L&T Finance Holdings
BSE SENSEX
33,157
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm
Free float (%)
Financials & Valuations (INR b)
Y/E March
2018E 2019E
NII
35.7
41.2
PPP
35.9
43.8
PAT
12.6
18.9
EPS (INR)
6.9
10.4
BV/Sh. (INR)
50.6
59.5
RoAA (%)
1.6
2.1
RoE (%)
14.9
18.9
Payout (%)
15.2
14.8
Valuation
P/E (x)
28.8
19.2
P/BV (x)
4.0
3.4
Div. Yield (%)
0.5
0.7
S&P CNX
10,323
LTFH IN
1,817
363.4 / 5.7
214/81
-4/45/69
826.0
35.8
2020E
47.2
51.3
23.4
12.9
70.5
2.2
19.8
14.6
15.6
2.8
0.8
27 October 2017
2QFY18 Results Update | Sector: Financials
CMP: INR199
TP: INR240 (+21%)
Buy
Strong performance continues
Estimate change
TP change
Rating change
LTFH: Quarterly performance
Y/E March
Interes t Income
Interes t Expens es
Net Interest Income
YoY Growth (%)
Other i ncome
Total Income
YoY Growth (%)
Opera ti ng Expens es
YoY Growth (%)
Operating Profits
YoY Growth (%)
Provi s i ons
Profit before Tax
Ta x Provi s i ons
Profi t/Los s of As s oci a te Compa ny
Profit after tax
YoY Growth (%)
Loa n growth (%)
Cos t to Income Ra ti o (%)
Ta x Ra te (%)
E: MOSL Es ti ma tes
L&T Finance Holding’s (LTFH) 2QFY18 PAT grew 45% YoY to INR3.6b (12% above
estimates). Robust core disbursement growth of 81% YoY (excluding IPO
financing, which is more opportunistic), a pick-up in fee income across lending
segments and a low tax rate were the key highlights of the quarter.
Rural business:
There was a clear uptick in disbursements in all segments,
including microfinance, leading to 88% YoY growth in disbursements (highest-
ever quarterly disbursements in each segment). Asset quality improved on a
sequential basis (GNPL ratio down 45bp QoQ). PCR is improving, but remains
inadequate at 39%, in our view. Management guides to improving asset quality
in 2HFY18. An interesting thing to note is the sharp pick-up in fee income (+69%
QoQ, 3x YoY).
Housing business:
Disbursement growth in the retail home loan/LAP segment
remains sluggish, but was compensated by 54% disbursement growth in the
builder loans segment. The share of builder loans in the housing finance
segment now stands at 48%. Management has guided that the current INR15-
18b quarterly run-rate of disbursements will continue.
Wholesale business:
In line with the trend of the prior quarters, growth in the
infrastructure finance segment was robust at 182% YoY – the key driver being
the DCM desk. Note that management’s strategy is to generate and sell-down
loans in order to drive strong fee income. This is evident from the 3x YoY jump
in fee income. LTFH continues to be opportunistic with IPO funding.
Valuation view:
LTFH has scripted an impressive turnaround over the past six
quarters, with a renewed focus on profitable segments. It has delivered strong
growth and consistent improvement in profitability. We are also encouraged by the
strong fee income traction– we believe this will play a key role in achieving 18%+
RoE by FY19/20. We marginally upgrade FY18-20 EPS estimates by 1-3% and our
target price to INR240 (3.7x Sep-2019E BVPS, 21x Sep-2019E EPS).
Buy.
FY17
2Q
3Q
20,940
20,876
11,602
11,532
9,338
9,343
17.4
16.0
540
679
9,883
10,018
17.7
17.9
3,327
3,154
-1.9
-1.4
6,557
6,864
31.0
29.7
3,202
3,282
3,354
3,582
888
811
15
(63)
2,481
2,709
16.3
28.7
18.5
10.4
33.7
31.5
26.5
34.5
4Q
21,626
11,580
10,046
20.9
755
10,801
22.3
3,063
-10.7
7,738
43.2
6,885
853
-2,286
19
3,158
34.3
14.4
28.4
-267.9
1Q
22,587
12,326
10,261
22.0
1,071
11,332
29.5
3,277
1.7
8,055
45.7
4,587
3,468
378
2
3,092
49.1
17.2
28.9
10.9
FY18
2Q
23,838
12,967
10,871
16.4
1,109
11,980
21.2
3,419
2.8
8,561
30.6
4,707
3,855
230
(22)
3,602
45.2
18.8
28.5
6.0
3Q
24,673
13,356
11,316
21.2
1,200
12,516
24.9
3,521
11.7
8,995
31.0
4,800
4,195
629
15
3,581
32.2
20.3
28.1
15.0
4Q
26,674
13,969
12,705
26.5
1,273
13,978
29.4
3,733
21.9
10,245
32.4
5,722
4,523
980
15
3,558
12.7
18.6
26.7
21.7
(INR Million)
FY17
FY18
1Q
19,965
11,557
8,408
14.7
342
8,751
13.1
3,222
3.6
5,529
19.4
2,530
2,999
951
26
2,074
8.2
18.2
36.8
31.7
83,406
46,270
37,136
17.3
2,317
39,453
17.9
12,765
-2.8
26,688
31.2
15,899
10,789
364
-3
10,427
87
10.4
32.4
3.4
97,772
52,618
45,153
21.6
4,653
49,806
26.2
13,950
9.3
35,857
34.4
19,815
16,042
2,218
9
13,814
32.5
19.6
28.0
13.8
Research Analyst: Piran Engineer
(Piran.Engineer@MotilalOswal.com); +91 22 3980 4393 |
Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com); +91 22 3982 5415
Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com); +91 22 3982 5540
| Anirvan Sarkar
(Anirvan.Sarkar@MotilalOswal.com); +91 22 3982 5505
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

L&T Finance Holdings
Disbursements in all three
rural lending products was
the highest-ever
Recovery to pre-demonetization levels to augur well for rural business
Loan book grew to INR 118b (+29% YoY), primarily led by micro finance (+45%
YoY) and 2W (+40% YoY).
