L&T Finance's Q3 net profit rises 39% on improved margins and fees

To accelerate sale of wholesale loan book; Makes one-time provision of Rs 2,687 cr

L&T Finance Holdings’ net profit rose by 39 per cent year-on-year (YoY) to Rs 454 crore in the third quarter ended December 2022 (Q3FY23) on improvement in margins and fees. 

The Net Interest Margin (NIM) plus fees grew to 8.8 per cent in the December quarter, up 70 basis points over the year-ago period. The NIM plus margins were 8.43 per cent in the September quarter. 

They improved despite the rise in costs of funds in Q3. 

Its stock closed 1.65 per cent higher at Rs 92.45 per share on BSE.

After the divestment of the mutual fund business, LTFH has proposed merger of its subsidiary lending entities - L&T Finance Ltd. and L&T Infra Credit Ltd with itself. This will result in a simple and unified structure, leading to optimal use of capital and effective use of management bandwidth. This merger would be subject to necessary statutory/regulatory approvals, the company said in a statement.

Dinanath Dubhashi, Managing Director & CEO, L&T Finance Holdings, said, the quarterly retail disbursements were Rs 11,607 crore in Q3Fy23. The share of retail in the portfolio mix has reached 64 per cent in Q3Fy23, up from 58 per cent in Q2FY23 and 50 per cent in Q3FY22. The share of retail in the portfolio mix is expected to be about 90 per cent by March 2024.

The retail book grew by 34 per cent YoY to Rs 57,000 crore in December 2022. However, the wholesale book contracted by 24 per cent from Rs 40,788 crore at end December 2021 to Rs 31,010 crore in December 2022.

The focus is on accelerated sell-down of the Wholesale book. Consequent to change in business model, the finance company made a One-time provision of Rs. 2,687 crore has been made during the quarter to enable accelerated sell-down of Wholesale book.

Dubhashi said the Rs 2,687 crore in not a provision for credit cost but a corpus to manage any impact of sale of the wholesale portfolio. The share of wholesale is expected to fall below 10 per cent by March 2024.

The total loan book rose by 3 per cent YoY to Rs 88,426 crore at the end of December 2022.

Its Gross non-performing assets (NPAs) declined to 4.21 per cent in December 2022 from 6.69 per cent a year ago. The net NPAs also dipped from 3.17 per cent in December 2021 to 1.72 per cent in December 2022. Its capital adequacy was 23.49 per cent and its Debt to Equity (D/E ratio) at 4.1 times.