L&T Finance Holdings

L&T Finance holdings reported a decent set of numbers for the quarter ending June 30, 2019. Net profit of the company rose 1.93 per cent to Rs 548.79 crore during the period as against Rs 538.38 crore during the previous quarter ended June 2018. It is important to note that the marginal rise in net profits came despite bearish sentiments in the NBFC space, due to a severe liquidity crunch.

Total income, saw a very healthy rise and was placed at Rs 3,689.50 crore from Rs 3,170.42 crore in the year-ago period.

Most importantly, even as the NBFC space is facing a slowdown, L&T Finance Holdings said it maintained a positive asset liability gap in all buckets up to one year and maintained liquidity of Rs 13,133 crore.

Prudent Policies

The return on equity for the first quarter of 2019-20 was 15.99 per cent, which is extremely healthy. In the first quarter the company has focused on new areas, that is building its SME business loans and consumer loans. L&T Finance Holdings is already in compliance with RBI's draft guidelines on Liquidity Risk Management Framework.

In fact, the company has a AAA rating, thanks also to a very strong pedigree. LTFH has principal outstanding investment exposure of Rs.525 Cr to one housing finance company, with interest accrued of Rs 42 crores. Considering the recent market development with the Housing Finance Company, LTFH has taken a conservative and commercially prudent view to take mark down of 50% (Rs. 284 Cr) on the total exposure of Rs 567 Crores.

Solid on fundamentals

The stock of L&T Finance Holdings is trading at a near 52-week low of Rs 108. Given that it has a strong pedigree, and a solid rating, the stock will be discounted at higher levels going ahead. In fact, we anticipate the company will report an EPS of around Rs 12 for the current year. This means the stock is discounted only 9 times its one year forward earnings.

The stock is also available at a price to book of just 1.53 times, which is not bad at all. As and when the economy gathers steam and there is a better offtake of credit, be rest assured that we would see significant gains in the stock of L&T Finance Holdings.

In fact, the shares have fallen from levels of Rs 189 to the current levels of Rs 108, which makes it extremely attractive to buy for those with a long term view.

Disclaimer

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