CRISIL IER Independent Equity Research

RESEARCH
CRISIL IER Independent Equity Research
L&T Finance
Holdings Ltd
Initiating Coverage
Enhancing investment decisions
Explanation of CRISIL Fundamental and Valuation (CFV) matrix

The CFV Matrix (CRISIL Fundamental and Valuation Matrix) addresses the two important analysis of an investment making process Analysis
of Fundamentals (addressed through Fundamental Grade) and Analysis of Returns (Valuation Grade) The fundamental grade is assigned on a
five-point scale from grade 5 (indicating Excellent fundamentals) to grade 1 (Poor fundamentals) The valuation grade is assigned on a fivepoint scale from grade 5 (indicating strong upside from the current market price (CMP)) to grade 1 (strong downside from the CMP).
CRISIL
Fundamental Grade
Assessment
CRISIL
Valuation Grade
Assessment
5/5
Excellent fundamentals
5/5
Strong upside (>25% from CMP)
4/5
Superior fundamentals
4/5
Upside (10-25% from CMP)
3/5
Good fundamentals
3/5
Align (+-10% from CMP)
2/5
Moderate fundamentals
2/5
Downside (negative 10-25% from CMP)
1/5
Poor fundamentals
1/5
Strong downside (<-25% from CMP)
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Last updated: May, 2013
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the grading recommendation of the company.
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purpose.
L&T Finance Holdings Ltd
RESEARCH
A well diversified lending NBFC
Valuation Grade
2/5 (CMP has downside)
Industry
Diversified finance
February 26, 2014

Fair Value
CMP
L&T Finance Holdings Ltd (LTFH) is a well diversified NBFC with AUM of 378 bn across two
key segments retail & corporate lending and infrastructure lending. The company also
provides mutual fund and wealth management services. The infra lending segment is well
positioned against peers with a potential to build on other verticals. The segment faces shortterm challenges in growth due to pending issues in the infrastructure sector; we expect an
improvement in FY15. The retail & corporate lending segment has a diversified portfolio
which is expected to help it to grow even in the present subdued macro-environment. We
initiate coverage with a fundamental grade of 4/5 indicating superior fundamentals.
CFV MATRIX
Excellent
Fundamentals
5
Derives competitive advantage from L&T parentage

LTFH derives strong competitive advantage from its parentage, primarily in terms of a) strong
backing from parent; b) leveraging extensive domain experience of L&T to underwrite and
manage risks of loans in infrastructure and construction equipment (44% and 7% of AUM);
and c) a strong brand equity that helps to raise debt and equity from diverse investors.
Retail & corporate lending: Diversified portfolio to sustain growth; weak positioning
We expect the diversified nature of the retail & corporate lending portfolio (AUM of 196 bn)
to help growth despite the present subdued macro-environment. The key sectors in the
portfolio - Corporate (~40% of AUM), Rural (~24%), CE/CV (~22%) and Retail (~15%), are
relatively less correlated, which is an advantage. The company is also focussing on high yield
products with entry into two-wheeler financing. However, the return profile is weaker than that
of peers primarily because of other lower yield products and higher credit costs.
3
2
1
Poor
Fundamentals
Valuation Grade
KEY STOCK STATISTICS

NIFTY/SENSEX
NSE/BSE ticker
Face value ( per share)
Shares outstanding (mn)
Market cap ( bn)/(US$ bn)
52-week range ()/(H/L)
Beta
Free float (%)
Avg daily volumes (30-days)
Avg daily value (30-days) ( mn)
6,239/20,987
L&TFH / LNTFH
10
1717
134 / 2
87/53
0.9
17%
2,861,204
221
SHAREHOLDING PATTERN
100%
90%
80%
13.9%
0.9%
2.6%
13.8%
0.9%
2.8%
13.9%
0.8%
2.8%
14.6%
0.9%
3.0%
82.5%
82.5%
82.5%
81.5%
Mar-13
June-13
70%
Further levers - banking, IDF and private equity; delay in recovery of macro
environment is a key risk
We expect the bank possibility, IDF and nascent private equity operations to be further
levers. Longer than expected delay in improvement of investment climate is a key risk.
60%
Valuations: Fair value of 65 per share

We have valued LTFH by the sum-of-the-parts method. Our fair value is 65 per share. At the
current market price of 76, our valuation grade is 2/5.
10%
50%
40%
30%
20%
0%
Promoter
Sep-13
FII
Dec-13
DII
Others
PERFORMANCE VIS--VIS MARKET
KEY FORECAST
( mn)
Total operating income
Pre-provision profit
Adjusted net profit
Adj EPS ()
Adj. BV ( per share)
P/E (x)
P/ABV (x)
RoE (%)
RoA (%)
Net NPA (%)
CAR (calculated) (%)
Strong
Downside
Infra lending: Well positioned with potential upside; short-term challenges to growth
The infra lending subsidiary, L&T Infrastructure Finance (LTI) with IFC status, is well
positioned to tap opportunities in the infrastructure sector leveraging parent L&Ts expertise.
IFC status helps it to compete against banks. Also, compared to IDFC Ltd, its closest peer,
LTI is well positioned. Its focus on developing other verticals such as infra project advisory /
syndication etc is expected to narrow the gap with IDFC. The infrastructure sector continues
to face short term challenges due to delays in environmental and forest clearances, weak
profile of state distribution companies, high leverage of companies, etc which have sharply
increased the stress on the loan book. We expect the policy-related bottlenecks to get
resolved over the medium term which would give fillip to the sector; this is likely to boost LTIs
business. Being smaller than peers, we expect the companys infra book to grow faster than
the industry average.
65
76
Strong
Upside
4/5 (Superior fundamentals)
Fundamental Grade
Fundamental Grade
FY12
12,353
8,794
4,548
2.7
25.8
28.7
2.9
12.1
2.0
1.3
18.1
FY13
15,923
10,622
5,125
4.3
33.6
17.9
2.6
10.1
1.6
1.4
20.9
FY14E
22,126
15,001
6,207
3.6
35.0
21.0
2.5
10.9
1.6
1.9
18.1
FY15E
26,203
18,549
9,045
5.3
42.0
14.4
2.2
14.2
1.9
1.8
17.8
FY16E
32,940
23,761
12,503
7.3
51.0
10.4
1.9
17.1
2.1
1.6
17.2
Returns
1-m
8%
3-m
2%
6-m
34%
12-m
-7%
-0.4%
3%
15%
6%
LTFH
CNX 500
ANALYTICAL CONTACT
Mohit Modi (Director)
mohit.modi@crisil.com
Ankit Hakhu
ankit.hakhu@crisil.com
Vishal Rampuria
vishal.rampuria@crisil.com
Client servicing desk

