L&T Finance Q4 Review - Asset Quality Vulnerability Increases: Prabhudas Lilladher
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Prabhudas Lilladher Report
Q4 FY21 earnings stood stable for L&T Finance Holdings Ltd. owing to robust disbursals in key businesses (micro/consumer/home loans) aiding fees and steady asset quality (5% gross non-performing asset versus 5.3%: Q3).
However, as second wave engulfs hinterlands, we foresee increased vulnerability for the company's business led by-
1. concentrated exposures of rapidly expanding two-wheeler/micro/consumer loans in states full of uncertainties (elections, higher Covid-19 cases, partial lockdowns)
2. continued higher write-offs (Rs 7 billion for Q4 FY21, Rs 19 billion for FY21 largely led by rural business) partially aiding asset quality improvement
3. 6% provisions on micro loans although down from 10% (Q3 FY21) stand higher than industry run-rate.
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