L&T Finance Holdings hits 52-week low post September quarter results

Shares of L&T Finance Holdings (LTFH) have slumped as much as 13% to Rs 111 per share, also their 52-week low on the BSE in early morning trade, despite the company reporting a strong 66% year-on-year (Y-o-Y) growth in its consolidated net profit of Rs 5.60 billion in September quarter (Q2FY19). Net interest income (interest income minus interest expense) grew 54% to Rs 11.26 billion over the previous year quarter.

Having achieved a RoE (return on equity) of 18.45% in Q1FY19, LTFH has maintained its profitability with 18.47% RoE in Q2FY19. This has been achieved on the back of strong NIMs plus Fee income, strict control on cost and improved asset quality, the company said.

The company is comfortably placed, with respect to both liquidity and interest rate risks, due to its robust asset-liability management (ALM), strong risk management framework and proactive actions, it added.

LTFH said the four big issues mainly Kerala deluge, Infrastructure Leasing & Financial Services (IL&FS), rumors of Supertech default and prevailing liquidity position affected the industry in Q2FY19.

The company has exposure of Rs 18 billion to infrastructure SPVs owned by IL&FS Transportation Networks (ITNL). This exposure is against four annuity projects and two toll road projects. LTFH has no exposure to the IL&FS parent. LTFH also has Rs 8 billion exposure as a sole lender to three projects of Supertech. The projects are in the construction phase, clocking monthly sales of Rs 370 million.

“LTFH has scripted an impressive turnaround and delivered strong growth with a consistent improvement in profitability. The company has grown well in the high-RoE business and continues allocating more capital to it. While the lending subsidiaries already generate 20%+ RoE, we believe there is scope for an improvement in profitability in the non-lending subsidiaries. While the migration to Ind-AS has impacted the financials of the company, we believe this is only an accounting change and there is no economic impact,” Motilal Oswal Securities said in result update.

At 10:02 am; LTFH was trading 5% lower at Rs 120 on the BSE, as compared to 0.88% decline in the S&P BSE Sensex. A combined 13.29 million equity shares changed hands on the counter on the BSE and NSE so far.