+91 22 3342 3561
clientservicing@crisil.com
Source: Company, CRISIL Research
For detailed initiating coverage report please visit: www.ier.co.in

CRISIL Independent Equity Research reports are also available on Bloomberg (CRI <go>) and Thomson Reuters.
Table 1: L&T Finance Holdings - Business environment

Retail & Corporate lending
Retail
CE/CV
Corporate
Products
Rural product
Personal
Microfinan
Housing Finance
Constr. Eqpt.
Commercial
Supply
Corporate
Capital
offerings
finance (primarily
vehicles finance
ce
(including typical housing (CE) finance
vehicle (CV)
chain
loans
market
tractor finance)
(primarily cars
finance, LAP and Builder
finance
finance
and two-
finance)
products
wheelers)
AUM mix
12%
7%
1%
4%
7%
4%
3%
12%
6%
Year started
2004
2012
2008
2012
Pre-2006
2007
Pre-2006
Pre-2006
2008
Offering
L&T Finance
Family credit
LTF
L&T Housing Finance
LTF
LTF
LTF
LTF / L&T
LTF
Subsidiary
(LTF)
(FC)
AUM (FY11)
16
26
16
27
10
38
17
30
19
11
47
17
56
54
30
41
23
17
70
27
54%
NA
(15)%
NA
8%
11%
78%
31%
33%
14%
46%
48%
110%
11%
7%
15%
14%
17%
60%-90%
Cars: 70%-75%
NA
LAP: 60%
75%-90%
80%-95%
NA
NA
NA
12%-15%
12%-15%
13%-14%
12%-14%
11%-16%
SCBs, Various NBFCs
(as of 9MFY14)
(formerly Indo-Pacific
Fincorp
HFC)
( bn)
AUM (FY13)
( bn)
AUM (FY16E)
( bn)
AUM growth
CAGR FY11-13
AUM growth
CAGR FY13-16
Typical LTVs
Two Wheeler:
Home Loans: 50%
80%-100%
Typical yields
15%-20%
Cars: 12%-16%
Builder Loans: 25%

24%
Two Wheeler:
Home Loans: 11%-12%
20%-21%
Competitors
Builder Loans: 14%-16%
SCBs, Mahindra
SCBs, Mahindra
SKS,
SCBs, HDFC, LIC
SCBs,
SCBs, Chola,
Finance
Finance, Bajaj
Spandana,
Housing Finance, ICICI
Magma
Shriram Transport,
Auto Finance
Share
Home finance etc
LAP: 13%-14%
Fincorp,
Shriram City,
Microfin,
SREI Infra,
Sundaram, Tata
Bhandan
Shriram
Cap, Magma,
Transport
Mahindra Finance

RESEARCH
Table 1: L&T Finance Holdings - Business environment (continued)

Infrastructure lending
Products
Thermal
Renewable
Power Corporate
offerings
power
power
loans + T&D
6%
8%
6%
AUM mix (as of

9MFY14)
Year started
Offering
subsidiary
AUM (FY11)
( bn)
AUM (FY13)
( bn)
AUM (FY16E)
( bn)
AUM growth
CAGR FY11-13
AUM growth
CAGR FY13-16
Investment Management
Transportation (Roads
/ Bridges / Highways/
Telecom
Others
5%
11%
Ports)
8%
Mutual Fund and nascent wealth management

portfolio
NA
2010 acq. Of DBS Chola AMC
2007
2012 acq. Of Fidelity Indias AMC

L&T Investment Management;
Primarily L&T Infra (LTI); Some corporate loans are offered through L&T Fincorp
Wealth management offered through L&T Capital

Markets
18
10
23
21
31
19
23
19
35
Mutual Fund -114

Wealth Management 20
Mutual Fund 256
296
76%
33
Wealth Management - 70
88%
46%
15%
33%
24%
Mutual Fund 85%

Mutual Fund 31%
26%
Wealth Management 10%
Typical LTVs
NA
Typical yields
13%-14%
Competitors
Banks, IDFC, PFC, REC, IIFCL etc
NA
13%-14%
13%-14%
13%-14%
12%-13%
13%-14%
NA
Fragmented with 44 players but top 5 players have
more than 50% of market share. Top 5 players are
- HDFC, Reliance, ICICI Pru, Birla Sunlife, UTI
Grading Rationale
Net worth split
A well diversified NBFC; derives strong support from parent
Others
14%
Promoted by L&T, L&T Finance Holdings Ltd (LTFH) is a well diversified lending company
with a total AUM of 378 bn (as of 9MFY14). The lending business is diversified across two
Retail &
corp.
finance
43%
Investment
mgmt.
9%
main segments - retail & corporate lending (52% of AUM, 55% of total income), and
infrastructure lending (44% of AUM, 38% of total income). The company also provides
investment management services such as mutual fund and wealth management, but these
services comprise a small portion of its overall business (1.7% of total income). The entire
Infra
finance
34%
business is operated through three main subsidiaries: L&T Finance (LTF) - retail & corporate
finance products, L&T Infrastructure Finance (LTI), and L&T Investment Management.
Source: CRISIL Research
Figure 1: Lending business of 378 bn (as of 9MFY14) is well diversified across ~14 asset classes
Housing
Finance
4%
Infrastructure
lending
44%
Others
24%
Therm al
Power
15%
Renewable
Power
18%
Telecom
11%
Transp.
19%
Power
Corp + T&D
13%
Retail &
Corporate
52%
Personal
vehicle
finance
13%
Capital
Market
Products
11%
Corporate
loans and
leases
24%
Derives strong advantage from L&T parentage

