L&T Finance Holdings shares trade flat

Our Bureau Chennai | Updated on October 07, 2019

Shares of L&T Finance Holdings gained marginally in opening deals on Monday to Rs 81.15 or 0.7 per cent, after Crisil assigned its Rs 500-crore non-convertible debentures an 'AAA/Stable' rating, and reaffirmed the Crisil A1+ for its Rs 1,500-crore commercial paper.

The stock hit a 52-week low of Rs 79.5 almost immediately after opening, but has recovered to current levels on the NSE.

Last week was one of the worst for shareholders of L&T Finance Holdings, as the stock crashed 16 per cent. Its one-year return stands at a negative 36.13 per cent, as against the BSE Sense'x return of 7.12 per cent. The stock's 52-week high and low are Rs 159.20 and Rs 80 (recorded on October 3).

The rating reflects the (L&T financial group) LTFS group's strong and diversified presence across the financial services space and a well-diversified resource profile, Crisil said, while reasoning out its rating. It also centrally factors in expectations of strong support from the parent, Larsen & Toubro. These strengths are partially offset by moderate, albeit improving, asset quality, Crisil further said.

For arriving at the rating, CRISIL has combined the business and financial risk profiles of LTFH and its subsidiaries and associates. This is because all these entities have significant operational and management linkages and operate under a common brand. CRISIL has also factored in strong support from the parent, L&T, given the strategic importance of the group to the parent, along with the shared brand name.

L&T is the majority shareholder of LTFH, with a shareholding of 63.89 per cent as on June 30, 2019.

Going forward, the LTFS group intends to focus on growing its retail business and concentrate on growing its fee-based income to supplement the net interest margins (NIMs). Consequently, it expects higher growth in the rural and home loan portfolios.

The share of the wholesale portfolio (excluding the IDF loan portfolio) has been declining steadily, from 62 per cent as on March 31, 2016, to 54 per cent as on June 30, 2019; the management intends to reduce the share further in the coming quarters.

This shift in proportion is supported by a higher sell-down strategy in the infrastructure financing book (which also supports higher fee income) as well as through growth in the retail and housing finance portfolios.

While the group continues to use its (and L&T's) expertise in the infrastructure finance segment to underwrite loans, a majority of the disbursements are now sold down. Moreover, the focus will continue to be on operational infrastructure projects in L&T Infra Debt Fund Ltd, the share of which has increased from 4 per cent to 8 per cent over three fiscals through March 31, 2019, the Crisil note added..

Published on October 07, 2019

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