The net profit for the lending business surged 58% to Rs 690 crore in Q1FY2020, driven by 31% jump in rural business net profit to Rs 252 crore. Housing Finance business net profit moved up 25% to Rs 208 crore, while the infrastructure finance net profit also gained 199% to Rs 230 crore. However, the losses in the defocused business surged to Rs 174 crore in Q1FY2020.

In order to concentrate better on businesses where the company has strong position, the company has deemphasized Structured Finance and DCM book, where it is a marginal player, and made them part of defocused book. Thus, the defocused loan book of the company jumped to Rs 9404 crore end June 2019 from Rs 848 crore end March 2019, but declined from Rs 13043 crore end June 2018.

The consolidated income from operations of the company increased 16% to Rs 3689.50 crore for the quarter ended June 2019, as interest income moved up 16% to Rs 3594.54 crore and other income also increased 48% to Rs 94.96 crore for quarter ended June 2019.

Interest expenses increased 27% to Rs 1922.94 crore. Net Interest Income rose 5% to Rs 1671.60 crore. Operating expenses declined 13% to Rs 427.73 crore, allowing the operating profits to improve 15% at Rs 1338.83 crore. The cost-to-income ratio declined to 24.2% in Q1FY2020 from 29.7% in Q1FY2019.

Depreciation jumped 35% to Rs 15.77 crore, while provisions galloped 37% to Rs 580.43 crore. Profit before tax rose 2% yoy basis at Rs 742.63 crore for quarter ended June 2019. Effective tax rate was flat at 26.0% in quarter ended June 2019. Net Profit of the company, after share in profit of associates and non-controlling interest, moved up 2% to Rs 548.79 crore for quarter ended June 2019.

As per the latest resolution plan submitted by IL&FS management, 5 out of 6 SPVs amounting to Rs 1696 crore out of Rs 1816 crore will now be ‘Green'. Consequently, interest income of Rs 84 crore that was deferred in Q4FY19 is now being recognized.

Considering the recent developments with a Housing Finance Company, LTFH has taken conservative and commercially prudent view to mark down 50% (Rs 284 crore) of the total exposure (including principal and accrued interest).

Business performance

Loans and Advances grew 16% to Rs 99904 crore at end June 2019 as compared to Rs 86321 crore at end June 2018. Loans & Advances in the focused businesses moved up 24% to Rs 90500 crore at end June 2019 compared with Rs 73278 crore at end June 2018. In the de-emphasized portfolio, the loans & advances dipped 28% to Rs 9404 crore end June 2019.

The company has posted 36% decline in loan disbursements to Rs 9608 crore in Q1FY2020. The disbursements in the focused businesses fell 3%, as the disbursements of the infrastructure finance segment declined 3% to Rs 3252 crore in Q1FY2020. The rural business disbursements also fell 6% to Rs 4232 crore and housing finance business dipped 14% to Rs 2124 crore in Q1FY2020.

In the Investment Management business, Average Assets under Management (AAUM) has increased 3 to Rs 73497 crore in Q1FY20 from Rs 71118 crore in Q1FY19.

In the Wealth Management business, Assets under Service (AUS) has increased 36% to Rs 25589 crore in Q1FY20 from Rs 18866 crore in Q1FY19.

Asset Quality

Gross Stage 3 assets of the company have declined to 5.72% end June 2019 from 5.90% a quarter ago and 7.93% a year ago. Net State 3 assets rose marginally to 2.48% from 2.40% a quarter ago, while declined from 3.17% a year ago. The provision coverage ratio eased to 58% from 62% a year ago.

Rural business: Rural Business net profit has increased 31% to Rs 252 crore in Q1FY2020, driven by NIM rising 43% to Rs 726 crore, while Fee Income also surged 47% to Rs 109 crore. The operating expenses moved up 88% to Rs 258 crore, while credit cost moved up 20% to Rs 223 crore in Q1FY2020. The net interest margins of the rural business were healthy at 11.32% in Q1FY2020 compared with 11.28% in Q4FY2018.

