L&T Financial Holdings
Estimate change
TP change
Rating change
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
LTFH IN
1,996
105.7 / 1.5
138 / 46
-14/-20/-34
1166
18 May 2020
4QFY20 Results Update | Sector: Financials
CMP: INR53
TP: INR75 (+42%)
Business performance stable
Buy
Increased provisioning for COVID-19 impacts earnings
Financials & valuations (INR b)
Y/E March
2020 2021E
Total Income
70.3
71.5
PPP
50.6
51.3
Adj. PAT
21.7
17.1
EPS (INR)
10.9
8.6
EPS Gr. (%)
-2.7
-21.3
BV/Sh. (INR)
71.9
79.0
Ratios
NIM (%)
5.8
5.9
C/I ratio (%)
28.1
28.3
RoAA (%)
2.0
1.6
RoE (%)
15.6
11.3
Payout (%)
17.8
13.9
Valuation
P/E (x)
4.9
6.2
P/BV (x)
0.7
0.7
Div. Yield (%)
2.5
1.9
Shareholding pattern (%)
As On
Mar-20 Dec-19
Promoter
63.7
63.9
DII
5.2
4.4
FII
10.6
12.5
Others
20.5
19.2
FII Includes depository receipts
2022E
75.0
53.7
23.3
11.7
36.3
89.4
6.0
28.4
2.1
13.8
13.9
4.5
0.6
2.6
LTFH reported 4QFY20 PAT of INR3.8b (-30% YoY), ~20% below our
estimates. The miss was largely on account of lower-than-expected total
income (8% miss) while opex and credit costs were in line. LTFH reported
INR844m in net loss on fair value changes, which led to the topline miss.
LTFH created additional provisions of INR3.1b for the impact of COVID-19
during the quarter, of which INR2.1b was as per the RBI’s requirement of
5% provisioning against 1-89dpd loans under moratorium.
The provision
would be repeated in 1QFY21. While as of Mar’20, ~36% of AUM was
under moratorium, a modest increase was seen in April.
Disbursements in Rural finance declined ~20% QoQ, compared with 6–9%
decline witnessed in other segments. The plunge in Rural lending was
largely attributed to the Auto segment (Tractors and 2Ws).
Hence, loan
growth in the segment declined to 8% YoY in 4QFY20 from 14% YoY in
3QFY20.
While NIM on a consolidated basis came in steady at 5.7%, lower
disbursements led to ~50bp decline in the fee income margin to 1.2%.
CoF declined 10bp QoQ to 8.4%. The share of CPs was down 300bp QoQ /
1,000bp YoY to 6%.
The GNPL ratio improved 60bp QoQ to 5.4%, with PCR at 59% (+200bp
QoQ).
More importantly, even without the moratorium on 1-89dpd loans, the
GNPL ratio would have been only 25bp higher at 5.6%.
LTFH has INR6.6b worth of provisions over and above the standard asset
and NPL provisions; this includes the existing INR3.5b macro-prudential
provisions and INR3.1b worth of COVID-19-related provisions this quarter.
Rabi crop output is strong. Economic recovery would be led by rural India.
Credit norms have been tightened across products.
75% of the portfolio falls under the Orange and Green zones.
Rural disbursements most impacted; NIM stable
Improvement in asset quality
Mar-19
63.9
3.0
11.4
21.7
Highlights from management commentary
Valuation and view
Over the past year, LTFH has focused on consolidating its loan book and
improving the liability franchise. The overall loan book has been largely flat
and is expected to remain this way in the near term. On the liability side, the
share of CPs is down to 6% YoY from 16% YoY. The proposed consolidation of
lending subsidiaries would further simplify the business structure. We estimate
a 4% loan book CAGR over the next three years (largely back-ended). Asset
quality performance would be the key monitorable going ahead. We cut our
FY21/FY22 EPS estimates by 17%/8% to factor in higher credit costs given the
extended lockdown. Buy, with TP of INR75 (0.8x FY22E BVPS).