LTFH derives significant competitive advantage over peers because of its parentage. It not
only enjoys strong backing from parent but is also able to leverage L&Ts extensive domain
experience (for its loan underwriting business) and strong brand equity (that helps it to raise
funds). L&T, a professionally-run company with decades of experience, has a presence in
almost all infrastructure sectors. L&T holds a controlling stake of 81.5% (as on the date of
writing of the report) in LTFH.
Const. Equipt.
Finance
14%
Supply
Chain
Finance
5%
Microfinance
2%
Transp. Eqpt.
Finance
8%
Rural
Products
Finance
23%

RESEARCH
Senior management team drawn from L&T

The companys senior management consisting of Mr. Y M Deosthalee and Mr. N Sivaraman
have been drawn from L&T (but on the payrolls of LTFH). The team has more than two
decades of experience in the financial services sector along with established track record in
starting, and growing new businesses. Mr. Y. M. Deosthalee, former CFO of L&T is the
chairman and managing director of LTFH and Mr. N. Sivaraman, former senior vice president,
Financial Services, L&T is the president and whole-time director of the company.
Leveraging the domain experience of L&T

The company derives synergies by leveraging L&Ts industry knowledge in sectors such as
infrastructure (which forms about 44% of LTFHs lending portfolio) and construction equipment
(~7.3% of the lending portfolio). This knowledge of the parent provides better understanding of
7.5 bn of preference equity was raised

from diverse investors
the risks in the infra lending segment which, in turn, helps in prudent underwriting and pricing
ICICI
Securities
Primary
Dealership
Limited
11%
Azim H.
Premji
12%
of loan products.
Strong brand equity of L&T helps to raise resources

L&T is a strong and a respected brand in the infrastructure space. The parents brand equity
Azim Premji
Trust
8%
thus helps LTFH to raise resources from diverse investors to meet the capital requirement of
its subsidiaries (and also to keep CAR under control). E.g. the company raised 7,500 mn of
preference capital, at 8.75% yield, in FY13 and 12,450 mn of equity capital through an IPO in
Others
69%
FY12 (which was subscribed 5.2x), pre-IPO placement and retail NCD issues as well as infra
bonds on the debt side. Moreover, the company has a strong credit rating of AA+ (from CARE
and ICRA) for its debt instruments, largely due to parent, as one of the factors. Its
subsidiaries, LTF and LTI, also enjoy a relatively strong credit rating of AA+. This helps the
subsidiaries to keep their borrowing costs competitive.
Relatively stronger growth due to aggressive launch of new products

The company, in line with its diversification strategy, has aggressively launched new products
Relatively stronger growth in AUM

AUM FY10-FY13 growth CAGR
IDFC
as well as acquired companies to enter new businesses. This has resulted in high growth in its
Bajaj Finance
lending AUM AUM CAGR of 43% over FY10-13 which is better than the growth in AUM of
Shriram Transport Finance
its peers.
30%
Shriram City Union
45%
56%
20%
Mahindra Finance
33%
34%
Cholamandalam Finance
Since 2006, the company has been aggressively launching new products. By 2006, the
company was primarily into vendor financing, construction equipment (CE) financing and
corporate loans. In 2007, it started infrastructure lending (leveraging parent L&Ts experience
in this field) and commercial vehicle (CV) financing. In 2008, it entered into microfinance and
27%
Magma Fincorp
43%
LTFH
0%
10% 20% 30% 40% 50% 60%
capital market products businesses. In 2012, the company followed the inorganic route to
acquire Indo Pacific Housing Finance - to enter into housing finance, and Family Credit - to
enter into two-wheeler financing. Consequently, the infra and retail & corporate loan book of
the company have grown at 51% CAGR and 38% CAGR, respectively, resulting in faster
growth than peers.
Acquisition of CitiFinancials portfolio provides scale, reach and higher share

of high yield LAP portfolio to housing finance business
In Q3FY14, LTFH acquired CitiFinancials housing finance portfolio of ~7 bn to achieve scale
in housing finance. The AUMs as a result have increased from 3bn in FY13 to 15.7bn as of
Q3FY14. Also, the acquisition expanded the ability to service customers to 68 cities as of
Q3FY14 (from 16 cities pre acquisition). Moreover, the acquisition provided access to higher
yielding LAP portfolio (~76% of the acquired portfolio) which we expect to help improve the
yield of the housing finance business.
The distribution network has been gradually increased from around 60 branches in 2006 to
~150 as of 9MFY14. The company also has an extensive distribution reach in terms of having
700+ points of presence across India as of 9MFY14. It has diversified geographically by
increasing its presence in all states except J&K and with a limited presence in the North East.
Figure 2: Strong growth in lending AUM

( bn)
55.0%
400
56.6%
350
60%
45.1%
50%
Relatively stronger AUM growth at 43%
40%
CAGR over FY10-13 - better than peers -
300
250
29.8%
200
26.5%
150
because of aggressive launch of new

30%
20%
100
10%
50
8.5
73
113
177
257
333
378
FY06
FY09
FY10
FY11
FY12
FY13
9MFY14
0%
Consolidated AUM
yoy growth %

On the investment management side, the company entered the mutual fund business by
acquiring DBS Cholamandalam in 2010 and then acquired Fidelitys AMC business in 2012.
Consequently, mutual fund AUMs have increased from 26 bn in FY10 to 170 bn as of
9MFY14.
Infra lending short term challenges to growth and asset

quality; well positioned against peers with potential upside
Going forward, growth in disbursement in the infrastructure lending segment is largely hinged
on the timely resolution of bottlenecks that are holding back investments in this sector - such
as financial restructuring of state distribution companies, signing of FSAs for power producers,
delays in environmental and forest clearances, and land acquisition. We expect the policy
inertia issues to be ironed out in the medium to long term. If the political situation at the center
improves in FY15, we expect the economy to come back to the growth path and consequently
see an improvement in the investment cycle. Turnaround in the economy is critical for growth
and remains a monitorable.
products

