Release Date: October 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- L&T Finance Ltd (BOM:533519, Financial) reported a 17% year-on-year growth in quarterly consolidated profit after tax, reaching INR696 crores.
- The company achieved a 28% year-on-year growth in its retail book, which now stands at INR88,975 crores.
- Retail disbursements grew by 12% year-on-year, totaling INR15,092 crores for the quarter.
- The company surpassed its Lakshya 2026 goal of achieving greater than 95% utilization, reaching 96% by the end of the quarter.
- L&T Finance Ltd has maintained a strong collection efficiency in its Rural Business Finance vertical, with a rate of 99.43% in September 2024.
Negative Points
- The company faced challenges in its Rural Business Finance vertical due to widespread floods in certain regions, impacting collection efficiencies.
- There was a slight erosion in GST performance over Q1 FY25, attributed to macroeconomic deterioration in certain business verticals.
- The company's provision coverage ratio (PCR) decreased from 75% to 71%, primarily due to write-offs and new assets moving into Stage 3.
- L&T Finance Ltd anticipates continued challenges in Q3 FY25, with normalization expected only in Q4 FY25.
- The company is experiencing a period of deleveraging in the industry, which may moderate growth outlook in the coming quarters.
Q & A Highlights
Q: Can you provide insights on the credit cost front, particularly regarding ECL provisions and any significant write-offs?
A: Sachinn Joshi, Group Chief Financial Officer, explained that the overall credit cost has increased, and the PCRs have decreased due to some write-offs. The reduction in PCR is primarily due to write-offs and the addition of certain Stage 1 and Stage 2 assets moving to 90-plus days. The company maintains a conservative approach with provisions for challenging times, and the current reduction in PCR is not a major concern.
Q: How is the company addressing challenges in the Microfinance (MFI) sector, particularly in Bihar due to floods?
A: Sudipta Roy, CEO and Managing Director, stated that despite floods in Bihar, collection efficiency remained high at 99.5%. The company focuses on collections and maintains strict underwriting standards, ensuring no lending to customers with existing delinquencies. They have also reduced the average accounts per collector to improve efficiency. The company has INR975 crores in macro-prudential provisions, which they may use if necessary.
Q: What is the outlook for credit costs and the potential use of macro-prudential provisions?
A: Sachinn Joshi mentioned that credit costs may remain elevated for the next few quarters. If challenges in the microfinance sector increase, the company may utilize macro-prudential provisions. However, they are currently managing well, and any utilization would be minimal unless conditions worsen significantly.
Q: Can you provide details on the company's strategy for personal loans, given the stress in unsecured credit?
A: Sudipta Roy explained that the company has slowed down personal loan disbursements to focus on prime salaried customers. They are confident in scaling up this business with a risk-calibrated approach and are integrating advanced data analytics for underwriting.
Q: How is the company managing its Loan Against Property (LAP) portfolio, and what are the yields?
A: Sudipta Roy stated that the company is focusing on urban LAP, with yields around 10% to 10.5%, and rural LAP, with yields between 17% to 18%. The strategy aims to push yields upwards while maintaining a balanced portfolio.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