Disbursements grew to INR 38b (+88% YoY). This was led by growth in both 2W
lending (+177% YoY) and farm equipment (+189% YoY), reflecting a buoyant
rural economy focused usage of digital analytics in customer acquisition as well
as in acquiring greater share of the OEMs wallet. In addition, repayment rates in
micro finance returned to pre-demonetization levels at 97% annualized
compared to 60-70% in the past 3 quarters.
On the back of healthy recovery in rural markets, we note of a decline (-45bp
QoQ) in GNPL ratio to 10.9%. Management expects 2HFY18 to see better
recoveries, especially in the farm equipment segment, as well as write-off of the
MFI loans.
PAT reflected a healthy increase of 21% YoY to INR 920m. We believe with credit
costs tapering down in 2HFY18, PAT growth trajectory is likely to be on an
upward trend.
Share of builder loans
increased from 37% to 48%
YoY
Housing finance – Walking a tight rope with chunkiness building in
Housing business continued its growth streak, growing to INR 154b (+35% YoY).
The share of builder finance now stands at 48% (+1,100bp YoY) of the housing
loan book. We remain circumspect of the chunkiness being built in the housing
portfolio due to incremental builder loans proportion.
Management has guided that the current quarterly run-rate of builder loan
disbursements will continue going forward too.
The company is seeing early signs of traction in generating retail home loans
from the final home buyers of projects funded by them.
On account of strong loan growth and fee income pick-up, PAT grew smartly by
85% YoY resulting in 30% RoE in the quarter.
Sell-downs in the quarter
were up ~6x YoY
Continued focus on sell-downs in the wholesale business
LTFH continued to bank on its expertise in renewables and road sector, as the
disbursements grew 3.5x of that in 2QFY17 to INR 256b. This was largely on
account of disbursements in renewables (+182% YoY).
Loan book grew by 18% YoY to INR 431b, with an increased skew of book
towards renewables, now at 33% of loan book (+400bp YoY).
Fee income increased 4x YoY to INR 1.5b.
The GNPL ratio (90dpd) increased 50bp QoQ to 4.8%. As per management, the
total stressed loans pool remains largely stable at INR50b. It’s PCR declined by
400bp to 44%.
Non-lending businesses growth strong
PAT in the Investment Management business grew 75% YoY to INR210mn. This
was driven by robust Avg. AUM growth of 62% YoY to INR528b.
The Wealth Management business recorded PAT of INR70m in the quarter
which is 3x of PAT in 2QFY17. AAUS increased 52% YoY to INR165b.
27 October 2017
2

L&T Finance Holdings
Valuation and view
L&T Finance Holdings (LTFH) is a quintessential turnaround story, in our view.
From a company with 20+ product lines and sub-standard return ratios, it is
gradually transforming itself to a focused financier with eight product lines
across three verticals, with a target to achieve 18-20% RoE by FY20 (12% in
FY17).
With focused management and strong execution skills, the company is set to
deliver 14-15% loan CAGR over FY17-20, driven by growth in the rural and
housing finance segments. In addition, continued origination and down-selling in
the infra finance book will drive fee income traction and thus RoE elevated.
Strong growth, pick-up in core fee income and a decline in the expense
ratio/credit costs should elevate RoA/RoE from 1.5%/12.4% in FY17 to
2.5%/19.8% in FY20. While the stock has re-rated well over the past year on
account of strong execution by management, we expect re-rating to continue.
We marginally increase our FY18-20 EPS estimates to factor in better growth.
We use RI model with Rf of 7%, CoE of 13% and terminal growth rate of 5% to
arrive at a TP of INR240 (3.7x Sep2019E BVPS).
BUY.