Research Analyst: Piran Engineer
(Piran.Engineer@MotilalOswal.com); +91 22 6129 1539 |Alpesh
Mehta
(Alpesh.Mehta@MotilalOswal.com);+91 22 6129 1526
Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com); +91 22 6129 1542 |
Divya Maheshwari
(Divya.Maheshwari@motilaloswal.com); +91 22 6129 1540
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
20 January 2020
1
 Motilal Oswal Financial Services
L&T Financial Holdings
LTFH: Quarterly performance
Y/E March
Income from Operations
Interest Expenses
Net Interest Income
Change YoY (%)
Other income
Total Income
Change YoY (%)
Operating Expenses
Change YoY (%)
Operating Profits
Change YoY (%)
Provisions
Profit before Tax
Tax Provisions
Profit after tax
Change YoY (%)
Key Operating Parameters (%)
Rep. Net Inc. (% of Avg Assets)
Rep. Cost of funds (%)
Cost to Income Ratio
Rep Credit Cost
Tax Rate
Balance Sheet Parameters
Gross Customer Assets (INR B)
Change YoY (%)
Borrowings (INR B)
Change YoY (%)
Customer Assets /Borrowings (%)
Debt/Equity (x)
Asset Quality Parameters (%)
GS 3 (INR B)
Gross Stage 3 (%)
NS 3 (INR B)
Net Stage 3 (%)
PCR (%)
Return Ratios (%)
ROAA
ROAE
E: MOFSL Estimates
(INR M)
FY19
FY20 4QFY20E v/s Est.
4Q
33,552 1,29,900 1,41,755 35,752 -6
18,031 68,601 75,136 19,007 -5
15,521 61,300 66,619 16,745
-7
5.5
29.5
8.7
13.8
720
3,117
3,726
891 -19
16,241 64,417 70,345 17,636
-8
4.7
30.3
9.2
13.7
5,261 19,216 19,785
5,296 -1
21.7
15.2
3.0
21.9
10,980 45,200 50,560 12,340
-11
-1.9
37.9
11.9
10.5
6,421 14,680 23,759
6,366
1
4,559 30,520 26,801
5,974
-24
711
8,200
5,064
1,078 -34
3,849 22,321 21,736
4,896
-21
-30.3
74.7
-2.6
-11.3
1Q
31,061
15,122
15,939
54.6
643
16,582
43.3
5,048
41.6
11,535
44.1
4,243
7,292
1,894
5,398
71.8
6.57
8.29
30.4
1.66
26.0
863
24.0
772
20.6
112
6.5
64.8
7.9
24.6
3.2
62.0
2.4
18.5
FY19
2Q
3Q
32,199 33,598
16,495 18,659
15,704 14,939
22.4
30.9
825
852
16,529 15,791
27.5
32.4
5,236 4,609
21.4
28.0
11,293 11,183
30.6
34.3
3,317 3,425
7,976 7,758
2,385 1,949
5,591 5,810
62.2
77.8
6.86
8.33
31.7
1.66
29.9
912
24.1
868
32.0
105
7.0
61.2
7.1
23.0
2.8
62.5
2.3
18.5
6.79
8.50
29.2
1.79
25.1
947
21.8
878
28.3
108
6.8
60.3
6.7
22.6
2.6
62.5
2.3
18.3
4Q
33,042
18,325
14,717
15.2
797
15,514
19.4
4,324
-16.9
11,190
43.6
3,696
7,494
1,972
5,521
104.5
6.77
8.53
27.9
1.91
26.3
991
16.3
915
27.8
108
6.8
55.5
5.9
21.7
2.4
60.8
2.1
16.6
1Q
35,945
19,229
16,716
4.9
950
17,666
6.5
4,435
-12.1
13,231
14.7
5,804
7,426
1,932
5,494
1.8
7.10
8.59
25.1
2.39
26.0
999
15.7
929
20.3
108
6.6
54.6
5.7
22.9
2.5
58.1
2.1
16.0
FY20
2Q
3Q
36,113 36,289
18,980 18,896
17,134 17,393
9.1
16.4
1,005 1,052
18,139 18,445
9.7
16.8
4,791 5,299
-8.5
15.0
13,349 13,146
18.2
17.6
5,786 5,894
7,563 7,252
1,084 1,338
6,479 5,915
15.9
1.8
7.33
8.61
26.4
2.49
14.3
1,003
9.9
901
3.8
111
6.4
57.5
6.0
26.3
2.8
54.2
2.4
18.1
7.29
8.54
28.7
2.39
18.4
995
5.0
930
5.9
107
6.4
56.6
5.9
24.6
2.7
56.6
2.2
16.5
32.4
15.6
984
-0.7
939
2.6
105
6.4
49.4
5.2
20.0
2.2
59.6
1.5
10.4
29.8
26.9
991
16.3
915
27.8
108
55.5
5.9
21.7
2.4
60.8
28.1
18.9
984
-0.7
939
2.6
105
49.4
5.2
20.0
2.2
59.6
30.0 236BPS
18.1 -246BPS
995
0.4
926
1.2
107
58.7
5.9
25.8
2.7
56.1
-1
1
18 May 2020
2
 Motilal Oswal Financial Services
L&T Financial Holdings
Highlights from management commentary
Business updates
Liquidity
Decline is expected in Tractor and 2W sales for the industry in FY21.
