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ICICI Securities Report
L&T Finance Holdings reported its Q1 FY21 Profit After Tax at Rs 1.47 billion (I-Sec: Rs 3.8 billion) primarily led by accelerated Covid-19 and macro prudential buffer of Rs 5.8bn, and provisioning on one conglomerate in the defocused business of Rs 2.25bn utilising exceptional gain from sale of the wealth management business. With this, LTFH now carries a buffer of 3% on rural portfolio and 2.3% on Loan Against Property and Refinancing (LAP+RE). Given the prevailing macro uncertainty, prudent provisioning will continue for a couple of quarters more (we are building-in credit costs of 3.3% for FY21E).
Emerging trends in rural both on demand and collections has brought in some guarded optimism, though we will watch the behaviour of its real estate financing and infrastructure business till clear visibility emerges. Rising credit reserves, adequate liquidity and stock underperformance (approximately 47% in past six months) renders risk-reward favourable at 0.7 times estimated for FY22 Price to Book Value.
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