Exhibit 2: P/E (1 year forward)
Exhibit 1: P/B (1 year forward)
P/B (x)
Min (x)
4.0
3.3
2.5
1.8
1.0
1.4
2.4
1.9
1.2
Avg (x)
+1SD
3.8
Max (x)
-1SD
3.8
P/E (x)
Min (x)
28
23
18
13
8
Avg (x)
+1SD
26.8
20.5
16.5
12.4
9.9
Max (x)
-1SD
24.1
Source: MOSL, Company
Source: MOSL, Company
Conference call highlights
Consolidated Business
Clear focus on fee income. For every deal, the business team is not focused on
NIM but on ‘NIM+fees’.
Expenses to grow slower than income growth, as productivity increases and
processes become technology oriented. C/I ratio to remain steady.
Management expects 30% CAGR in disbursement and ‘early-twenties’ CAGR in
the loan book for next 2-3 years.
Rural Business
Digital and analytics focus helping identify customers, geographies and
products.
Focus on increasing business from desired OEMs in 2W and tractor finance. For
example, the share of preferred OEMs increased from 50% last year to 70%
now.
Expect 200-250bp of credit cost in micro finance on a run-rate basis.
3
27 October 2017

L&T Finance Holdings
Expanding into states like Assam and Bihar in micro finance.
Funded 150,000 2Ws and 16,000 tractors in 2QFY18. LTFH has 7% market share
in tractors and 11% in tractors.
30% MFI debtors are partially paying; collection efficiency is at 93%
Housing Business
Focus on Cat A and B developers, hence expect decline in yields.
LRD is a small portion of builder loans. INR15-18b disbursements in builder loans
per quarter will continue.
Accelerated provisions due to early warning signals. The disbursements are 2-
3 years old
The retail housing book is 52% home loan and 48% LAP.
One sanction of INR5b to a JDA of L&T Realty arm with some other developer.
Due to RERA, cash flow from developers will be back-ended. Developer equity
commitments will go up. Will be an opportunity for the company.
Smaller builders will find it difficult to sustain once RERA is fully implemented.
Infra Business
Management’s focus is to avoid risk in PPA, land acquisition, etc.
Infra debt funds are designed to takeover assets from existing financiers.
Asset Quality
Total balance sheet coverage ratio (provisions/AUM) has increased from 3% in
FY17 to 4% in 1HFY18. The company will continue to make counter cyclical
provisions going ahead.
NPLs in the rural business should come down from next quarter, driven by lower
farm NPLs. Will write-off MFI NPLs by year-end.
INR50b stressed loans in wholesale lending – bulk of this is from EPC and
thermal power sectors.
In MFI business, number of debtors who are even 1 day overdue has remained
stable.
Others
Open architecture in wealth management driving growth.
In the AMC business, 6 equity funds are in Top quartile performance.
Tractor loans tenure is 5.5-6 years.
In home loans, the split between home loans and LAP is 52:48.
17% of MFI business in 2Q came from branches opened in 1HFY18.
Provisions against stressed wholesale lending assets should reach INR20b by
end-FY18.
27 October 2017
4

L&T Finance Holdings
Exhibit 3: Quarterly Snapshot
FY16
1Q
Profit and Loss (INR m)
Net Interest Income
Operating Expenses
Employee
Others
Operating Profits
Provisions
PBT
Taxes
