L&T Finance Holdings Ltd (LTFH) is confident of maintaining a compound annual growth rate (CAGR) of 18-20 percent over the next 5-10 years with a top quartile return on equity, the chief executive officer of the company has stated.
The company has exposure to around 90-100 real estate projects. “We believe that given the pedigree of the group and our expertise in judging and monitoring real estate projects, we are extremely well placed to fund this sector. It is our core strength to fund the real estate sector and there will be excellent opportunities when everybody is panicking to fund this sector. Most of our exposure, more than 80 percent, is to A and A+ category, which means those who have delivered more than 5 million sq ft of houses already,” MD and CEO of LTFH Dinanath Dubhashi pointed out.
The company’s consolidated net profit rose by 94 per cent to Rs 548 crore for fourth quarter ended March 2019 on rise in interest margins. The net interest margins rose to 5.08 percent in Q4 FY19 from 4.64 percent in Q4FY18.
Most of the realty exposure is in middle and late construction stage. Majority of it is to ticket sizes of less than 1,300 sq ft. So we believe it is in a very safe area overall. Even specific projects are progressing pretty well,” he noted.
In terms of book growth, Dubhashi said, “Growth in our focused product will come from gaining market share by going deeper, growing on adjacencies of our excellent products, our existing products. We now have a data base of close to 1.5 crore customers and the ability of data analysing these customers and selling, cross-selling, upselling more to them. And last but not the least, we are working at launch of some new businesses.”
The company, through its subsidiaries, has around ₹1,800 crore exposure to six project special purpose vehicles (SPVs) of Infrastructure Leasing & Financial Services (IL&FS). The resolution plan submitted by the government to National Company Law Appellate Tribunal, specifies that these SPVs are capable of servicing loans to secured creditors and there will be priority on payments towards them.
As a measure of commercial prudence and taking a conservative view, the firm has reversed Rs 84 crore towards interest of Q3 FY19 and Q4 FY19. “Without this deferment, the PAT and the return on equity (RoE) for FY19 would have been Rs 2,285 crore and 18.38 percent, respectively. Similarly, the PAT and the RoE for Q4 FY19 would have been Rs 607 crore and 18.32 percent, respectively," a statement issued by the company said.
“Our lending is to six operating SPVs. That is number one. Number two is according to the resolution plan submitted by IL&FS through the Government of India, all our SPVs, all the six, are in green and amber,” Dubhashi pointed out.Speaking about stressed assets, he further mentioned, “We started with a very high level of legacy non-performing assets (NPAs). This year we solved around Rs 1,100 crore. We believe that with the Insolvency and Bankruptcy Code (IBC) and National Company Law Tribunal (NCLT) etc, we will reduce this significantly. In housing, our quality is quite steady and it will continue to be steady, maybe reduce a little bit. The most interesting thing is happening in rural. Over the last three years, our rural portfolio has grown from Rs 7,000-8,000 crore to Rs 25,000 crore.”