RESEARCH
Table 2: Status on key issues and challenges affecting investments

Sectors
Key issues
Power
Poor financial health of state distribution companies lowered power offtake:
Governments of eight states (including UP, TN, Bihar, Kerala, Himachal Pradesh and Rajasthan) have agreed to restructuring
of SEBs which would improve the SEBs financial health and as a result they would be able to increase power offtake.
However, there is uncertainty on the completion of such a restructuring
Over the past two years, most distribution companies have hiked tariffs, which is also expected to improve their financial
health
Delay in financial closures of projects due to limited fuel availability:
Coal India (CIL) has signed ~145 fuel supply agreement (FSAs), as of 1HFY14, against a target of ~170 FSAs. Signing of
FSAs would help the power producers to secure financial closures. However, even after signing FSAs, there is a challenge in
the production ramp up of CIL, which may lead to power producers running at sub-optimal levels
Roads
Stressed balance sheet, low traffic stretches
As of FY13, average gearing for large road developers was ~3.0x, rendering limited room to bid for new projects due to
stressed balance sheet
Delays in land acquisition and regulatory hurdles
More than 35% of the projects awarded in FY12 are stalled due to delays in environmental and forest clearance
Land acquisition hurdles also impacted timely execution. These regulatory hurdles impacted bidding for new projects in FY13
Project awards have slowed down
Ports
Projects offered in FY13 had low traffic density and limited potential to make good returns; hence low interest
Despite the decision to shift to EPC route, NHAI has not awarded any major projects
Guidelines for determination of tariff for projects at major ports
This was announced in July 2013 and the new guidelines would provide for tariffs to be indexed to inflation, they have also set
out performance standards for port projects to improve accountability and ensure improved quality of service
Expected to increase investment flows into the port sector
Delays in security clearances for port projects
In May 2013, the cabinet committee has directed security agencies to provide faster clearances within the decided time of 12
weeks the Adani project suffered because of such a delay
Airports
Expected to accelerate award of new projects
Public private participation in operation, management and transfer of six airports (Chennai, Lucknow, Kolkata, Guwahati, Jaipur
and Ahmedabad)
o
This is under process Request for quotations for Chennai and Lucknow airports were invited up to mid October, 2013 and
financial bids were likely to be received by mid December, 2013. The other four airports are likely to be taken on the same
pattern shortly.
Status of greenfield airports

o
In-principle approval given for 15 airports but pace remains slow

Provided the short term challenges are weeded out, there is significant opportunity for
XII five year plan estimates a
investment in infrastructure in India as envisaged in the XII five year plan. The XII plan puts
significant investment
the infra investment opportunity at 56 trillion. Assuming only 70% of the target is met (as
opportunity in infrastructure
against ~90% met in the XI plan) and ~50% of this through debt, it implies a total opportunity
of 19 trillion. The adjusted total investment implies a ~10% CAGR over the XI plan.
Table 3: CRISIL Research expects infrastructure investments at 10%-12%

CAGR over FY13-16
Key Infra segment
CRISIL Research's investment growth expectation in sub-sectors
Power
Investments to grow at a CAGR of 5-6% over FY13-FY17 driven by:
16% CAGR in transmission investments primarily because of transmission line additions of around 98,000 circuit
Kilometers (ckm) over FY13-FY17
Roads
4% CAGR in generation investments driven by capacity addition expectation of ~68GW over FY13-17
-2% CAGR in distribution investments primarily because of poor health of state owned distribution utilities
Investments to grow at a CAGR of 10%-12% over FY13-FY17 driven by investments in national highways and state roads.
Private sector participation in national highways is expected to decline to 57% during this period in comparison with the
previous five-year period (67%), considering the anticipated growth in the share of contracts on EPC (Engineering
Procurement Construction) basis
Ports
In the XII five year plan, a total outlay of around 1.8 trillion has been earmarked for port investments (as against 0.2 trillion
investment in the XI plan). Around 86% of the investments are expected to be from the private sector in both major and nonmajor ports
Telecom
Investments to grow at 13% CAGR over FY13-16 driven by network expansion by operators in rural areas, which are
relatively under-penetrated (tele-density of less than 41%, as of September 2013). Additionally, extension of 3G services by
large operators will drive investment growth in the mobile services segment
Airports
Investments to grow at a CAGR of 20% over FY13-17. During 2012-13 to 2016-17, investments will mainly go towards
completion of work at the Mumbai and Bengaluru airports, and development of greenfield airports at Navi Mumbai, Goa,
Pune, Kannur and Nagpur. The modernisation of 35 airports controlled by the Airports Authority of India is also expected to
attract investments over the next five years. Private sector participation is expected at ~70%.
As the companys infra book is smaller compared to peers, we expect it to grow faster than the
industry average. We expect 19% CAGR in disbursement over FY13-16 and a repayment rate
Infra book expected to grow faster

than the industry average
at 20% of the loan book. Consequently, we expect 26% CAGR for AUM over FY13-16.
Figure 4: Expect 26% CAGR for infra lending AUM over

Figure 3: Smaller base vs. peers
( bn)
FY13-16
( bn)
FY13 AUM
1,400
350
1,200
300
75%
70%
60%
250
1,000
80%
45%
200
800
50%
35%
150
600
26%
24%
28%
30%
100
400
20%
50
200
1,274
566
148
PFC
IDFC
LTI
75
109
148
187
231
296
FY11
FY12
FY13
FY14E
FY15E
FY16E
Infra AUM growth
The infra books asset quality has come under pressure over the past few quarters. While the
operational projects (that form 33% of the loan book) are doing fine, the corporate loan book
(that forms 35% of the infra loan book) has come under pressure given the downturn in
economic activity; this has resulted in delayed payments from companies as the latters
10%
0%
Asset quality has come under pressure
working capital requirements have elongated.
40%
yoy growth %

