L&T Finance on track to build retail focused loan book with improved asset quality
Finance has lost 16% on bourses over the past three months amid rising regulatory scrutiny over the micro finance and unsecured consumer finance segments. While the company’s 26% loan book is comprised of microfinance segment, its exposure to highly leveraged customers in this category is just under 5%. In addition, the lender continued to grow loan book in the September quarter while retaining asset quality and interest margin, and improving return ratios. Analysts have a buy call on the stock given the company’s focus on the retail segment, initiative to improve asset quality and an attractive valuation.
L&T Finance is a pan-India lender with presence across 20 states and two union territories through 209 branches and 1,934 micro finance meeting centres. Its loan book grew by 18% year-on-year to Rs 93,015 crore at the end of September 2024. Of this, retail finance including farm equipment, rural business, urban and small and medium enterprises (SME) finance formed Rs 88,975 crore.
A conscious effort to make the loan book retail oriented has helped in improving the company’s margin profile over the past two years. Retail loans formed 96% of the loan book at the end of September 2024 compared with 58% at the end of September 2022. Net interest margin expanded to 8.9% from 6.9% during the period, reflecting higher profitability. In addition, the credit cost remained in a range of 2.2-2.6% implying a tight control over asset quality.
On the microfinance front, the company maintains a tight control on the selection