Share of profit of associates
PAT
Asset Quality
Gross NPAs (%)
Net NPAs (%)
PCR (Calculated, %)
Ratios (%)
Cost to Income
Provision to operating profit
Tax Rate
RoA - calculated
RoE - calculated
Margins Reported (%)
Yield on earning assets
Cost of Funds
Spreads
NIMs
Business Details (INR b)
Total Loans
Total Borrowings
AUM Break-up (INR b)
Rural
Micro Finance
2W
Farm Equipment
Housing
Home loans & LAP
Real Estate Finance
Wholesale
Infra Finance
Structured Finance
Supply Chain Finance
De-focused loan book
Total
Total Borrowing Mix (%)
Term Loan
NCD
LOC/CC/WCL/STL
CP
Others
7,331
3,108
1,148
1,961
4,631
1,878
2,752
831
4
1,925
5.5
4.4
20.0
40.2
40.6
30.2
1.6
2Q
7,957
3,392
1,312
2,081
5,007
1,834
3,173
1,029
11
2,154
5.1
4.1
20.6
40.4
36.6
32.4
1.7
3Q
8,052
3,200
1,348
1,852
5,294
2,035
3,259
1,147
7
2,120
5.0
3.9
21.7
37.7
38.4
35.2
1.6
4Q
8,306
3,428
1,070
2,359
5,405
2,063
3,343
983
9
2,369
3.1
2.1
32.8
41.3
38.2
29.4
1.7
1Q
8,408
3,222
1,095
2,127
5,529
2,530
2,999
951
26
2,074
4.6
3.1
31.7
36.8
45.8
31.7
1.4
FY17
2Q
3Q
9,343
3,327
1,277
2,050
6,557
3,202
3,354
888
15
2,481
4.7
3.1
34.7
33.7
48.8
26.5
1.7
9,338
3,154
1,226
1,928
6,864
3,282
3,582
811
-63
2,709
4.9
3.1
36.1
31.5
47.8
22.6
1.8
FY18
4Q
10,046
3,063
1,338
1,725
7,738
6,885
853
-2,286
19
3,158
4.9
3.8
22.7
30.5
89.0
-267.9
2.0
1Q
2Q
Variation (%)
QoQ YoY
6
4
3
5
6
3
11
-39
NM
17
16
3
-11
11
31
47
15
-74
NM
45
10,261 10,871
3,277 3,419
1,104 1,141
2,173 2,278
8,055 8,561
4,587 4,707
3,468 3,855
378
230
2
-22
3,092 3,602
5.7
3.3
42.0
28.9
56.9
10.9
1.8
5.8
3.3
42.9
28.5
55.0
6.0
2.1
14.2
8.8
5.5
6.1
492
461
75
12
15
48
68
41
26
290
222
50
18
60
492
24.0
38.0
15.0
13.0
10.0
14.3
8.5
5.7
6.3
514
474
79
15
16
48
75
48
27
305
240
45
20
55
514
21.0
39.0
19.0
11.0
10.0
13.5
8.3
5.3
6.0
561
509
82
17
17
48
87
55
32
341
272
49
20
52
561
22.0
35.0
17.0
14.0
11.0
13.7
8.7
5.0
5.8
583
528
86
22
18
46
98
63
35
349
276
50
23
49
583
32.0
28.0
19.0
11.0
10.0
13.7
8.6
5.1
5.8
582
541
86
24
18
44
104
66
38
348
280
47
21
44
582
20.0
34.0
23.0
15.0
9.0
14.0
8.5
5.6
6.3
609
550
92
31
18
43
114
72
42
365
294
48
22
38
609
13.0
34.0
26.0
14.0
13.0
13.6
8.3
5.3
6.1
620
564
96
32
20
43
116
74
41
377
305
50
22
32
620
13.0
34.0
27.0
13.0
13.0
13.5
7.9
5.6
6.2
666
610
100
36
21
44
125
76
49
414
329
64
21
27
667
15.0
33.0
22.0
18.0
11.0
13.4
8.0
5.4
6.1
682
620
105
38
22
45
136
77
59
417
343
57
18
24
682
14.0
37.0
25.0
13.0
11.0
13.6
8.1
5.4
6.2
703
657
119
45
25
48
154
80
74
431
345
67
20
20
723
15.0
36.0
22.0
17.0
10.0
Source: Company, MOSL
3
6
13
18
15
8
13
4
26
3
1
18
8
-16
6
16
19
29
45
40
12
35
11
76
18
17
38
-12
-47
19
27 October 2017
5

L&T Finance Holdings
Exhibit 4: Upgrading estimates to factor in stronger loan growth
INR b
NII
Other Income
Total Income
Operating Expenses
Operating Profits
Provisions
PBT
Tax
PAT
Loan book
NIM (%)
Spreads (%)
ROAA (%)
RoAE (%)
FY18
36.7
14.2
50.9
14.7
36.2
20.4
15.8
2.2
13.6
708
5.0
4.7
1.8
16.1
Old Est.
FY19
41.2
16.2
57.4
15.4
42.0
18.0
24.0
4.4
19.6
803
5.0
4.8
2.2
19.7
FY20
47.1
19.1
66.2
17.0
49.2
19.1
30.1
6.1
23.9
933
5.0
4.9
2.4
20.4
FY18
35.7
14.1
49.8
13.9
35.9
19.8
16.0
2.2
13.8
745
4.8
4.7
1.7
16.3
New Est.
