L&T Finance net soars 49 pc as advances jump 96.4 pc

L&T Finance Holdings, financial services arm of the engineering major L&T, today reported consolidated net profit growth of 49 per cent at Rs 309 crore for the three months to June driven by higher advances that clipped at 96.4 per cent and better asset quality.
This is the fifth consecutive successful quarter for the company after many quarters of headwinds wherein it has been improving its return on investment (RoE), for which it has set a target of 18-20 per cent by 2020.
But Dinanath Dubhashi, managing director & chief executive of the city-based firm told PTI that the 18-20 per cent RoE target will be met a year before the board-set deadline of 2020 having already got an RoE of 13.63 per cent in June quarter, which is an improvement of 385 bps y-o-y.

"The 49 per cent growth has been achieved after taking accelerated provisions of Rs 230 crore over and above regulatory provisions to further strengthen our portfolio. For the reporting quarter, we delivered 13.63 per cent, which is the highest ever Q1 RoE since listing," he said.
Attributing the numbers to "getting every basic things right" he said total advances clipped at 95 per cent, and income grew 26 per cent while cost was kept flat.
"We cut almost all the flabs. We got every little thing right and did not cry over external factors instead resolved the problems. We've one of the best risk management systems in place and also one of the highest provision coverage ratios. We've moved into the 90-day NPA reporting structure three quarters ahead of the RBI mandate," Dubhashi told PTI in a post-earnings concall.

In line with RBI guidelines, the company proactively moved to recognition of GNPA at 90-days past due (DPD). From Q4 of FY17 to Q1 of FY18, gross NPA has come down by 18 per cent-- from Rs 4,519 crore to Rs 3,698 crore or to 5.71 per cent from 7.11 per cent, While net NPA has seen a sharp reduction from 5.02 per cent in Q4 of FY17 or at Rs 3,118 crore to 3.31 per cent or Rs 2,092 crore in Q1 of FY18.

Its provision coverage ratio improved to 43.43 per cent from 31 per cent during the period.

On the cost front he clarified that the company did not give pink slips to many but in fact hired 900 more in the quarter taking the total headcount to 11800 as of end June.
It can be noted that following the monsoon scare and the resultant farm sector crisis, the company had in FY15 withdrew from the rural lending and had sacked over 500 people from the sales front.
Lending businesses, namely rural finance, housing finance and wholesale finance, grew 22 per cent driven by a strong growth in disbursements in all its businesses.
While rural finance disbursement grew 65.3 percent to Rs 11,500 crore its tractor financing arm disbursal soared 118 per cent to Rs 4,500 crore. Housing finance grew 118 per cent Rs 13,500 crore, while wholesale finance more than doubled to Rs 42,000 crore, taking the total asset book to Rs 66,000 crore, he said, adding total lending book grew 96.4 per cent.

Under its investment & wealth management businesses, the average assets under management increased 57 per cent to Rs 44,484 crore. Average assets under service in wealth management business increased 71 per cent to Rs 16,531 crore.