L&T Finance net jumps 33% on higher loan growth,assets quality

L&T Finance today reported a 33 per cent rise in net profit for the March quarter at Rs 316 crore on higher loan growth and better asset quality following its decision to exit non-core businesses earlier in the year.
For the full year, the non-banking subsidiary of the engineering major Larsen & Tubro reported a 22 per cent in net income at Rs 1,042 crore.
While disbursement grew 64 per cent in the reporting quarter, for the full year, the same clipped at 23 per cent.
"All the business verticals did exceedingly well during the year after we successfully exited the non-core businesses like equipment finance. As a result the share of this business now has halved to 4 per cent of the total business from 8.5 per cent earlier. All this has had our fee income growing at 87 per cent in the quarter and 47 per cent for the full year," MD & CEO Dinanath Dubhashi told PTI.

The better performance was achieved via a combination of growth in the focused businesses, exit from non-core businesses, increase in fee income, and reduction in cost- income ratio which has come down by 23 per cent, he added.
On its exit from non-core businesses he said they sold Rs 327 crore of this portfolio in Q4 following which only Rs 2,671 crore of this portfolio remains with them, which as a percentage of total assets is only 4 per cent now as against 8.5 per cent a year ago.

Its focused lending businesses include rural finance, housing finance and wholesale finance, the asset of which grew 20 per cent. While rural finance rose 13.5 per cent to Rs 7,405 crore, housing finance clipped at 19 per cent to Rs 6,904 crore, wholesale finance grew at a faster pace of 25.7 per cent to Rs 34,996 crore, taking the total focused lending businesses to Rs 49,305 crore, recording a total growth of 22.8 per cent for the year, Dubhashi said.

On the rise in fee and other income, he said this rose from Rs 495 crore to Rs 722 crore in fiscal 2017, a growth of 46 per cent, which as a percentage of assets, has gone up from 0.94 per cent in fiscal 2016 to 1.18 per cent in fiscal 2017.
On asset quality, he said the best improvement was in the rural portfolio, which resulted in net NPA ratio coming down substantially from 3.82 per cent to 2.89 per cent, while the gross NPA ratio remained almost flat at 4.94 per cent.
In absolute terms gross NPAs rose from Rs 2,757 crore to Rs 3,146 crore, while net NPAs came down from Rs 2,145 crore to Rs 1,799 crore. That apart it has set aside Rs 491 crore as accelerated provisions, which rose manifold form Rs 47 crore a year ago, taking its provision coverage to 42.82 per cent from 22.19 per cent.

Meanwhile, the company also said leading chartered accountant Shailesh Haribhakti, currently the chairman of its audit committee, will be non-executive chairman from June 1.
Going ahead, Dubhashi said he expects 17-20 per cent growth in total assets in fiscal 2018 while balancesheet growth should be 20 per cent from the present Rs 66,000 crore.
When asked about fund-raising plans, he said they are well capitalised so there will not be any equity raising but depending on the growth they will raise debt. The company raises only under 20 per cent of its working capital from banks and this will continue to be so, he added.

He also said the company will be getting Rs 370 crore in equity capital from Bain Capital later this month after the PE fund converts debentures into equity. Bain will then own 10 per cent equity in the company.