L&T Finance Limited (LTF), formerly known as L&T Finance Holdings Ltd., is a prominent Non-Banking Financial Company (NBFC) in India, offering a diverse range of financial products and services. Headquartered in Mumbai, LTF has been rated 'AAA' by four leading rating agencies, reflecting its strong creditworthiness.
Financial Performance
In the fiscal year 2024, LTF achieved its highest-ever annual Profit After Tax (PAT) of ₹2,320 crore, marking a 43% year-on-year growth. The company's retail disbursements reached ₹54,267 crore, a 29% increase from the previous year, with the retail book crossing ₹80,000 crore, up 31% year-on-year.
Strategic Initiatives
Under its "Lakshya 2026" strategy, LTF has been focusing on retailization, aiming to transition from a product-focused to a customer-focused approach. The company has set ambitious goals, including achieving over 95% retailization and maintaining a Consolidated Return on Assets (RoA) between 2.8% and 3%. As of FY24, LTF has made significant progress towards these targets.
Business Segments
- Rural Business Finance: Achieved annual disbursements of ₹21,495 crore, a 27% year-on-year growth, leading to a book size exceeding ₹24,000 crore.
- Farmer Finance: Maintained a book size of ₹13,892 crore, growing 8% year-on-year, despite industry-wide challenges.
- Urban Finance: Expanded the book size to ₹36,089 crore, a 30% year-on-year growth, driven by increased disbursements in two-wheeler, personal, and home loans.
- SME Finance: The book size reached ₹3,905 crore, nearing the ₹4,000 crore milestone, supported by geographic expansion and strengthened channel partnerships.
Asset Quality
LTF has maintained a strong asset quality, with Gross Stage 3 (GS3) assets at 3.15% and Net Stage 3 (NS3) assets at 0.79% as of FY24. The Provision Coverage Ratio (PCR) improved to 76%, up from 59% in the previous year, indicating a robust approach to managing potential credit risks.
Digital Transformation
The company has been investing in digital initiatives to enhance customer experience and operational efficiency. The launch of "Project Cyclops," an AI-driven underwriting engine, exemplifies LTF's commitment to leveraging technology for better risk assessment and customer service.
Market Position and Outlook
LTF faces competition from larger, more diversified financial institutions. As of 2023, the company's market share in the retail lending segment was 2.3%, compared to HDFC Bank's 9.5% and ICICI Bank's 7.2%. Despite this, LTF's strategic focus on retailization and digital transformation positions it well for future growth.
Analyst Recommendations
Analysts have shown a positive outlook on LTF. Motilal Oswal, for instance, has recommended a 'Buy' rating with a target price of ₹200, citing the company's strong financial performance and strategic initiatives.
L&T Finance Limited has demonstrated robust financial performance and strategic foresight in its operations. With a clear focus on retailization, digital transformation, and maintaining asset quality, the company is well-positioned to navigate the competitive landscape and achieve sustainable growth in the coming years.