MFI – The repeat rate for good customers is 51%. NTC customers account for
17% of the portfolio. The indebtedness limit for a borrower has now been
lowered to ~INR70k from ~INR80k earlier.
The operating instruction from authorities on the ground across geographies
was confusing. Local authorities across states interpreting rules in their own way
has resulted in operational confusion.
The Rabi crop output is strong. However, some problems related to harvesting
have been witnessed in certain regions. However, economic recovery would
undoubtedly be led by rural India.
Toll receipts for operating roads are back to 30–40% of normal collections.
The company would need to use the DCCO dispensation for its Real Estate
lending portfolio very sparingly (less than 10% of projects would require this).
Even if zero sales are assumed up to Sep–Oct, expect the Real Estate portfolio to
be healthy (unless there are delays beyond the promoter’s control).
~75% of the portfolio belongs to the Orange and Green zones.
The infusion of equity in the infra book is more of an accounting need to
maintain certain ratios.
Credit norms have been tightened across products, at least until there is a
lingering uncertainty.
TLTROs have only partially helped the NBFC sector.
Positive ALM has been witnessed even after factoring the impact of the
moratorium on the asset side.
LTFH has not asked its lenders for a moratorium.
Collections for March would be treated as an advance for the June payment
for MFI loans. For other products, it would be considered repayment for
March, and moratorium would be provided only for April and May.
In April, a small increase was reported in moratorium availed across segments.
In RE lending, only 28% of the portfolio is under moratorium on account of
significant prepayments (due to sweep-ins). However, a substantial increase is
expected in the moratorium percentage in April and May.
NS3 of sub-1% in Rural lending sets a benchmark.
Another 5% hit would be taken on 1-89dpd moratorium accounts in 1QFY20.
There could be a small increase in this number (to ~INR2.5b).
The reduction in the GNPL ratio in Infra finance was from ARC sales, write-offs,
and some recovery of ~INR4b.
Collection efficiency currently stands at 33% for Farm and 50% for 2W.
Some green shoots have been observed, with a few areas opening up in the
country.
The merger of lending subsidiaries makes ALM and liquidity management more
efficient. However, no tax benefit is possible from the merger of subsidiaries
under Ind-AS.
3
Moratorium related
Asset quality
Others
18 May 2020
 Motilal Oswal Financial Services
L&T Financial Holdings
Two large exposures in the de-focused book (one HFC and one power
generation company) are largely covered. No shocks are expected from this
book.
The new launch of unsecured business loans has been postponed to 2021.
The first preference is to retain the IDF if the regulator grants the same
concessions if the IDF is merged with the book. Otherwise, the company would
consider other options, such as a sale or merger.
Valuation and view
Since the IL&FS crisis, LTFH has been able to raise adequate debt capital at
competitive prices. CRISIL affirmed its rating as AAA on stable operating metrics
and a strong parentage. Despite the reduction in CP share, incremental cost of
funds has been on the decline.
At the same time, LTFH has been focusing on consolidating its loan book.
Overall, the loan book has been largely flat and is expected to remain this way
for the next few quarters.
The proposed consolidation of lending subsidiaries would further simplify the
business structure.
The AMC business has done well over the past three years and contributed to
12% of consolidated PAT. We believe this business would continue to grow
faster over the next three years v/s the lending segments.
We estimate a 4% loan book CAGR over the next three years (largely back-
ended). Asset quality performance would be the key monitorable going ahead.
We cut our FY21/FY22 EPS estimates by 17%/8% to factor in higher credit costs
given the extended lockdown. Buy, with TP of INR75 (0.8x FY22E BVPS).
Exhibit 1: We downgrade est. to factor in lower growth and higher credit costs
INR b
Total Income
Operating Expenses
Operating Profits
Provisions
PBT
Tax
PAT
Loan book
NIM (%)
Spreads (%)
ROAA (%)
RoAE (%)
FY21
72.1
20.9
51.2
25.1
26.1
5.4
20.7
972
5.4
4.7
1.9
13.1
Old Est.
