L&T Finance reports 47% increase in net profit, driven by retail growth and higher margins

L&T Finance Holdings on Tuesday reported a 47% year-on-year (year-on-year) increase in net profit to Rs 262 crore, driven by a 19% growth in the retail loan portfolio. The company posted its highest-ever net interest margin plus fees of 8.23% in the quarter, up 71 basis points (bps) year-on-year.

The loan book shrank by 0.4% year-on-year to Rs 88,078 crore as the lender reduced its exposure to infrastructure and real estate. Retail recorded the highest quarterly outflow ever at Rs 8,938 crore, up 148% year-on-year. The rural enterprise finance portfolio, aimed at micro-entrepreneurs, increased by 27%, while disbursements in finance for agricultural equipment increased by 13%. Retail assets represented 54% of the loan portfolio in Q1FY23, compared to 45% in Q1FY22.

The company’s Stage 3 gross loans, representing its bad debts, were flat on a sequential basis at 4.08%. The Stage 3 net ratio moderated to 1.87% from 1.98% in Q4FY22.

As a precautionary measure, L&T Finance has additional provisions of Rs 1,450 crore, corresponding to 1.73% of the standard pound, in addition to provisions for gross stage 3 loans and expected credit loss (ECL) on assets standard. The additional provisions are intended to counter a likely deterioration in asset quality with some existing accounts being restructured related to Covid.

“With the inflow momentum existing in the Single Restructuring (OTR) Pool, the Company remains confident that the current provisions will be sufficient to counter any future stress related to OTR accounts,” the company said.

L&T Finance’s overall capital adequacy was 23.12%, with a Tier 1 capital ratio of 19.98%.

Dinanath Dubhashi, Managing Director and CEO of L&T Finance Holdings, said that over the past five years, the company has achieved market leading positions in rural lending business by applying rules engines based on data and analysis. “The company is now focused and confident in building the same value proposition for our city businesses,” Dubhashi said, adding, “The continued rise of existing products and increased traction of new products bodes well. on our journey to become a premium, retail finance company with over 80% retail books by 2026.”