Non-banking finance company (NBFC) L&T Finance on Monday reported 2 per cent year-on-year (y-o-y) fall in net profit for the quarter ended December at ₹626 crore.

The NBFC’s overall loan book stood at ₹95,120 crore, of which retail book stood at ₹92,224 crore.Interest income rose 13 per cent y-o-y to ₹3,610 crore, while interest expense rose 16 per cent y-o-y to ₹1,569 crore.Net interest margin (NIM) fell sharply from 8.94 per cent in Q2FY25 8.50 per cent in Q3.

Asset quality deteriorated, with gross stage-3 ratio or gross bad loans rising to 3.23 per cent in Q3FY25 from 3.19 per cent a quarter ago, and net stage-3 ratio rising 1 bps sequentially to 0.97 per cent.

Sudipta Roy, MD & CEO of L&T Finance said, “Despite certain macro challenges within the microfinance sector, we have managed the situation effectively. We are hopeful that the environment will be much better over the next couple of quarters.”

During Covid-19 period of FY21-FY22, the NBFC had created macro-prudential provision of Rs 975 crore exclusively for Rural Group Loans & Microfinance business (RGL & MFI). These provisions were created to be utilised only in case of macro events, the NBFC said in investor presentation.

During the current financial year, the NBFC said there have been certain macro events including prolonged heat wave, severe floods in several states, temporary slowdown of government expenditure & grants due to general elections, leading to increased credit cost for RGL & MFI portfolio, thus warranting a case for utilisation of these macro prudential provisions.

“In alignment with the above inclement business environment in RGL & MFI, LTF post approval by the Audit Committee and the Board has utilised ₹100 crore of macro-prudential provisions in Q3FY25,” the NBFC said.

“Before utilisation of macro-prudential provisions, the total credit cost in the RGL and MFI business is estimated to be in the range of ₹950–₹1,000 crore for full year FY25. Our advance estimate of the macro-prudential utilisation in Q4 is in the range of ₹300—₹350 crore,” it added.

Published on January 20, 2025