FY22
75.9
22.4
53.5
21.4
32.0
6.6
25.4
1,032
5.6
4.7
2.2
14.3
FY21
71.5
20.2
51.3
30.0
21.3
4.2
17.1
923
5.9
4.8
1.6
11.3
New Est.
FY22
75.0
21.3
53.7
24.7
29.0
5.7
23.3
954
6.0
4.8
2.1
13.8
FY21
-0.9
-3.3
0.1
19.2
-18.3
-21.9
-17.3
-5.1
Change %
FY22
-1.1
-5.0
0.5
15.4
-9.5
-14.3
-8.2
-7.6
Source: MOFSL, Company
18 May 2020
4
 Motilal Oswal Financial Services
L&T Financial Holdings
Key Exhibits
Curtailed disbursements
due to lockdown result in
lower growth
Exhibit 2: Loan book growth (%)
Loans (INR b)
20
21
25
28
24
24
22
Change YoY (%)
16
16
10
5
-1
Exhibit 3: Slowdown in rural and housing finance growth
continues
Rural( YoY %)
70
32
26
36
36
53
50
76
71
65
50
34
34
28
35
24
24
Housing (YoY%)
Exhibit 4: De-focused book down 50% YoY (-5% QoQ) (%)
Wholesale (YoY %)
24
18
10
23
12
11
-6
-10
-17
-32
-28
-45 -50 -55
9
13
14
Defocused (YoY%)
11
14
13
13 3
52 48 40
11
14
14
4
8
7
Exhibit 5: Business mix sequentially stable (%)
Rural
20
45
20
16
20
42
21
17
19
40
22
19
18
40
22
20
Housing
15
39
24
22
14
38
24
24
Wholesale
13
37
25
25
10
38
26
26
Defocused
9
39
26
26
7
39
27
27
6
40
27
28
5
40
27
28
Exhibit 6: CP exposure reduced by 1000bp YoY (%)
NCD (Ex Retail) NCD Retail TL+WC etc CP ECBs Others
1
3
8
8
10
6
2
3 33 3 2
4
5
4
2
20 18 16 16 13 10
13
9
6
17 13 14
38
46
37
36
40
39
41
37
35
3
40
36
3
38
36
3
39
36
3
41
38
6
38
42
6
36
43
7
36
44
7
38
Housing net income %
down 40bp sequentially
Exhibit 7: Net income (NIM +Fee Margins, %)
Overall (%)
12.6
6.2
5.8
3.8
3.9
10.6
6.5
5.8
3.1
11.6
6.7
5.6
4.3
12.1
6.9
6.6
3.5
Rural(%)
12.9
6.7
6.6
3.0
13.8
6.7 6.9
6.7
3.0
Housing(%)
13.6
13.5
6.8
6.8
2.7
13.0
7.1
6.3
4.0
5.9
3.8
Wholesale (%)
13.3
13.7
13.7
6.9
6.8
7.3 7.3
6.0 5.3
3.4
3.5
Source: MOFSL, Company, *4QFY20 wholesale business represents Infrastructure finance (ex-IDF)
18 May 2020
5
 Motilal Oswal Financial Services
L&T Financial Holdings
Rural business profitability
down 160bp sequentially
Exhibit 8: RoA across segments (%)
4.0
3.5
2.8
1.7
1.5
4.0
Overall (%)
4.3
4.3
3.0
1.8
1.3
1.6
1.4
0.9
0.6
3.4
Rural (%)
4.3
4.2
3.2
3.4
3.4
2.3
0.7
2.3
0.8
Housing (%)
3.9
3.5
2.1
0.7
4.0
3.0
2.3 2.1
2.0
3.9
Wholesale (%)
4.6
4.1
3.4
2.7
2.4
1.7
2.2
1.4
1.5
2.5
1.8
2.4
0.9
Source: MOFSL, Company, *4QFY20 wholesale business represents Infrastructure finance (ex-IDF)
Collection efficiency for ML
portfolio at 98.8% in
Mar’20; would be adjusted
against billing in June’20
Exhibit 9: Borrower count, being granted moratorium (%)
%
March'20
ML
100%
Farm
31%
TW
29%
CL HL &LAP Real Estate Infra (Non-IDF)
32%
16%
28%
30%
IDF
21%
Source: MOFSL, Company, *Micro Loans, Consumer Loan
Exhibit 10: GS3 improves ~50bp sequentially (%)
11.7
Consol. GNPA (INR b)
11.0 10.4
8.7
7.9
Overall GS3%
Exhibit 11: Sequential increase in PCR leads to lower NS3 (%)
6.1
Consol. NNPA(INR b)
5.4
4.7
3.3 3.2
2.8 2.7
2.8 2.6
2.4 2.5
2.3
Overall NS3%
7.1 6.7
5.9 5.7 6.0 5.9 5.4
75.8 75.2 75.1 70.4 64.8 61.2 60.3 55.5 54.6 57.5 56.6 50.4
37.3 34.9 32.2 25.5 24.6 23.0 22.6 21.7 22.9 26.3 24.6 20.8
