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L&T Finance Holdings drops after Q4 PAT slides 29% to Rs 386 cr

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L&T Finance Holdings tumbles 7.76% to Rs 52.90 after consolidated net profit slumped 29.48% to Rs 386.15 crore on 1.54% rise in net sales to Rs 3,355.24 crore in Q4 March 2020 over Q4 March 2019.

Consolidated profit before tax dropped 39.15% to Rs 455.94 crore in Q4 March 2020 as against Rs 749.36 crore in Q4 March 2019. Current tax expenses tumbled 97.21% to Rs 7.34 crore in Q4 March 2020 as against Rs 263.56 in Q4 March 2019. The Q4 results was declared post trading hours on Friday, 15 May 2020.

This reduction in PAT is primarily due to the additional provisions taken to strengthen the balance sheet to be able to face the aftermath of pandemic. As per RBI guidelines, the company created additional Covid-19 provisions of Rs 209 crore, corresponding to 5% of 1-90 DPD book availing moratorium in March 2020. The company also created enhanced ECL provisions of Rs 105 crore on stage 2 assets, considering possible emerging stress in the economy after the lockdown is over.

The company said that the Q4 March 2020 was expected to be a fairly normal quarter till about 10 March 2020. The partial lockdown due to COVID-19 and the subsequent nationwide lockdown led to a slowdown in the disbursements and collections, across the country. While it had minimal impact on the operating performance of the financer, the profitability for the quarter was impacted largely due to the incremental provisions taken to strengthen the balance sheet against the after effect of the pandemic.

The substantial pre-planned disbursements in infrastructure finance were paused due to increasing risk perception. The retail disbursements were completely stopped in the end of March 2020 due to point of sale being closed during lockdown. Excluding COVID-19 impact, disbursement is in line with the previous quarters (Y-o-Y).

The average assets under management (AAUM) of the investment management business stands at Rs 71,056 crore in Q4 March 2020. The weighted average cost of funds improved significantly at 8.43% in Q4 FY20 as compared to 8.53% in Q4 FY19 and 8.54% in Q3 FY20, despite a year-on-year (Y-o-Y) reduction in share of commercial papers (CP), increase in long-term borrowings, and enhanced liquidity in Q4 FY20. Return on Equity (RoE) (pre DTA) stands at 14.96% in FY20 as against 17.92% in FY19.

Commenting on the Q4 financial results, Dinanath Dubhashi, the managing director (MD) and chief executive officer (CEO) of L&T Finance Holdings (LTFH), has said that, "The inherent strength of the business model will be proven as we face one of the worst economic situations experienced by the entire world. While our disbursement, collection and asset quality has remained strong during Q4 FY20, there is a clear need to counter the difficulties facing the economy in FY21. Accordingly, we have further strengthened our balance sheet by building substantial incremental provisions as well maintaining the comfortably positive ALM and enhanced liquidity. This along with a robust collection mechanism, aggressive monitoring of portfolios, stringent risk mitigants and judicious cost control will hold us in good stead as the country emerges from this pandemic."

L&T Finance Holdings is a leading diversified non-banking financial company (NBFC).

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(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, May 18 2020. 12:59 IST