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Informist, Wednesday, Oct. 16, 2024

By Sourabh Kumar

MUMBAI - L&T Finance is expected to report a 16.7% on-year rise in its consolidated net profit which is seen at a record high of INR 6.94 billion in the quarter ended September, due to strong growth in loans and a rise in its assets under management, an average of estimates provided by six brokerage firms showed.

Sequentially, the net profit is expected to rise by a mere 1.3%. In fact, Elara Securities sees the company’s bottom line to fall 1.1% on quarter. In Apr-Jun, the company reported an all-time high net profit of INR 6.86 billion, primarily on account of strong growth in disbursements and an improvement in asset quality.

According to the company’s provisional figures released on Oct. 4, its retail loan book rose nearly 28% on year to INR 889.50 billion as of Sept. 30. Both Kotak Institutional Equities and Motilal Oswal expect the company’s loan book to grow 4% on a quarterly basis. In August, the company had announced a partnership with CRED to offer unsecured personal loans to the latter's customers. CRED is a payments platform that allows credit card users to manage multiple cards, and also rewards individuals for timely credit card bill payments. The partnership was L&T Finance's entry into the co-lending space, according to the lender.

Further, estimates also showed the company’s net interest income having risen 20.5% on year to INR 22.21 billion for the quarter ended September. On a quarterly basis, it is estimated to rise 5.7%. The company's net interest income was INR 20.20 billion in Apr-Jun.

Three of the six brokerage firms - Elara Securities, Kotak Institutional Equities, and Motilal Oswal, expected the net interest margin of the non-banking finance company to decline on a quarterly basis. Kotak Institutional Equities expected NIM to moderate to 9.2% in the quarter ended September from 9.3% in Apr-Jun, due to a rise in funding costs.

Emkay Global said they expect "a marginal improvement in the overall NIMs+fees, and for it to remain at around 11.3% (vs 11.2% in Apr-Jun)."

Further, the credit cost of the non-bank lender is likely to go up, as per most of the brokerage firms. Motilal Oswal anticipates credit costs to expand to around 2.6% (annualized) in Jul-Sep. Emkay Global said, "credit cost is expected to increase due to some concerns around micro loans and should come at around 2.8%." Sharekhan said performance and outlook on the company’s microfinance were the key monitorable components. The same was iterated by Motilal Oswal.

Estimates from three brokerage firms predicted a 17-18% on-year rise in the company's assets under management for the quarter ended September. "L&T Finance retail AUM (assets under management) is expected to register around 5.6% sequential growth led by strong disbursement in mortgage and SME (small and medium enterprises) business, while micro loans disbursement is expected to remain muted," Emkay Global said. "Overall AUM growth is expected to be around 4.6% sequentially and 18% on YoY basis."

Brokerages expect the operating expenses of the company to remain elevated, given the company's plans to increase its branches and its focus on technology infrastructure. "Considering L&T Finance's commitment toward developing its tech infrastructure and increasing branch presence, we expect opex (operating expenditure) to remain elevated with cost-to-income coming around 39.5%, (and) with opex to AUM (assets under management) at around 4.5% levels."

Moving ahead, Emkay Global expects the asset quality of the non-banking financial company to remain broadly stable. "Asset quality is expected to be stable with GS3 (gross stage 3) and NS3 (net stage 3) coming in at 1.2% & 0.6% each (vs 0.67% & 0.32% in Apr-Jun)," Emkay Global said.

The non-bank lender will announce its consolidated earnings for Jul-Sept on Friday. On Wednesday, shares of the company closed 0.7% down at INR 166.83 on the National Stock Exchange. 

Following are the Jul—Sept earnings estimates of L&T Finance based on reports compiled by Informist from 6 brokerage houses:

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Vidhi Verma

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