RESEARCH
Figure 5: Infra loan book asset quality under pressure
Figure 6: Infra loan book mix
3.0%
2.4%
2.5%
2.0%
1.8%
1.7%
1.4%
1.5%
1.5%
1.5%
1.0%
1.2%
1.1%
0.5%
0.7%
1.5%
1.3%
1.6%
1.2%
0.9%
0.9%
1.1%
2.4%
1.9%
1.9%
1.4% 1.6%
1.6%
Others
24%
1.5%
Renewable
Power
18%
1.2%
Telecom
11%
NNPA
Q3FY14
Q2FY14
Q1 FY14
Q4FY13
Q3FY13
Q2FY13
Q1FY13
Q4FY12
0.0%
GNPA
Therm al
Power
15%
Transp.
19%
Power
Corp + T&D
13%
Credit Cost
Figure 7: Operational assets % of infra loan book has
Figure 8: Restructured assets % has increased
increased
34%
7.00%
33%
32%
6.00%
31%
5.00%
30%
Restructured assets as a % of infra loan book
4.00%
29%
3.00%
28%
27%
26%
2.00%
30%
28%
33%
32%
1.00%
FY13
Q1 FY14
Q2FY14
Q3FY14
0.00%
25%
Opertional projects
3.05%
3.66%
3.90%
5.26%
6.01%
Q3FY13
Q4FY13
Q1 FY14
Q2FY14
Q3FY14
Given the pressure on asset quality, the company is closely monitoring the stressed assets for
restructuring. As a result, the restructured loan book has increased from 3.05% of the infra
loan book as of Q3FY13 to 6.01% of the infra loan book as of Q3FY14. While the standard
asset provision is 0.4%, the company has 5% provision for the restructured assets. Moreover,
the companys provisioning is conservative vis-a-vis that prescribed by the RBI. The
cumulative provision over RBI norms stood at 1,218 mn in the infra loan book. We expect the
mix of restructured assets to standard assets to further increase in Q4FY14. Consequently,
we have built a higher provision coverage ratio in FY14 and FY15 over FY13.
... but expected to improve in FY15 because of improvement in macroenvironment and cautious approach to lending
We expect improvement in asset quality in FY15 on the back of a) improvement in
infrastructure investment environment; and b) a cautious approach to lending adopted by the
management - providing more weightage to the usual debt protection metrics while lending.
Consequently, we have built in an improvement in asset quality in FY15 and FY16.
Strategy to increase exposure to operational assets and larger ticket

sizes - NIMs to compress
With a cautious approach to lending, the company is gradually building up exposure to
operational assets as well as focussing on quality large-ticket clients which offer relatively low
yields. Consequently, the NIMs have compressed. Going forward, we expect a slight
compression in NIMs driven by the continued focus on building a good quality book and
improvement in opex because of increase in loans ticket size.
IFC and PFI status of infra subsidiary lowers borrowing cost

LTI - the infrastructure lending subsidiary of the company is a notified Public Financial
Institution (PFI) and has an Infrastructure Finance Company (IFC) status, which helps it to
access low cost funds as well as diversify its resource profile.
The IFC status allows LTI to raise more funds of longer tenors and at lower costs. E.g.
the IFC status enables LTI to raise long term debt through infrastructure bonds and have
a higher permissible bank borrowing (up to 20% of the bank's net worth compared to
15% for an NBFC that is not an IFC). It also provides access to low cost external
commercial borrowings (up to 50% of owned funds under the automatic route).
The PFI status allows the company access to cheaper sources of funds (such as from
insurance companies, public trusts and pension funds) with a larger exposure which is
not otherwise available to NBFCs without PFI status. E.g., the issued bonds and certain
other liabilities of PFIs are treated as eligible investments for insurance companies,
provident funds, mutual funds and residuary non-banking companies (RNBCs). Such
exposures on select PFIs also qualify for concessional risk weight of 20% for banks,
financial institutions (FIs), NBFCs and residual non banking companies (RNBCs) under
RBI guidelines.
Apart from lowering borrowing cost, the PFI status also provides powers of SARFAESI Act,
not available to non PFI NBFCs, for recoveries from delinquent customers.
Infra subsidiary is well positioned against banks and moderately

positioned against IDFC; potential upside in terms of other income
In the infra lending space, the peers of LTI include IDFC and banks. LTI is well positioned
against banks due to its better financial performance. However, compared to LTI, IDFC is a
bigger player with 4x more AUM. IDFC also has a higher total operating income to average
AUMs (net of interest cost) vis-a-vis LTI because of greater share of other income IDFCs
other income is 1.7% of its average AUM vis-a-vis LTIs 0.6%. As a result, opex cost per AUM
is also higher for IDFC. The credit costs are comparable. As a result, IDFC has better RoA
than LTI.
10

RESEARCH
Table 4: LTIs financial performance better than banks

Spread
NIM
Opex
RoA
RoE
Figure 9: IDFC has a diversified other income stream

Other
Incom e
2%
GNPAs
LTI
3.0%
4.5%
0.6%
2.7%
16.6%
1.5%
Pvt banks
2.5%
3.0%
2.2%
1.3%
13.4%
2.7%
Principal
Gains
21%
Loan Book
Related fees
21%
Mutual
Fund
20%
Fixed
Income
13%
I-Banking &
Broking
9%
Alternatives
14%
Dupont analysis of LTI vs. infra financing NBFCs

Figure 10: Total income-to-average AUMs
Figure 11: Opex-to-average AUMs
FY13
FY13
LTI
5.1%
LTI
IDFC
6.6%
PFC
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
IDFC
PFC
4.3%
6.0%
7.0%
0.6%
0.9%
0.1%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
*Net of interest costs

Source: Companies, CRISIL Research
Figure 12: Provision & write-offs to average AUM
Figure 13: Return on average AUM
FY13
FY13
LTI
IDFC
PFC
0.0%
LTI
0.6%
0.7%
IDFC
3.5%
PFC
0.1%
0.1%
2.7%
0.2%
0.3%
0.4%
0.5%
0.6%
0.7%
0.0%
3.1%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
11
Figure 14: Leverage
Figure 15: Return on average networth

FY13
FY13
LTI
IDFC
2.0 x
3.0 x
4.0 x
5.0 x
6.0 x
15.1%
PFC
5.9 x
1.0 x
22.5%
IDFC*
4.0 x
PFC
0.0 x
LTI
5.4 x
7.0 x
0.0%
19.2%
5.0%
10.0%
15.0%
20.0%
25.0%
*adjusted for SSKI acquisition