FY19
41.2
17.6
58.8
15.1
43.8
18.9
24.9
4.8
20.1
855
4.7
4.7
2.2
20.1
FY20
47.2
20.7
67.9
16.6
51.3
20.1
31.1
6.6
24.6
1,002
4.7
4.8
2.3
20.8
FY18
-2.7
-0.6
-2.1
-5.3
-0.9
-2.7
1.4
2.2
1.3
5.2
Change %
FY19
-0.1
8.9
2.4
-2.2
4.1
4.7
3.6
8.2
2.6
6.6
FY20
0.3
8.4
2.6
-2.3
4.3
5.5
3.6
7.3
2.7
7.4
Source: MOSL, Company
27 October 2017
6

L&T Finance Holdings
Story in charts
Exhibit 5: Focused loan book grew by 23% YoY
Loan Book (INR b)
24
24
20
15
(10)
459
509
533
538
571
588
640
658
703
87
127
102
28
(4)
122
183
231
320
Loan Growth (%)
22
23
Exhibit 6: Disbursement trend (incl IPO financing)
Disbursements (INRb)
Growth (%)
200 187
80
77 111
Source: Company, MOSL
Source: Company, MOSL
Exhibit 7: Cost to income ratio stable (%)
Exhibit 8: Stable asset quality
GNPA (%)
NNPA (%)
4.7
3.1
4.9
3.1
4.9
3.8
5.7
3.3
5.8
3.3
40.4
37.7
38.8
36.8
33.7
31.5
28.4
28.9
28.5
5.1
5.0
4.1
3.9
4.6
3.1
2.1
3.1
Source: Company, MOSL
Source: Company, MOSL; Migrated to 90dpd in 1QFY18
Exhibit 9: NII grew 16% YoY
NII (INR m)
19
19
18
17
NII Growth (%)
21
15
16
22
16
Exhibit 10: Inching closer to target RoE of 18-20%
RoE (%)
8.0
8.1
8.3
8.4
9.3
9.3
10.0
10.3
10.9
9.8
9.3
10.8
9.8
11.7
12.8
11.8
13.6
15.2
Source: Company, MOSL
Source: Company, MOSL
27 October 2017
7

L&T Finance Holdings
Exhibit 11: Financials – Valuation metrics
Rating
66
ICICIBC*
HDFCB
AXSB
KMB*
YES
IIB
IDFC Bk
FB
DCBB
JKBK
SIB
Equitas
RBL
Private Aggregate
SBIN (cons)*
PNB
BOI
BOB
CBK
UNBK
OBC
INBK
Public Aggregate
Banks Aggregate
HDFC*
LICHF
IHFL
PNBHF
GRHF
REPCO
DEWH
Housing Finance
SHTF
MMFS
BAF
CIFC
SCUF
LTFH
MUTH
CAFL
SKSM
Asset Finance
FY19E
Buy
Buy
Neutral
Buy
Buy
Buy
Neutral
Buy
Neutral
Neutral
Buy
Buy
Buy
Buy
Buy
Neutral
Buy
Neutral
Neutral
Neutral
Buy
CMP
(INR)
301
1,793
485
1,033
307
1,627
57
120
177
86
31
144
525
311
196
180
174
404
176
136
307
Mcap
(USDb)
29.5
70.9
17.8
28.7
11.6
14.9
3.0
3.2
0.8
0.7
0.6
0.8
3.1
42.6
7.0
3.1
6.6
3.5
2.0
0.8
2.4
EPS (INR)
FY18E
14.5
68.7
18.1
32.1
17.8
60.9
2.8
5.5
8.5
3.9
1.9
1.7
16.4
14.6
5.8
-11.2
9.5
30.1
9.0
17.1
34.4
FY19E
16.6
84.7
29.9
41.6
23.3
78.6
3.2
6.6
10.5
8.3
3.8
6.1
23.0
26.8
11.0
6.6
20.8
47.0
19.1
21.4
38.3
P/E (x)
FY18E
14.7
26.1
26.8
32.2
17.2
26.7
20.5
21.7
20.8
22.2
16.7
84.7
32.1
19.1
33.6
-16.0
18.3
13.4
19.4
8.0
8.9
FY19E
11.9
21.2
16.2
24.8
13.2
20.7
17.6
18.1
16.9
10.4
8.3
23.8
22.8
10.3
17.8
27.3
8.4
8.6
9.2
6.4
8.0
P/BV (x)
FY18E
1.46
4.70
1.97
4.45
2.80
4.21
1.26
1.89
2.11
0.77
1.15
2.13
3.30
1.23
1.07
0.83
1.10
0.81
0.58
0.36
0.94
FY19E
1.25
3.99
1.78
3.79
2.38
3.59
1.19
1.74
1.88
0.73
1.03
1.97
2.95
1.11
1.02
0.83
1.00
0.75
0.55
0.34
0.86
RoA (%)
FY18E
1.14
1.86
0.67
1.77
1.70
1.82
0.74
0.81
0.98
0.23
0.42
0.58
1.22
0.36
0.17
-0.19
0.31
0.29
0.14
0.22
0.73
FY19E
1.15
1.92
0.97
1.95
1.82
1.89
0.71
0.86
1.00
0.44
0.75
1.65
1.32
0.60
0.30
0.10
0.61
0.41
0.27
0.26
0.72
RoE (%)
FY18E
8.6
18.8
7.6
14.8
17.3
16.9
6.3
9.6
11.5
3.5
6.7
2.5
12.4
7.0
3.2
-5.2
6.1
6.2
3.0
4.6
10.9
FY19E
9.3
20.4
11.6
16.5
19.5
19.0
6.9
10.0
11.8
7.2
12.6
8.6
13.7
11.4
5.9
3.0
12.4
9.1
6.1
5.4
11.2
Buy
Neutral
Buy
Buy
Neutral
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Neutral
1,698
614
1,265
1,417
499
602
610
1,160
421
1,814
1,124
2,145
199
480
708
972
40.9
4.8
8.1
3.6
2.8
0.6
2.9
3.9
3.6
15.4
2.7
2.1
5.5
3.0
1.1
2.1
39.9
41.6
83.6
52.5
9.9
33.7
37.6
80.0
14.2
45.7
56.0
118.3
6.8
38.7
32.8
29.9
45.4
48.9
105.1
66.5
12.0
38.4
46.0
102.4
19.1
63.7
68.1
155.3