The rural business loan book jumped 35% to Rs 25844 crore end June 2019. Within the rural finance book, the microfinance loan book moved up 37% to Rs 12524 crore, farm equipment 20% to Rs 7463 crore and two wheeler 55% to Rs 5857 crore end June 2019.

The company has exhibited 6% decline in rural business disbursements to Rs 4232 crore in Q1FY2020. The two wheelers disbursements increased 14% to Rs 1090 crore, but the disbursement in the farm equipment segment declined 4% to Rs 874 crore and microfinance disbursements dipped 13% to Rs 2268 crore in Q1FY2020.

Gross Stage 3 assets of rural business have notched down to 3.42% and net stage 3 assets declined to 1.26% end June 2019. The provision coverage ratio improved 64% end June 2019.

Housing Finance business: The net profit of housing finance business jumped 25% to Rs 208 crore in Q1FY2020. The Net Interest Income jumped 35% to Rs 344 crore, while fee income declined 19% to Rs 62 crore in housing finance business. The credit cost declined 12% to Rs 58 crore in Q1FY2020.

The disbursement in the housing finance business dipped 14% to Rs 2,124 crore, as real estate finance disbursements fell 19% to Rs 1275 crore and LAP dipped 36% to Rs 188 crore in Q1FY2020. The home loan disbursements increased 12% to Rs 661 crore.

The housing finance loan book jumped 28% to Rs 26033 crore end June 2019 over June 2018. The real estate finance loan book moved up 35% to Rs 15201 crore and home loan book increased 35% to Rs 6615 crore and LAP rose 1% to Rs 4217 crore end June 2019.

Gross stage 3 assets of housing finance business have eased marginally to 0.82% end June 2019 from 0.83% a quarter ago. The provision coverage ratio increased to 31% end June 2019.

Infrastructure finance business: The net profit of infrastructure finance business increased 199% to Rs 230 crore in Q1FY2020. The Net Interest Income increased 62% to Rs 272 crore, while fee income moved declined 13% to Rs 111 crore in infrastructure finance business. The credit cost dipped 97% to Rs 4 crore in Q1FY2020.

The disbursement in the wholesale finance declined 3% to Rs 3,252 crore, as infrastructure finance disbursements rose 4% to Rs 3252 crore and IDF disbursements were nil in Q1FY2020.

The focused infrastructure finance loan book increased 14% to Rs 38622 crore end June 2019 over June 2018. The infrastructure finance loan book moved up 14% to Rs 30315 crore and IDF 14% to Rs 8307 crore.

The gross stage 3 assets of wholesale finance business eased to 9.68% end June 2019 from 10.45% a quarter ago. The provision coverage ratio declined to 55% end June 2019.

Book value per share of the company stood at Rs 70.0 per share at end June 2019. Adjusted book value (net of NNPA) per share of the company stood at Rs 58.5 per share at end June 2019.

Annual Financial Performance

The consolidated income from operations increased 31% to Rs 11637.90 crore for the year ended March 2019, while other income of the company moved up 19% to Rs 1663.62 crore. The total income increased 30% to Rs 13301.52 crore for FY2019. Interest expenses increased 26% to Rs 6860.03 crore. Operating expenses increased 40% to Rs 1871.84 crore, allowing the operating profits to improve 31% at Rs 4569.65 crore. The cost-to-income ratio increased to 29.1% in FY19 from 27.7% in FY18. Depreciation declined 4% to Rs 49.62 crore, while provisions fell 26% to Rs 1468.05 crore. Profit before tax surged 111% yoy basis at Rs 3051.98 crore. Effective tax rate increased to 27% in FY2019 from 11.6% in FY2018. Net Profit of the company, after share in profit of associates and non-controlling interest, improved 77% to Rs 2226.30 crore for FY2019.