Potential upside in terms of other income

Although, LTI has a lower RoA vis-a-vis IDFC, we see scope for gradual improvement in fee
income/other income (through infra project advisory / syndication etc.). This in turn would
result in an increase in ROA for the infra lending business. We believe the scale up in fee
income advisory and syndication business is possible based on managements strong
experience in assessing risk in the infra segment. We have also gradually built an
improvement in other income in LTI from 0.6% of its average AUMs in FY13 to 0.8% in FY16.
Retail & corporate lending - de-linked nature of the portfolio to

sustain growth; RoA weaker than that of peers but scope to
improve
Exposure to sectors is relatively de-linked
CE/CV
22%
Rural
23%
We expect the diversified nature of the retail & corporate portfolio (with an AUM of 196 bn) to
help the segment to grow despite the present subdued macro-environment. The hit on the
portfolio in terms of growth is expected to be lower than that of peers. The portfolios exposure
Retail
15%
risk is relatively mitigated with exposure to the following sectors corporate (40% of the AUM
including corporate loans, supply chain finance and capital market products), CE/CV (~22% of
the AUM including CE and CV finance), rural (~23% of the AUM primarily tractor finance) and
Corporate
40%
retail (~14% of the AUM including two wheeler finance and car finance and microfinance),
which are less correlated. This entry into new products business / diversification has enabled
the company to grow 23% y-o-y in FY13 even though growth of some segments declined
(such as lending to the CE/CV sector, declined 7%). Strong growth in tractors in the rural
segment (AUM growth of 33% in FY13) compensated for the decline in CV/CE segments.
Short-term growth challenges due to prevailing macro conditions

We expect an overall 8% CAGR in disbursements over FY13-16 in the retail & corporate
segment subject to improvement in the macro situation in most categories.
12

RESEARCH
Table 5: Outlook on key retail and corporate lending segments

Key segment
Loan
book mix
CRISIL Researchs expected

Current market scenario
CRISIL Research outlook on the industry disbursement growth for the

company (FY13-16)
Weak investment climate owing to
muted capital expenditure plans by

corporates
Corporate
40%
Subdued credit confidence -
with tightly structured deals in
CRISILs credit ratio (proportion of
in the near term; flat growth over FY13-
terms of cash flows and
rating upgrades to downgrades) for
16
security
Chances of deterioration in asset
climate FY15 onwards
finance
(primarily
The robust growth is expected to taper

going forward but we still expect a
Rural
as incremental growth due to

gain in market share.
reduced replacement cycles, stable
Currently, the company is in
farm incomes, and increased focus of
due to good monsoon
the second position in the
the government on agriculture through
financing)
tractor lending market, behind
rise in MSPs and agricultural credit, and
Mahindra Finance
rural development
CE sales have declined in excess

of 20% because construction
Construction
equipment
players are experiencing slow
Subdued environment in the near term,
the near term. Improvement is
(15-18 months) with an assumption of
acquisition and government
contingent on improvement in
improvement in macro situation
clearances on projects, and tight
Flat growth over FY13-16;

15%-20% decline expected in
but 7-8% growth over the medium term
growth due to delays in land
14%
10% CAGR expected on the

back of industry growth as well
the next five years on the back of
realisations and higher crop output
tractor
strong 8% CAGR in tractor sales over
Robust growth in tractor sales in

1HFY14 on the back of high crop
24%
Growth is contingent on
improvement in the investment
quality
products
Company is moving cautiously
Subdued investment climate expected
1HFY14 was 0.87x.
A decline or a flat growth

expected
the economic situation.
cash flow situation of infra players
Personal
vehicle
(primarily
13%
Two-wheeler sales have picked up;

up 8% y-o-y in Q2FY14
monsoons.
two-wheeler)
Commercial
vehicle
8%
5-7% growth in FY14 on the back of

improving rural income aided by good
~14% decline expected in
CV sales have declined in excess

of 15% as of November 2013.
expectations of lower industrial growth,
Weak industrial demand,
freight availability and weak transporter
particularly from the manufacturing
sentiment (owing to their constrained
and construction sectors, has
finances)
40% CAGR on a small base
9-11% yoy growth in the long run

disbursements for CVs in FY14 on
hampered growth in the MHCV
8% CAGR with decline

expected in FY14
The growth is contingent on
CRISIL Research expects CV
improvement in the economic
category; the LCV category has
disbursements to grow by ~17% over
situation.
declined because of prolonged
FY13-18 with the likely improvement in
slowdown in consumption demand
the economic situation and healthy

freight traffic demand

With an overall repayment rate expected at 60%-80% of the loan book over FY13-16, we
expect an AUM growth of 18% over FY13-16.
13
Figure 16: Expect 18% CAGR for retail & corporate AUM over FY13-16
( bn)
350
45%
50%
45%
45%
300
40%
250
35%
200
30%
23%
20%
19%
150
25%
20%
14%
15%
100
10%
50
102
148
182
208
247
296
FY11
FY12
FY13
FY14E
FY15E
FY16E
5%
0%
Retail & Corporate AUM growth
yoy growth %
Family Credit acquisition and rural products to increase yields

The acquisition of Family Credit (FC) has provided the company access to the high-yielding (in
the range of 20%-21%) two-wheeler financing segment. Moreover, with the increase in the
share of rural products (primarily tractor lending with yields around 16%) in the overall mix, the
yields of retail and corporate division have increased from 14% as of FY13 to 15.1% as of
Q3FY14. Although we expect tractor sales growth to taper from FY14, the increasing share of
two wheeler financing is likely to result in increase in overall yields.
Table 6: Loan products characteristics

Finance category
Yields (%)
LTV (%)
Tenor (months)
CE
12%-15%
75%-90%
36
CV
12%-15%
80%-95%
48
Tractor
15%-20%
60%-90%
48
Supply Chain
13%-14%
Microfinance
24%
12to24
Corporate Loans
12%-14%
48
Capital Market
11%-16%
24
Cars
12%-16%
70%-75%
48
Two Wheeler
20%-21%
80%-100%
24
Weaker return profile vis-a-vis asset financing peers
AUM per branch metrics better than others