10.1
44.4
42.4
54.9
24.0
14.8
15.1
27.0
50.6
17.8
16.2
14.5
29.7
39.7
20.1
18.1
29.0
12.4
21.6
32.5
18.7
12.6
12.0
21.3
41.4
15.7
13.3
11.3
22.0
28.5
16.5
13.8
19.6
10.8
16.7
17.7
4.21
2.50
3.94
3.82
15.08
2.83
2.17
2.07
3.42
6.37
3.46
2.49
3.93
2.50
2.68
4.44
2.96
2.16
3.47
3.34
12.37
2.43
1.91
1.80
3.13
5.35
2.92
2.17
3.36
2.12
2.34
3.58
1.79
1.44
3.16
1.66
2.40
2.18
1.23
2.67
1.75
3.45
2.85
3.34
1.61
4.82
1.74
3.24
1.81
1.51
3.09
1.51
2.40
2.14
1.28
3.06
2.01
3.55
2.94
3.84
2.09
4.94
1.80
4.03
18.6
18.2
27.6
15.0
32.8
17.1
14.1
15.0
11.9
20.2
18.6
14.6
14.7
21.8
13.2
15.1
17.8
18.5
30.7
16.7
32.8
16.7
15.3
16.9
14.8
20.4
19.2
16.8
18.5
21.2
15.0
22.4
*Multiples adj. for value of key ventures/Investments; For ICICI Bank and HDFC Ltd BV is adjusted for investments in subsidiaries
Source: MOSL, Company
27 October 2017
8

L&T Finance Holdings
Financials and valuations
Income statement
Y/E March
Interest Income
Interest Expended
Net Interest Income
Change (%)
Other Operating Income
Net Income
Change (%)
Operating Expenses
Operating Income
Change (%)
Provisions/write offs
PBT
Tax
Tax Rate (%)
PAT
Change (%)
Preference Dividend
Change (%)
PAT
Change (%)
7,277
60.0
2013
38,191
23,286
14,905
24.2
1,757
16,662
27.7
6,225
10,437
20.3
2,731
7,706
2,594
34
7,292
60.3
15
2014
48,719
30,739
17,980
20.6
3,653
21,633
29.8
9,123
12,510
19.9
4,261
8,249
2,300
28
5,948
-18.4
760
4,965.3
5,189
-28.7
2015
59,025
35,678
23,347
29.9
4,349
27,697
28.0
10,771
16,926
35.3
6,617
10,309
3,014
29
8,734
46.8
1,102
45.0
7,632
47.1
2016
68,174
41,241
26,933
15.4
6,533
33,466
20.8
13,129
20,337
20.2
7,810
12,527
3,990
32
8,537
-2.3
1,671
51.7
6,866
-10.0
2017
77,710
46,270
31,439
16.7
8,013
39,453
17.9
12,765
26,688
31.2
15,899
10,789
364
3
10,425
22.1
1,244
-25.5
9,180
33.7
2018E
88,329
52,618
35,710
13.6
14,096
49,806
26.2
13,950
35,857
34.4
19,815
16,042
2,218
14
13,824
32.6
1,200
-3.6
12,624
37.5
2019E
102,315
61,120
41,195
15.4
17,623
58,817
18.1
15,053
43,765
22.1
18,893
24,871
4,751
19
20,120
45.6
1,200
0.0
18,920
49.9
INR Million)
2020E
116,928
69,739
47,190
14.6
20,748
67,938
15.5
16,649
51,289
17.2
20,141
31,147
6,581
21
24,566
22.1
1,200
0.0
23,366
23.5
INR Million)
2013
24,668
17,168
37,535
62,202
282,474
34.0
21,019
365,696
323,750
30.0
18,427
139.4
5,767
365,696
2014
27,184
17,184
41,072
68,257
358,536
26.9
21,817
448,609
388,936
20.1
27,303
48.2
7,287
448,609
2015
30,837
17,203
46,562
77,399
420,906
17.4
29,117
527,422
460,425
18.4
26,492
-3.0
7,185
527,422
2016
29,668
17,534
53,237
82,905
516,157
22.6
37,221
636,283
564,679
22.6
35,633
34.5
6,962
637,463
2017
29,691
17,534
60,202
89,893
598,111
15.9
35,952
723,955
623,145
10.4
60,115
68.7
6,189
725,136
2018E
29,691
18,172
73,805
103,496
711,448
18.9
39,547
854,491
745,404
19.6
66,127
10.0
6,498
855,672
2019E
29,691
18,172
89,924
119,615
821,113
15.4
43,502
984,231
855,361
14.8
72,740
10.0
6,823
985,411
2020E
29,691
18,172
109,871
139,562
950,445
15.8
47,852
1,137,860
1,001,708
17.1
80,013
10.0
7,164
1,139,040
Balance sheet
Y/E March
Capital
- of which equity share capital
Reserves & Surplus
Net Worth
Borrowings
Change (%)
Other liabilities
Total Liabilities
Loans
Change (%)
Investments
Change (%)
Net Fixed Assets
Total Assets
E: MOSL Estimates
27 October 2017
9

L&T Finance Holdings
Financials and valuations
Ratios
Y/E March
Spreads Analysis (%)
Avg Yield on Loans
Avg. Yield on Earning Assets
Avg. Cost-Int. Bear. Liab.
