CRISIL has assigned its ‘CRISIL AAA/Stable‘ rating to the Rs 500 crore non-convertible debentures of L&T Finance Holdings Limited (LTFH; holding company of the L&T financial services [LTFS] group). The LTFS group includes LTFH and its subsidiaries and associates. CRISIL has also reaffirmed its rating on commercial paper programme at ‘CRISIL A1+’.
The rating reflects the LTFS group’s strong and diversified presence across the financial services space and a well-diversified resource profile. It also centrally factors in expectation of strong support from the parent, Larsen & Toubro Ltd (L&T; rated ‘CRISIL AAA/FAAA/Stable/CRISIL A1+’). These strengths are partially offset by moderate, albeit improving, asset quality.
For arriving at the rating, CRISIL has combined the business and financial risk profiles of LTFH and its subsidiaries and associates. This is because all these entities have significant operational and management linkages and operate under a common brand. CRISIL has also factored in the strong support from the parent, L&T, given the strategic importance of the group to the parent along with the shared brand name. L&T is the majority shareholder of LTFH, with a shareholding of 63.89% as on June 30, 2019.
The LTFS group has demonstrated healthy growth and improved its return on equity (ROE) over the last few years. Due to L&T’s focus on building a strong services portfolio including IT, technology and financial services, the LTFS group has been identified as a key focus area for the parent. As a result, L&T provides strategic oversight to the group and has personnel from its senior management, including the chief financial officer, on LTFH’s board. L&T also has representation in some of the LTFS group’s key committees, such as asset-liability, risk management and credit committees. The group also benefits from the synergies and expertise of L&T, especially in infrastructure and real estate lending. The shared name also supports the liabilities of the LTFS group.