L&T Finance Holdings Q1 net up 47% to Rs 262 cr on better interest margins

Firm expects NIM plus fees to stay above 8% in FY23

L&T Finance Holdings Ltd’s consolidated net profit rose by 47 per cent year on year to Rs 262 crore in the first quarter ended June 2022 (Q1FY23) on improved interest margins and fees.

Its stock closed 0.56 per cent higher at Rs 72.4 per share.

The firm's net interest margin (NIM) plus fees rose to 8.23 per cent in Q1FY23, up 71 basis points over Q1FY22. Sequentially it improved from 8.17 per cent in Q4FY22.

Dinanath Dubhashi, Managing Director & CEO, L&T Finance Holdings, said the cost of funds declined during the reporting quarter despite hardening of rates. The strategy of raising long-term funds when interest rates were ruling low has given benefits. Even when the interest rates are rising, the company will be see its NIM plus fees at above 8.0 per cent in FY23.

Referring to business growth, Dubhashi said retail disbursements are at an all-time high in the quarter (Rs 8,938 crore). The share of the retail portfolio in the loan mix reached 54 per cent in June 2022, up from 45 per cent in June 2021 and 51 per cent in March 2022.

The share of the retail in loan portfolio may cross 60 per cent by March 2023, given the conducive climate for business especially in rural areas, Dubhashi said. L&T Finance Holdings has set a target to attain 80 per cent share of retail by FY26 and scale down the share of the wholesale business gradually.

While growth in the total book was flat YoY at about Rs 88,078 crore, retail expanded by 19 per cent to Rs 47,794 crore. The wholesale book shrunk to Rs 39,795 crore in June 2022 from Rs 45,663 crore in June 2021.

The asset quality profile improved with gross non-performing assets (GNPAs) declining from 6.67 per cent in June 2021 to 4.08 per cent in June 2022. The net NPAs also were down from 2.26 per cent to 1.87 per cent.

Overall capital adequacy was 23.12 per cent with tier-1 at 19.98 per cent at end of Q1FY23.