Interest Spread
Net Interest Margin
Profitability Ratios (%)
RoE
RoA
Int. Expended/Int.Earned
Other Inc./Net Income
Efficiency Ratios (%)
Op. Exps./Net Income
Empl. Cost/Op. Exps.
Asset Quality (%)
Gross NPAs
Gross NPAs to Adv.
Net NPAs
Net NPAs to Adv.
VALUATION
Book Value (INR)
Price-BV (x)
EPS (INR)
EPS Growth YoY
Price-Earnings (x)
Dividend per share (INR)
Dividend yield (%)
E: MOSL Estimates
0.8
0.7
0.8
0.8
4.2
59.8
3.0
-28.8
4.4
46.9
3.9
-11.7
31.9
33.9
37.1
40.4
44.3
4.5
5.2
33.7
38.2
0.9
0.4
50.6
4.0
6.9
32.7
28.8
0.9
0.5
59.5
3.4
10.4
49.9
19.2
1.3
0.7
70.5
2.8
12.9
23.5
15.6
1.6
0.8
6,596
2.0
4,063
1.3
12,430
3.2
8,895
2.3
14,281
3.1
9,630
2.1
17,354
3.1
11,540
2.1
24,900
3.9
14,610
2.3
32,969
4.3
19,369
2.6
38,009
4.4
21,982
2.6
44,184
4.3
25,573
2.6
37.4
32.9
42.2
30.0
38.9
32.7
39.2
37.1
32.4
38.7
28.0
0.0
25.6
0.0
24.5
0.0
14.2
2.3
61.0
10.5
9.2
1.3
63.1
16.9
12.5
1.6
60.4
15.7
10.2
1.2
60.5
19.5
12.4
1.3
59.5
20.3
14.9
1.6
59.6
28.3
18.9
2.1
59.7
30.0
19.8
2.2
59.6
30.5
12.8
12.8
9.4
3.3
5.0
13.1
12.8
9.6
3.3
4.7
13.4
13.1
9.2
3.9
5.2
12.9
12.5
8.8
3.7
5.0
12.7
12.1
8.3
3.8
4.9
12.7
11.8
8.0
3.8
4.8
12.7
11.8
8.0
3.8
4.7
12.7
11.6
7.9
3.8
4.7
2013
2014
2015
2016
2017
2018E
2019E
2020E
27 October 2017
10

L&T Finance Holdings
Corporate profile: L&T Finance Holdings
Company description
Exhibit 1: Exhibit 19: Sensex rebased
L&T Finance Holdings (LTFH) in the holding
company for all finance-related activities of the
L&T Group. LTFH is among the largest NBFCs in
India with a loan book in excess of INR700b and
with 700+ points of presence across 24 states. It
operates in retail/wholesale lending, as well as
across 2W finance, tractor finance, microfinance,
home loans/LAP, builder finance, infra finance and
structured finance among other product lines. LTFH
is rated AA+ by CARE. Mr Dinanath Dubhashi serves
as MD & CEO of the company. He was promoted to
the position of Managing Director in July 2016.
Exhibit 12: Shareholding pattern (%)
Sep-17
Promoter
DII
FII
Others
64.2
4.0
10.9
20.9
Jun-17
64.2
4.1
11.0
20.8
Sep-16
66.7
2.9
10.9
19.5
Exhibit 13: Top holders
Holder Name
Citigroup global markets Mauritius private limited
BC Asia growth investments
BC Investments vi limited
Prazim trading and investment co. Pvt. Ltd.
% Holding
5.5
3.5
1.8
1.3
Note: FII Includes depository receipts
Exhibit 14: Top management
Name
Shailesh V Haribhakti
Dinanath Dubhashi
Apurva Rathod
Designation
Chairman
Managing Director
Company Secretary
Exhibit 15: Directors
Name
B V Bhargava
Harsh Mariwala
Nishi Vasudeva *
Vaishali Kasture *
Name
P V Bhide
R Shankar Raman
Thomas Mathew T
*Independent
Exhibit 16: Auditors
Name
B K Khare & Co
Deloitte Haskins & Sells LLP
Naina R Desai
Sharp & Tannan
Type
Statutory
Statutory
Secretarial Audit
Statutory
Exhibit 17: MOSL forecast v/s consensus
EPS
(INR)
FY17
FY18
FY19
MOSL
forecast
6.9
10.4
12.9
Consensus
forecast
7.0
9.3
12.2
Variation
(%)
-1.4
11.5
5.7
27 October 2017
11

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 Securities Ltd. (MOSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOSL, 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. MOSL is a subsidiary company of Motilal Oswal Financial Service Ltd. (MOFSL). MOFSL is a listed
public company, the details in respect of which are available on
www.motilaloswal.com.
