Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*Results Down, Credibility Continues To Decrease: L&amp;T Finance Holdings (LTFH.IN) [LTFH] reported FY 1Q22 bottom-line results of 1.8 bn, declining INR 890 mn (33.3%) linked quarter. Results were weaker across the board;  and  *Accelerating Negative Credit Delta: Inclusive of NCOs of INR 8.5 bn or 3.62% annualized total loans, we note that net new NPLs skyrocketed INR 12.0 bn or increasing an eye popping 106.7% on an annualized basis during the period. By our calculation, if the large blip in credit continues, LTFH  management ought to think about adding another INR 69 bn plus to the reserve. A hit this large represents over seven years of PBT or 6.3x average equity.

*Results Down, Credibility Continues To Decrease: L&amp;T Finance Holdings (LTFH.IN) [LTFH] reported FY 1Q22 bottom-line results of 1.8 bn, declining INR 890 mn (33.3%) linked quarter. Results were weaker across the board;  and  *Accelerating Negative Credit Delta: Inclusive of NCOs of INR 8.5 bn or 3.62% annualized total loans, we note that net new NPLs skyrocketed INR 12.0 bn or increasing an eye popping 106.7% on an annualized basis during the period. By our calculation, if the large blip in credit continues, LTFH  management ought to think about adding another INR 69 bn plus to the reserve. A hit this large represents over seven years of PBT or 6.3x average equity.  

L&T Finance Holdings – Struggling To Survive

*NIM Driven Bottom-line: L&amp;T Finance Holdings (LTFH.IN) [LTFH] reported FY 3Q21 operating results of INR 2.9 bn, increasing INR 260 mn (9.8%) linked quarter. Much of LTFH’s strength during the quarter was attributed to net interest income growth of INR 2.1 bn (15.8%) associated with improving cost of funds (down 72 bp linked quarter) on liquidity improvement.*Credit Risk Challenges: While LTFH would like to have the investment community believe that it has turned the corner with credit, that notion is patently false. Inclusive of INR 12.8 mn in NCOs, we calculate a continued acceleration of net new NPL growth to 101% on an annualized basis – which is troubling. We calculate that reserves need a boost close to INR 80 bn or nearly five years of pre-tax earnings; and   *Banking License May Be Out of Reach: LTFH's Tier-1 ratio was 17.8% at FY 3Q21. However, if our reserve shortfall analysis is correct, LTFH’s stated Tier 1 capital ratio will be quite challenged, leaving it short of the Reserve Bank of India’s (RBI) plan for larger NBFCs to become banks.

*NIM Driven Bottom-line: L&amp;T Finance Holdings (LTFH.IN) [LTFH] reported FY 3Q21 operating results of INR 2.9 bn, increasing INR 260 mn (9.8%) linked quarter. Much of LTFH’s strength during the quarter was attributed to net interest income growth of INR 2.1 bn (15.8%) associated with improving cost of funds (down 72 bp linked quarter) on liquidity improvement.*Credit Risk Challenges: While LTFH would like to have the investment community believe that it has turned the corner with credit, that notion is patently false. Inclusive of INR 12.8 mn in NCOs, we calculate a continued acceleration of net new NPL growth to 101% on an annualized basis – which is troubling. We calculate that reserves need a boost close to INR 80 bn or nearly five years of pre-tax earnings; and   *Banking License May Be Out of Reach: LTFH's Tier-1 ratio was 17.8% at FY 3Q21. However, if our reserve shortfall analysis is correct, LTFH’s stated Tier 1 capital ratio will be quite challenged, leaving it short of the Reserve Bank of India’s (RBI) plan for larger NBFCs to become banks.

L&T Finance Holdings – Credit Risk Jeopardizes Bank License

APAC IPOs & Placements

Zhen Zhou, Toh

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

Equity Capital Markets

IndoStar Capital Finance / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/27025" target="_blank" data-smartkarma-citation="entities:27025:1">IndoStar Capital Finance Ltd (0607155D IN)</a> is looking to raise about US$275m in its upcoming IPO and proceeds will be used to increase capital base to meet future capital requirements.In this insight, we will examine the company's past performance, analyze the corporate and SME lending industry in which the company is currently operating in, and compare it to other listed NBFC peers. Last, but not least, we will also run the deal through our ECM framework.

IndoStar Capital Finance Ltd (0607155D IN) is looking to raise about US$275m in its upcoming IPO and proceeds will be used to increase capital base to meet future capital requirements.In this insight, we will examine the company's past performance, analyze the corporate and SME lending industry in which the company is currently operating in, and compare it to other listed NBFC peers. Last, but not least, we will also run the deal through our ECM framework.

IndoStar Capital Finance IPO Review - Loans and Advances Growth Stalled in 1H 2018

India

L&T Finance is an Indian non-banking financial company providing a diverse range of financial products and services to rural and urban customers. Its portfolio includes personal loans, two-wheeler loans, home loans, rural business loans, farm loans, and SME loans, alongside bancassurance products such as life, health, and general insurance. L&T Finance is headquartered in Mumbai, Maharashtra, India, and was founded in 2008.

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L&T Finance (LTF IN)

L&T Finance Holdings – Struggling To Survive

L&T Finance Holdings: LTFH reported FY 1Q22 bottom-line declined 33.3% QOQ. Results were weak across the board. LTFH's reserve is short INR 69 bn...

Thomas J. Monaco

L&T Finance Holdings – Credit Risk Jeopardizes Bank License

L&T FINANCE: LTFH reported a FY 3Q21 result increase of 9.8% linked quarter. Continued acceleration of net new NPL growth and a reserve shortfall...

Thomas J. Monaco

IndoStar Capital Finance IPO Review - Loans and Advances Growth Stalled in 1H 2018

IndoStar Capital Finance Ltd (0607155D IN) is looking to raise about US$275m in its upcoming IPO and proceeds will be used to increase capital base...

Zhen Zhou, Toh

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