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 12: Segment-wise GS3 fairly stable in last three
quarters (%)…
Rural GS3%
14.1
4.9
1.0
10.9
12.5
10.5
3.8
1.0
Housing GS3%
9.7
9.2
3.6
0.8
Wholesale GS3%
9.1
3.6
0.9
9.0
3.8
1.0
Exhibit 13: …with rural NS3 down 60bp during same period
(%)
Rural NS3%
5.8
4.2
1.7
0.8
1.5
0.7
5.0
1.3
0.7
0.6
4.5
1.3
0.6
4.6
4.2
1.5
0.6
4.1
1.3
0.6
3.9
0.9
0.7
Housing NS3%
Wholesale NS3%
4.3
1.0
3.5
0.8
3.4
0.8
1.3
Source: MOFSL, Company; Note: Infra finance ex-IDF numbers in
4QFY20
Source: MOFSL, Company; Note: Infra finance ex-IDF numbers in
4QFY20
18 May 2020
6
 Motilal Oswal Financial Services
L&T Financial Holdings
Exhibit 14: Prudent provisioning leading to higher credit cost
(%)
Overall
4.1
4.2
4.3
Rural
4.1
1.9
1.5
0.9
0.6
0.7
Housing
Wholesale
4.0
2.4
1.3
0.0
0.6
1.0
1.1
6.3
3.0
2.3
0.9
3
14
3
15
4
15
4
16
4
16
12
Exhibit 15: ~75% of stressed loans from wholesale and
defocused book (%)
Rural
6
Housing
12
13
Wholesale
15
19
Defocused
18
24
51
5
20
3.5
2.4
0.9
3.8
2.5
1.7
1.7
1.3
0.6
1.7
1.5
1.8
71
76
69
68
65
61
4
16
61
4
17
Source: MOFSL, Company,*Q4FY20 Wholesale business is ex-IDF
Source: MOFSL, Company
Exhibit 16: Rural PCR up 1100bp sequentially (%)
Rural
66
63
64
66
63
66
Housing
64
55
32
Wholesale
66
57
28
77
Exhibit 17: Overall PCR up 200bp sequentially (%)
62
62
62
Overall PCR
61
58
60
31
54
59
57
62
59
61
57
30
23
26
27
30
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 18: Rural disbursements (INR b)
Micro Loans
26
28
28
16
13
8
2W Finance
27
23
11
13
8
11
7
Farm Equipment
28
26
1514
Exhibit 19: Segmental Rural loan growth YoY (%)
Micro Loans
133
22
12
68
115
86
9
66
33
33
78
33
60
27
68
55
37
20
41 23
23
13
15
11
2W Finance
Farm Equipment
10 9
11
9
15 15
0
Source: MOFSL, Company
Source: MOFSL, Company
18 May 2020
7
 Motilal Oswal Financial Services
L&T Financial Holdings
Exhibit 20: Housing disbursements (INR b)
Home Loans
16
6
6
16
7
3
LAP
20
14
8
2
7
2
13
7
1
12
7
2
12
6
1
12
78
59
17
-42
-42
-40
Real Estate Finance
Exhibit 21: Loan growth YoY (%)
Home Loans
119
109
87
27
-36
62
11
46
33 36 47 35 33 31 24
35
31 15
-1
7 -1
1 -5
-8 -9
LAP
Real Estate Finance
3
3
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 22: Wholesale loan book growth (%)
Renewables
Transport
56
Power
Others
114
36
23
42
28
27
26 19 22
21 16 26 18 24 14
11
-7
-15
-43
-12
81
Exhibit 23: AMC segment – AUM growth (%)
102
Avg. AUM YoY Growth(%)
Avg. Equity AUM YoY Growth(%)
75
35
59
-21
40
15
13
8
7
3
4
4
74
-18
-2
-6
-35-12
-34
-11
-21
-20
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 24: One-year forward P/B
3.5
2.5
1.5
0.5
P/B (x)
Min (x)
Avg (x)
+1SD
Max (x)
-1SD
3.3
2.3
Exhibit 25: One-year forward P/E
30
23
P/E (x)
Min (x)
Avg (x)
+1SD
Max (x)
-1SD
26.7
19.5
15.2
5.0
10.9
5.5
1.8
1.3
0.6
0.7
16
9
2
Source: MOFSL, Company
Source: MOFSL, Company
18 May 2020
8
 Motilal Oswal Financial Services
L&T Financial Holdings
Valuation matrix
66
Rating
HFCs
HDFC*
LICHF
PNBHF
REPCO
Vehicle fin.