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), Metropolitan Stock Exchange Of India Ltd. (MSE) for its stock broking activities & is Depository participant with Central Depository Services Limited
(CDSL) & National Securities Depository Limited (NSDL) and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products. Details of associate entities of Motilal Oswal Securities Limited are
available on the website at
http://onlinereports.motilaloswal.com/Dormant/documents/Associate%20Details.pdf
L&T Finance Holdings
NOTES
Pending Regulatory Enquiries against Motilal Oswal Securities Limited by SEBI:
SEBI pursuant to a complaint from client Shri C.R. Mohanraj alleging unauthorized trading, issued a letter dated 29th April 2014 to MOSL notifying appointment of an Adjudicating Officer as per SEBI regulations to hold
inquiry and adjudge violation of SEBI Regulations; MOSL requested SEBI to provide all documents, records, investigation report relied upon by SEBI which were referred in Show Cause Notice and also sought personal
hearing. The matter is currently pending.
MOSL, it’s associates, Research Analyst or their relative may have any financial interest in the subject company. MOSL and/or its associates and/or Research Analyst may have beneficial ownership of 1% or more securities in
the subject company at the end of the month immediately preceding the date of publication of the Research Report.
MOSL 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 MOSL even though there might exist an inherent conflict of interest in some of the stocks mentioned in the
research report.
Research Analyst may have served as director/officer, etc. in the subject company in the last 12 month period. MOSL and/or its associates may have received any compensation from the subject company in
the past 12 months.
In the last 12 months period ending on the last day of the month immediately preceding the date of publication of this research report, MOSL or any of its associates may have:
a)
managed or co-managed public offering of securities from subject company of this research report,
b)
received compensation for investment banking or merchant banking or brokerage services from subject company of this research report,
c)
received compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company of this research report.
d)
Subject Company may have been a client of MOSL or its associates during twelve months preceding the date of distribution of the research report.
MOSL and it’s associates have not received any compensation or other benefits from the subject company or third party in connection with the research report. To enhance transparency, MOSL has incorporated a Disclosure
of Interest Statement in this document. This should, however, not be treated as endorsement of the views expressed in the report. MOSL 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 MOSL 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.
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This report has been prepared by MOSL 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 MOSL. 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. MOSL will not treat recipients as customers by virtue of their receiving this report.
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.
Disclosure of Interest Statement
Analyst ownership of the stock
L&T Finance Holdings
No
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 MOSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated from MOSL research activity and therefore it can have an independent view with regards to
subject company for which Research Team have expressed their views.
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Analysis in Hong Kong.
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Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by MOSL, 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., MOSL 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
Motilal Oswal Capital Markets Singapore Pte Limited is acting as an exempt financial advisor under section 23(1)(f) of the Financial Advisers Act(FAA) read with regulation 17(1)(d) of the Financial Advisors Regulations and is a
subsidiary of Motilal Oswal Securities Limited in India. This research is distributed in Singapore by Motilal Oswal Capital Markets Singapore Pte Limited and it is only directed in Singapore to accredited investors, as defined in
the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time. In respect of any matter arising from or in connection with the research you could contact the following
representatives of Motilal Oswal Capital Markets Singapore Pte Limited:
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. MOSL, 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 MOSL. 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 MOSL 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 MOSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOSL or any of its affiliates or
employees responsible for any such misuse and further agrees to hold MOSL 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.: 022-3980 4263; www.motilaloswal.com. Correspondence Address: Palm Spring
Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad (West), Mumbai- 400 064. Tel No: 022 3080 1000. Compliance Officer: Neeraj Agarwal, Email Id:
na@motilaloswal.com,
Contact No.:022-30801085.
Registration details of group entities.: MOSL: NSE (Cash): INB231041238; NSE (F&O): INF231041238; NSE (CD): INE231041238; BSE (Cash): INB011041257; BSE(F&O): INF011041257; BSE(CD); MSE(Cash): INB261041231;
MSE(F&O): INF261041231; MSE(CD): INE261041231; CDSL: IN-DP-16-2015; NSDL: IN-DP-NSDL-152-2000; Research Analyst: INH000000412. AMFI: ARN 17397. Investment Adviser: INA000007100. Motilal Oswal Asset
Management Company Ltd. (MOAMC): PMS (Registration No.: INP000000670) offers PMS and Mutual Funds products. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.: INP000004409) offers wealth
management solutions. *Motilal Oswal Securities Ltd. is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs, Insurance and IPO products. * Motilal Oswal Commodities Broker Pvt. Ltd. offers Commodities
Products. * Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. offers Real Estate products. * Motilal Oswal Private Equity Investment Advisors Pvt. Ltd. offers Private Equity products
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