Motilal Oswal: L&T Finance Q1 Strengthening The Balance Sheet
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Motilal Oswal Report
L&T Finance Holdings reported Q1 FY21 Profit after Tax of Rs 1.47 billion. However, excluding the Rs 2.25b one-time gain on the sale of the Wealth Management business to IIFL Wealth Management Ltd. the company reported net loss of Rs 780 million (verses our PAT estimate of Rs 1.8b. While Pre Provision operating profit was 8% above our estimate, elevated provisioning of Rs 11.2b verses our Rs 7b estimate has led to net loss.
The company took additional Rs 5.8 billion Covid-19 provisions in the quarter verses Rs 3.1b in Q4 FY20. As a result, the total contingency provision buffer (over and above Non Performing Asset provisions) stands at Rs 12.4b (i.e.1.4% of standard loans). In addition to 45 basis points of Stage 1 and 2 loan provisions, total standard asset provisions are now 1.8% of standard loans.
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