L&T Finance Holdings (LTFH), a leading, well-diversified Non-Banking Financial Company (NBFC)announced the financial results for the quarter ended June 30, 2020.It isamongst the leading financiers across its focused businesses today and continues to leverage its strengths, built over the years,for building a stable and sustainable organization.
The company remained resilient in Q1FY21, enduring the challenges posed by COVID-19,by maintainingenhanced levels of liquidity, higher focus on restoring collection rhythm including digital modes of collection, and re-initiating disbursements with tightened credit norms. The company also prudently increased provisions to safeguard the balance sheet against uncertainties of the external environment.With roll out of moratorium 2.0, customer communication and engagement remained the key priority.
LTFH saw significant pick-up in collections and disbursements in June, thus highlighting the business robustness acrossthe lending platforms. Businesses started returning to normalcy in the third month of the quarter and the company placed incremental focus on preserving asset quality, strengthening the balance sheet and further building on the business strengths.
- Moratorium: LTFH followed the RBI’s circulars of granting moratorium to customers and offered the option to all its customers. With the opening up and resumption of on-field collection, the team worked with customers to educate thebenefits of timely payments. Consequently, the percentage of borrowers opting for moratorium drastically came down in Q1FY21 as against Q4FY20.
- Considerable reduction in portfolio under moratorium for retail productsfrom 79%in March-20 to 44% in June -20
- The overall moratorium for Infrastructure finance, IDFand Real Estate borrowersremained close to 40%, as majority of the Infrastructure portfolio is operational and has a ‘must run’ status.In addition, for projects under moratorium, the company has ensured that adequate liquidly is maintained in borrower’s DSRA / TRA accounts.
- Collections:LTFH placed higher focus on collection while educating the customers about the impact of moratorium.It’s inherent strengths in data analytics were utilized to model propensity to pay and aid field collection efforts. On-ground collections started in all field locations except containment zones, with simultaneous push on digital collections and strengthening of collection infrastructure.
- Reduction in debtors by Rs.1,306 Cr and GS3 by Rs. 98 Cr on the back of improved ‘on due date’ collections primarily led by farm portfolio
- Consistent month on month increase in collection volumes, with retail collections till 14th July about 15%higher than similar period in June’20.
- Month on month increase in collections from wholesale portfolio, with toll collections in June reaching 80% and escrow collections in Real estate reaching 33% of pre-Covid levels.
- Increased push towards collections from digital modes including payment wallets. First time digital collections for our Microloans portfolio
- Disbursements:The Companyfocused on increasing reach and gradual ramping up of business:
- Retail businesses have seen animproved momentum on month on month basis
- In wholesale, disbursements have been limited to tranches with focus towards completing existing projects
- Positive sentiments in rural India with timely onset of monsoon and above normal reservoir storage
- Financed over 10,000 Farm Equipments in June (19% YoY increase)
- Retail disbursements expected to accelerate in Q2F20, Infrastructure and Real estate disbursements will depend upon the growth in the sector
- Liquidity:LTFH is comfortably placed with adequate liquidity even after factoring the effect of moratorium and difficult conditions in the debt market. It’s prudent ALM framework and well-diversified liability mix helped it navigate the market situation:
- Maintained positive liquidity gaps in all buckets up to 1 year, enabling us to tide over liquidity challenges
- Enhanced liquidity of Rs. 16,669 Crincludingliquid assets of Rs. 9,082Cr, undrawn bank lines of Rs. 5,587 Cr and back up line of Rs. 2,000 Cr from L&T Ltd.
- Received the first tranche of $ 50 million of the total $ 100 million ECB loan from Asian Infrastructure Investment Bank (AIIB). This development marks AIIB’s first loan to a non-banking financial company (NBFC) in India
- Strong Balance Sheet: The Gross Stage 3 assets of the company stood at 5.24% of its book, showing a reduction of 48 bps on YoY basis. The company also strengthened the PCR on stage 3 assets from 59% in Q4FY20 to 69% in Q1FY21.