Bajaj Finance
LTF (the retail & corporate financing subsidiary) has a lower return profile compared to peers.
In general, niche NBFCs (such as Shriram Transport, Mahindra Finance among others) enjoy
Mahindra Finance
better returns than diversified players (such as LTF and Magma) because of competitive
advantage backed by scale and years of experience. Niche NBFCs focus on specific asset
584
1,222
412
367
Magma Fincorp
692
classes which help them build better systems and processes such as focussed sourcing
teams, better knowledge of appraisal systems and strong in-house collection teams. These
advantages are in turn reflected in their returns which are higher than that of diversified
NBFCs.
14
LTF
897
-
500
1,000
( mn)
1,500

RESEARCH
Given that LTF has a diversified product range and lower yield products vis-a-vis peers, it has
a lower NIM. However, the subsidiary has a better AUM per branch. LTF lays emphasis on
analytics for central loan assessment which result in faster disbursement turnaround time. The
companys credit costs are higher than that of peers primarily because of the stress faced by
the company in its corporate loan book (corporate GNPAs have deteriorated from ~1% of
corporate loan book AUM in FY12 to ~2% of its AUM as of FY13). Moreover, the company
also follows a conservative provisioning policy for its retail & corporate loan book compared to
the norms laid down by the RBI. Thus, the provision for any asset going bad is more than
what the RBI suggests, which results in higher credit cost. As of 9M FY14 the provision in
retail & corporate segment was 1.6 bn over the RBIs norms. (Net NPAs was 1.1% as of
FY13, lying in between peers range - from 0.2% of Cholamandalam to 1.3% of Magma.)
Consequently, return on average AUMs is lower than that of peers.
Dupont analysis of LTF vs. asset financing NBFCs

Figure 17: Total income-to-average AUM
Figure 18: Opex-to-average AUM
FY13
FY13
Shriram City Union
11.2%
Bajaj Finance
12.2%
6.3%
2.1%
3.5%
Magm a Fincorp
4.4%
2.4%
LTF
5.9%
0.0%
4.1%
7.1%
LTF
1.5%
Sundaram Finance
5.8%
Magma Fincorp
5.5%
Mahindra Finance
9.1%
4.1%
Bajaj Finance
Mahindra Finance
Sundaram Finance
Shriram City Union
5.0%
10.0%
15.0%
0.0%
2.1%
2.0%
4.0%
6.0%
*Net of interest costs

Figure 19: Provision & write-offs to average AUM
Figure 20: Return on average AUM
FY13
FY13
Shriram City Union
2.5%
Bajaj Finance
1.2%
Sundaram Finance
Magm a Fincorp
3.8%
1.2%
2.4%
Mahindra Finance
0.4%
3.6%
Sundaram Finance
0.8%
Magm a Fincorp
2.0%
1.9%
0.8%
LTF
1.4%
1.0%
2.3%
0.5%
LTF
0.0%
3.1%
Bajaj Finance
1.4%
Mahindra Finance
Shriram City Union
3.0%
0.0%
1.6%
1.0%
2.0%
3.0%
4.0%
15
Figure 21: Leverage
Figure 22: Return on average networth

FY13
FY13
Shriram City Union
5.7 x
Bajaj Finance
Shriram City Union
2.9 x
4.7 x
Mahindra Finance
Bajaj Finance
21.9%
22.0%
3.4 x
Sundaram Finance
Mahindra Finance
3.6 x
7.8 x
Magm a Fincorp
21.2%
7.5 x
18.0%
Magm a Fincorp
5.7 x
0.0 x
23.4%
Sundaram Finance
LTF
22.7%
11.0%
LTF
5.0 x
10.0 x
10.2%
0.0%
10.0%
20.0%
30.0%
Potential upside to RoA of retail & corporate segment in terms of

improving opex and credit costs
We expect retail & corporate segment RoA to improve on the back of the following:
Improvement in opex - We expect a slight improvement in opex cost to be primarily

driven by integration of Family Credit (including improving cross-sell opportunities to
Pressure on asset quality in the retail &
Improvement in asset quality going forward - Currently the asset quality is under stress
corporate segment
due to slippages in the CE, CV and the corporate segments. However, we expect an
4.0%
3.0%
segment.
1.0%
1.1%
0.6%
0.5%
Q4FY12
The mutual fund business has still not broken even, on a full year basis, and this has affected
the companys ROE. In 2012, to acquire scale, the company acquired Fidelitys mutual fund
business at 6,300 mn one of the biggest acquisitions with a transfer of nearly two million
folios. This was also one of the expensive acquisitions, at ~6.5% of AUM, in the mutual fund
industry. Around 10% of the net worth is allocated to the investment management business
and the business is still not profitable at the PAT level. This has affected the companys ROE.
Table 7: Recent acquisitions in the mutual fund space

Date
Buyer
Target
2013
HDFC MF
Morgan Stanley MF
2013
SBI
Daiwa MF
2012
L&T MF
Fidelity MF
6.5%
2012
Schroders PLC
Axis MF
6.5%
2012
T Rowe Price
UTI AMC
3.6%
2012
Invesco
Religare
2012
Nippo Life
Reliance MF
16
Valuation Multiple (% of AUM)

5.2%
NA
NA
6.6%
2.0%
1.2%
1.1%
1.5% 1.6%
2.3%
1.5%
1.8%
1.2%
1.3%
1.3%
1.9%
1.6%
0.1%
0.0%
Fidelity acquisition has impacted the companys ROE
2.0%
GNPA
NNPA
Credit Cost
Q3FY14
1.5%
2.1%
3.5%
Q2FY14
Consequently, we expect the credit costs to come down for the retail & corporate
3.4%
Q1 FY14
2.0%
1.8%
2.0%
Q4FY13
growing the loan book in the segments in which it is facing stress such as CV and CE.
3.4%
2.5%
2.5%
Q3FY13
conditions (which remains a monitorable); and b) the companys cautious approach in
Q2FY13
improvement in asset quality in FY15 based on a) likely improvement in macro-economic
3.5%
Q1FY13
existing rural customers).