SHTF
MMFS
CIFC
Diversified
BAF
SCUF
LTFH
MUTH
MAS
CMP
(INR)
Buy
Buy
Neutral
Buy
Buy
Buy
Buy
Neutral
Buy
Buy
Neutral
Buy
1,512
220
174
106
576
138
125
1,940
680
53
776
552
Mcap
(USDb)
37.1
1.7
0.4
0.1
1.9
1.4
1.6
15.9
0.6
1.5
4.3
0.4
P/E (x)
FY21E
10.3
4.8
3.4
2.4
7.7
17.3
8.0
26.0
5.1
5.1
9.7
17.9
FY22E
6.7
4.1
2.6
2.2
4.9
9.6
6.7
17.9
4.5
4.2
8.6
14.8
P/BV (x)
FY21E
1.3
0.6
0.3
0.3
0.7
0.7
1.1
3.1
0.6
0.7
2.3
2.7
FY22E
0.8
0.5
0.3
0.3
0.6
0.7
0.9
2.7
0.5
0.6
1.9
2.4
RoA (%)
FY21E
1.7
1.0
1.1
2.3
1.6
0.7
2.0
2.6
3.0
1.9
7.1
4.2
FY22E
1.7
1.1
1.4
2.4
2.4
1.2
2.2
3.5
3.4
2.2
7.2
4.7
RoE (%)
FY21E
13.1
12.0
9.6
14.4
9.0
4.2
14.1
12.7
11.4
13.6
25.8
16.2
FY22E
13.2
13.0
11.5
13.6
12.7
7.2
14.9
16.2
11.8
14.7
24.4
17.2
18 May 2020
9
 Motilal Oswal Financial Services
L&T Financial Holdings
Financials and valuations
Income statement
Y/E March
Interest Income
Interest Expended
Net Interest Income
Other Operating Income
Total Income
Change (%)
Operating Expenses
Operating Income
Change (%)
Provisions/write offs
PBT
Tax
Tax Rate (%)
PAT before pref dividend
Change (%)
Preference Dividend
PAT to equity shareholders
Change (%)
2016
68,174
41,241
26,933
6,533
33,466
20.8
13,129
20,337
20.2
7,810
12,527
3,990
31.9
8,567
-2.4
1,671
6,896
-10.1
2017
76,614
46,270
30,343
9,110
39,453
17.9
12,765
26,688
31.2
15,899
10,789
364
3.4
10,422
21.7
1,244
9,177
33.1
2018
88,692
54,492
34,200
13,970
48,170
22.1
13,867
34,303
28.5
19,845
14,458
1,682
11.6
12,784
22.7
0
12,784
39.3
2019
116,403
68,600
47,803
16,636
64,439
33.8
19,215
45,224
31.8
14,681
30,544
8,200
26.8
22,344
74.8
0
22,344
74.8
2020
132,447
75,136
57,311
13,034
70,345
9.2
19,785
50,560
11.8
23,759
26,801
5,064
18.9
21,736
-2.7
0
21,736
-2.7
2021E
130,739
73,085
57,653
13,813
71,466
1.6
20,195
51,271
1.4
29,969
21,302
4,205
19.7
17,097
-21.3
0
17,097
-21.3
2022E
132,139
71,879
60,260
14,776
75,036
5.0
21,315
53,721
4.8
24,744
28,977
5,670
19.6
23,307
36.3
0
23,307
36.3
(INR M)
2023E
137,834
74,612
63,222
15,834
79,056
5.4
22,472
56,584
5.3
18,645
37,939
7,122
18.8
30,817
32.2
0
30,817
32.2
(INR M)
2023E
20,048
19,988
186,336
206,384
972,599
5.1
42,293
1,221,277
1,023,789
7.3
79,584
10.0
13,453
1,221,277
Balance sheet
Y/E March
Capital
- of which equity share cap.
