L&T Finance Holdings rallies 11% on strong Q1 earnings

The stock rallied 11% to Rs 172 after the company reported a healthy 71% yoy growth in consolidated net profit at Rs 5.38 billion driven by strong AUM growth and flat credit costs in June 2018 quarter

L&T Finance Holdings (LTFH) has rallied 11% to Rs 172 on the BSE after the company reported a healthy 71% year-on-year (yoy) growth in consolidated net profit at Rs 5.38 billion in June 2018 quarter (Q1FY19). This was driven by strong AUM growth and flat credit costs during the quarter. The company had profit of Rs 3.14 billion in the same quarter last fiscal.

“Average Assets under Management (AAUM) in investment management business increased to Rs 711 billion in Q1FY19 from Rs 445 billion in Q1FY18 – a growth of 60%,” LTFH said in a press release.

The focused loan book grew 27% YoY to Rs 854 billion driven by 76% YoY growth in rural lending, 48% YoY growth in housing finance and 7% YoY growth in wholesale lending.

Gross stress loan ratio (stage 3 under Expected Credit Losses or ECL) improved from 11.7% a year ago to 7.9%, while PCR improved from 51% to 62% over this time frame.

“The company has scripted an impressive turnaround over the past two years, and has delivered strong growth and consistent improvement in profitability. While the migration to Ind-AS accounting has impacted the financials of the company, we believe this is only an accounting change and there is no economic impact,” analysts at Motilal Oswal Securities said in result update.

The hit on net worth due to ECL, which was expected to be taken over FY19 and FY20, has been taken upfront. While this would be neutral to FY20 net worth, it would be accretive to FY20 EPS. Most business segments are firing on all cylinders, it added

At 03:22 pm; LTFH was trading 10% higher at Rs 171 on the BSE, as compared to 0.58% rise in the S&P BSE Sensex. The trading volumes on the counter surged more than four-fold with a combined 1.6 million shares changed hands on the BSE so far.