.5
22.7
40.6
2.2
FY23E
9,71,261
5.4
38.0
20.2
40.8
1.0
(%)
FY24E
10,69,704
10.1
41.9
18.2
39.5
0.5
(%)
FY24E
14.8
8.0
6.8
7.0
FY16
13.3
8.8
4.5
5.3
FY17
13.1
8.1
5.1
5.2
FY18
12.9
7.9
5.0
5.0
FY19
13.8
8.2
5.6
5.7
FY20
14.5
8.1
6.4
6.3
FY21
14.7
7.9
6.8
6.6
FY22E
14.2
7.4
6.8
6.8
FY23E
14.5
7.8
6.8
7.0
60.5
19.6
39.2
37.1
38.3
60.4
23.1
32.4
38.7
59.6
61.4
29.0
28.8
29.5
57.9
58.9
25.8
29.8
42.9
32.5
56.7
17.7
28.4
53.7
46.2
54.9
16.9
27.8
51.0
70.9
51.8
16.6
32.9
51.1
59.0
51.8
19.0
35.2
49.2
44.7
52.6
21.1
36.4
47.3
39.9
17,354
3.1
11,540
2.1
33.5
46,140
7.5
33,160
5.5
28.1
70,430
8.6
25,540
3.3
63.7
55,490
5.9
21,740
2.4
60.8
50,370
5.3
20,780
2.3
58.7
45,040
5.0
13,770
1.6
69.4
54,278
6.1
17,464
2.0
67.8
53,078
5.7
17,037
1.9
67.9
53,378
5.2
17,028
1.7
68.1
10.2
1.2
7.3
8.6
FY16
41.0
3.9
-11.8
0.8
13.0
1.4
9.0
9.5
FY17
39.7
5.2
32.9
0.8
13.9
1.6
6.6
8.6
FY18
57.2
6.4
22.5
1.0
18.0
2.3
6.8
7.8
FY19
67.3
11.2
74.4
1.0
12.1
1.6
6.4
7.7
FY20
73.3
8.5
-24.1
0.9
5.7
0.9
4.7
6.5
FY21
76.0
1.2
3.8
-54.7
23.7
0.0
0.0
7.5
1.4
4.1
5.5
FY22E
81.2
1.1
5.9
53.1
15.5
0.7
0.8
9.7
1.9
4.0
5.2
FY23E
88.4
1.0
8.2
39.6
11.1
1.0
1.1
10.5
2.1
4.0
5.1
FY24E
97.0
0.9
9.7
18.2
0.0
1.2
1.3
19 July 2021
10
 Motilal Oswal Financial Services
L&T Finance Holdings
Explanation of Investment Rating
Investment Rating
Expected return (over 12-month)
BUY
>=15%
SELL
< - 10%
NEUTRAL
< - 10 % to 15%
UNDER REVIEW
Rating may undergo a change
NOT RATED
We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within
following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the
Regulations, is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial
products. MOFSL is a subsidiary company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which are
available on www.motilaloswal.com. MOFSL (erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities & Exchange Board of India (SEBI) and is a
registered Trading Member with National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and
National Commodity & Derivatives Exchange Limited (NCDEX) for its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National
Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance
Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance products.
Details of associate entities of Motilal Oswal Financial Services Limited are
available on the website at
http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf
MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and
buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other
compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have
any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the
specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even
though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report
MOFSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report
should be aware that MOFSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific
merchant banking, investment banking or brokerage service transactions. Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the
website at
https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental
research and Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated
from MOFSL research activity and therefore it can have an independent view with regards to Subject Company for which Research Team have expressed their views.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability
or use would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong
Kong Securities and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst
Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of
research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity
to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these
securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not
located in Hong Kong & are not conducting Research Analysis in Hong Kong.
For U.S.
Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under
applicable state laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers
Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any
brokerage and investment services provided by MOFSL , including the products and services described herein are not available to or intended for U.S. persons. This report is
intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as
"major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which
this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration
provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange
Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a chaperoning agreement with a U.S. registered broker-
dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this
chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S.
registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public
appearances and trading securities held by a research analyst account.
For Singapore
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets
services license and an exempt financial adviser in Singapore.As per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and
Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL
in respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”,
of which some of whom may consist of "accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the
SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and
inform MOCMSPL.
Specific Disclosures
1 MOFSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.
2 MOFSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company
3 MOFSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months
4 MOFSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report
5 Research Analyst has not served as director/officer/employee in the subject company
6 MOFSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
7 MOFSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months
8 MOFSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months
9 MOFSL has not received any compensation or other benefits from third party in connection with the research report
10 MOFSL has not engaged in market making activity for the subject company
19 July 2021
11
 Motilal Oswal Financial Services
L&T Finance Holdings
********************************************************************************************************************************
The associates of MOFSL may have:
- financial interest in the subject company
- actual/beneficial ownership of 1% or more securities in the subject company
- received compensation/other benefits from the subject company in the past 12 months
- other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the
specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even
though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
- acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
- be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the
company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies)
- received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.
The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report
Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not
consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from
clients which are not considered in above disclosures.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the
research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
Terms & Conditions:
This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and
may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent
of MOFSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in
nature. The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty,
representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The
report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as
customers by virtue of their receiving this report.
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or
distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for
informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing
in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances.
The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment
objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this
document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this
document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views
expressed may not be suitable for all investors. Certain transactions -including those involving futures, options, another derivative products as well as non-investment grade
securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of
the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and
should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make
modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and the employees may from
time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to
perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a
separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of
information that is already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or
may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on,
directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or
entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law,
regulation or which would subject MOFSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in
all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.
Neither the Firm, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost
revenue or lost profits that may arise from or in connection with the use of the information.
The person accessing this information specifically agrees to exempt MOFSL or any of its
affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOFSL or any of its affiliates or employees responsible for any such
misuse and further agrees to hold MOFSL or any of its affiliates or employees free and harmless from all losses, costs, damages,
expenses that may be suffered by the person
accessing this information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263;
Website
www.motilaloswal.com.CIN
no.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road,
Malad(West), Mumbai- 400 064. Tel No: 022 7188 1000.
Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst:
INH000000412. AMFI: ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579;PMS:INP000006712. Motilal Oswal Asset Management Company
Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth
Management Ltd. (MOWML): PMS (Registration No.: INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is
a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt.
Ltd. which is a group company of MOFSL. Private Equity is offered through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL.
Research & Advisory services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no
assurance or guarantee of the returns. Investment in securities market is subject to market risk, read all the related documents carefully before investing. Details of Compliance
Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.
* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National
Company Law Tribunal, Mumbai Bench.
19 July 2021
12