Reserves & Surplus
Net Worth
Borrowings
Change (%)
Other liabilities
Total Liabilities
Loans
Change (%)
Investments
Change (%)
Net Fixed Assets
Total Assets
E: MOSL Estimates
2016
29,668
17,534
53,237
82,905
516,157
22.6
38,402
637,463
564,679
22.6
35,633
34.5
6,962
637,463
2017
29,691
17,557
60,202
89,893
598,111
15.9
37,133
725,136
623,145
10.4
60,115
68.7
6,189
725,136
2018
30,301
19,957
94,111
124,411
752,483
25.8
15,385
892,279
793,300
27.3
48,433
-19.4
5,311
892,279
2019
19,988
19,988
114,498
134,486
915,070
21.6
10,995
1,060,551
913,246
15.1
86,408
78.4
11,660
1,060,551
2020
20,048
19,988
123,766
143,814
938,945
2.6
12,531
1,095,290
914,625
0.2
59,793
-30.8
11,621
1,095,290
2021E
20,048
19,988
137,837
157,885
922,825
-1.7
18,797
1,099,507
922,825
0.9
65,772
10.0
12,202
1,099,507
2022E
20,048
19,988
158,763
178,812
925,221
0.3
28,196
1,132,228
953,836
3.4
72,349
10.0
12,812
1,132,228
18 May 2020
10
 Motilal Oswal Financial Services
L&T Financial Holdings
Financials and valuations
Ratios
Y/E March
Spreads Analysis (%)
Avg Yield on Loans
Avg. Yield on Earning Assets
Avg. Cost-Int. Bear. Liab.
Interest Spread
Net Interest Margin
Profitability Ratios (%)
RoE
RoA
Int. Expended/Int.Earned
Other Inc./Net Income
Efficiency Ratios (%)
Op. Exps./Net Income
Asset Quality (%)
Gross NPAs
Gross NPAs to Adv.
Net NPAs
Net NPAs to Adv.
VALUATION
Book Value (INR)
Price-BV (x)
EPS (INR)
EPS Growth YoY
Price-Earnings (x)
Dividend per share (INR)
Dividend yield (%)
E: MOSL Estimates
2016
12.9
12.5
8.8
3.7
5.0
2017
12.6
11.9
8.3
3.6
4.7
2018
12.6
11.6
8.1
3.6
4.5
2019
12.6
12.6
8.2
4.4
5.2
2020
12.6
13.4
8.1
5.3
5.8
2021E
12.6
13.3
7.9
5.5
5.9
2022E
12.6
13.1
7.8
5.3
6.0
(%)
2023E
12.6
12.9
7.9
5.1
5.9
10.3
1.2
60.5
19.5
12.4
1.3
60.4
23.1
13.3
1.6
61.4
29.0
18.0
2.3
58.9
25.8
15.6
2.0
56.7
18.5
11.3
1.6
55.9
19.3
13.8
2.1
54.4
19.7
16.0
2.6
54.1
20.0
39.2
32.4
28.8
29.8
28.1
28.3
28.4
28.4
17,354
3.1
11,540
2.1
2016
40.4
3.9
-11.8
0.8
24,900
3.9
14,610
2.3
2017
44.3
5.2
32.9
0.8
70,430
8.4
25,540
3.2
2018
57.2
6.4
22.5
1.0
55,490
5.9
21,740
2.4
2019
67.3
11.2
74.5
1.3
49,440
5.2
19,960
2.2
2020
71.9
0.7
10.9
-2.7
4.9
1.3
2.5
57,609
6.0
24,733
2.7
2021E
79.0
0.7
8.6
-21.3
6.2
1.0
1.9
56,052
5.7
23,846
2.5
2022E
89.4
0.6
11.7
36.3
4.5
1.4
2.6
53,555
5.1
19,654
2.2
2023E
103.2
0.5
15.4
32.2
3.4
1.9
3.5
18 May 2020
11
 Motilal Oswal Financial Services
L&T Financial Holdings
NOTES
18 May 2020
12
 Motilal Oswal Financial Services
L&T Financial Holdings
Explanation of Investment Rating
Investment Rating
Expected return (over 12-month)
BUY
>=15%
SELL
< - 10%
NEUTRAL
< - 10 % to 15%
UNDER REVIEW
Rating may undergo a change
NOT RATED
We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within
following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the
Regulations, is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial
products. MOFSL is a subsidiary company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which are
available on www.motilaloswal.com. MOFSL (erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities & Exchange Board of India (SEBI) and is a
registered Trading Member with National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and
National Commodity & Derivatives Exchange Limited (NCDEX) for its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National
Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance
Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance products.
Details of associate entities of Motilal Oswal Financial Services Limited are
available on the website at
http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf
MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and
buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other
compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have
any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the
specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even
though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report
MOFSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report
should be aware that MOFSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific
merchant banking, investment banking or brokerage service transactions. Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the
website at
https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental
research and Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated
from MOFSL research activity and therefore it can have an independent view with regards to Subject Company for which Research Team have expressed their views.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability
or use would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong
Kong Securities and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst
Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of
research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity
to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these
securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not
located in Hong Kong & are not conducting Research Analysis in Hong Kong.
For U.S.
Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under
applicable state laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers
Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any
brokerage and investment services provided by MOFSL , including the products and services described herein are not available to or intended for U.S. persons. This report is
intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as
"major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which
this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration
provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange
Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a chaperoning agreement with a U.S. registered broker-
dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this
chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S.
registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public
appearances and trading securities held by a research analyst account.
For Singapore
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets
services license and an exempt financial adviser in Singapore.As per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and
Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL
in respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”,
of which some of whom may consist of "accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the
SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and
inform MOCMSPL.
Specific Disclosures
1 MOFSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.
2 MOFSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company
3 MOFSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months
4 MOFSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report
5 Research Analyst has not served as director/officer/employee in the subject company
6 MOFSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
7 MOFSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months
8 MOFSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months
18 May 2020
13
 Motilal Oswal Financial Services
L&T Financial Holdings
9 MOFSL has not received any compensation or other benefits from third party in connection with the research report
10 MOFSL has not engaged in market making activity for the subject company
********************************************************************************************************************************
The associates of MOFSL may have:
-
financial interest in the subject company
-
actual/beneficial ownership of 1% or more securities in the subject company
-
received compensation/other benefits from the subject company in the past 12 months
-
other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on
the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL
even though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
-
acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
-
be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the
company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies)
-
received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.
The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report
Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not
consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from
clients which are not considered in above disclosures.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the
research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
Terms & Conditions:
This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and
may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent
of MOFSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in
nature. The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty,
representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The
report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as
customers by virtue of their receiving this report.
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or
distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for
informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing
in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances.
The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment
objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this
document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this
document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views
expressed may not be suitable for all investors. Certain transactions -including those involving futures, options, another derivative products as well as non-investment grade
securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of
the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and
should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make
modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and the employees may from
time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to
perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a
separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of
information that is already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or
may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on,
directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or
entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law,
regulation or which would subject MOFSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in
all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.
Neither the Firm, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost
revenue or lost profits that may arise from or in connection with the use of the information.
The person accessing this information specifically agrees to exempt MOFSL or any of its
affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOFSL or any of its affiliates or employees responsible for any such
misuse and further agrees to hold MOFSL or any of its affiliates or employees free and harmless from all losses, costs, damages,
expenses that may be suffered by the person
accessing this information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263;
Website www.motilaloswal.com.CIN no.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road,
Malad(West), Mumbai- 400 064. Tel No: 022 7188 1000.
Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst:
INH000000412. AMFI: ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579;PMS:INP000006712. Motilal Oswal Asset Management Company
Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth
Management Ltd. (MOWML): PMS (Registration No.: INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is
a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt.
Ltd. which is a group company of MOFSL. Private Equity is offered through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL.
Research & Advisory services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no
assurance or guarantee of the returns. Investment in securities market is subject to market risk, read all the related documents carefully before investing. Details of Compliance
Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.
* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National
Company Law Tribunal, Mumbai Bench.
18 May 2020
14