RESEARCH
Date
Buyer
Target
2011
Bank of India
Bharti Axa
Valuation Multiple (% of AUM)

4.0%
2011
Goldman Sachs
Benchmark
4.1%
2010
Nomura
LIC MF
2.5%
2010
Natixis Global AMC
IDFC MF
5.5%
2008
IDFC MF
StandardChartered MF
5.9%
Fidelity acquisition = Scale + Synergies

We believe that the Fidelity acquisition provided the company with instant scale as well as
synergies in terms of diversity in investor mix, diversity in products and enhanced distribution
network.
Scale in AUM: We believe the company has adopted the right strategy to achieve scale;
the mutual fund business does offer economies of scale. The costs are more of fixed in
nature. Thus faster asset growth reduces the opex per AUM ratio. Before the acquisition,
the company had ranked ~30 in terms of AUM size with an AUM of ~39 bn. Post the
acquisition, its AUM increased to 120 bn (and its rank jumped to 15). As of Dec 2013,
the average AUM is 170 bn (with a ranking of 13).
Diversity in investor mix: Prior to the acquisition, the company primarily catered to the
corporate sector. The Fidelity acquisition provided it access to a retail audience HNIs
and the urban population within India.
Diversity in products: L&T Mutual Fund was a debt-oriented AMC. The Fidelity
acquisition provided the company with an equity portfolio which provides a high fee
business vis-a-vis debt. Today, the portfolio is diversified across equity, fixed income,
FMP and hybrid products.
Mutual fund business turned PAT positive

in Q2FY14
( mn)
250
150
Diversity in distribution network: L&T Mutual Funds distribution network was more
100
through Independent Financial Advisors and Fidelity has provided it with access to
50
banking channels and some large national distributors. The company now has a
balanced mix of distributors to sell its products across investor segments.
96
21
As of 9MFY14, the mutual fund business is incurring losses but is on its way to become PAT
positive as per the run rate in Q3FY14. Q3FY14 PAT was positive at 13 mn whereas
17
13
Q2FY14
Q3FY14
(50)
(100)
(34)
(84)
(150)
PAT breakeven near but payback to take time
225
212
210
202
200
(149)
(200)
Q2FY13
Q3FY13
(139)
Q4FY13
Q1FY14
PAT (before exceptional & amortization)
Operating Revenue
9MFY14 reported a loss of 4 mn. CRISIL Research expects the business to turn PAT
positive in this year; however, payback could be four to five years down the line. Turnaround
An Infrastructure debt fund (IDF) is a
in the business remains a monitorable.
government initiative to channelise
Further levers - banking license, IDF and private equity

There are further levers to LTFHs growth story banking license, infrastructure debt fund and
private equity operations; we have not included these in our estimates but they can offer a
potential upside.
Banking license a wider canvas to play on
long-term funds to operational

infrastructure projects (roads, ports
and airports), enabling them to
refinance their existing bank loans as
well as release bank resources to fund
new infrastructure projects
If the company gets a banking license, we expect opportunities in terms of revenue increase
and capital structure. The company today is unable to provide lending solutions to large ticket
17
size AAA rated customers but it will be able to unlock this opportunity as a bank. There is also
the opportunity to increase contribution from fee / other income by cross-selling products
which a typical bank can offer. We also expect opportunities to generate low cost funds
through CASA as well as to lever up the balance sheet, similar to a bank.
Moreover, we believe the company has a good probability to get a banking license given the
diversity of its lending profile, a strong rural portfolio to cater to priority sector lending,
professional management with significant experience, a strong L&T brand equity and a
simpler shareholding structure with parent having past record of sound credentials and
integrity.
IDF could become a strong growth driver

The launch and development of IDF should boost LTIs growth as it is expected to evolve as
an additional route for funding infrastructure projects. The regulatory structure will help it
compete with banks. Two IDFs have already been rated AAA, which will help them raise
resources at the best/lowest rate. The summary of key features of the IDF is as follows:
The IDFs will re-finance only PPP projects (roads, ports and airports) that are already
operational for at least a year; this is expected to ensure minimal construction risk and
certainty of cash flows.
The IDFs will work in a well-defined and regulated framework to provide protection of
asset quality through a tripartite agreement - between the project authority, project
company and the IDF - and with a suitable credit enhancement mechanism.
There will be limited asset-liability mismatch as IDFs can raise long-term funds with
minimum five-year maturity.
However, as this is a new channel, we expect various stakeholders to face some teething
problems. The evolvement of the IDF structure is a key monitorable.
Private equity on the anvil

In line with the strategy to become a comprehensive financial services player, LTI is in the
process of setting up a private equity asset management platform by mobilising funds from
domestic and overseas investors. This has the potential to add to the fee income base for the
company.
18

RESEARCH
Key Risks
Delay in removing bottlenecks in infrastructure could delay the
investment cycle
We have based our assumptions on the likely improvement in investment cycle in
infrastructure in FY15 on the back of improvement in economy and ironing out of policy issues
(such as financial restructuring of state discoms, signing of FSAs for power producers, faster
environmental and forest clearances, and faster land acquisition). Therefore, a hung
parliament, persisting slowdown and delay in reform measures pose a risk to our estimates.
Further deterioration of asset quality in infra business

We expect improvement in asset quality of the infra business post FY14 on the back of
cautious approach in lending by the management increased frequency of project monitoring
and conservative lending based on debt protection metrics. Also, we expect the macro climate
to improve post FY14, boosting the financial health of borrowers. Therefore, any worsening of
financial health of borrowers due to delay in improvement in macro environment could affect
our estimates
Tight liquidity situation

Though L&T Finance Holdings has a strong brand equity, a tighter-than-expected liquidity
situation in the market could make it difficult to raise resources at a lower cost and could also
result in lower growth because of lack of funding. Moreover, we are not factoring in any more
rate hikes in the future. Further rate hikes could lead to NIM compression for the retail &
corporate division because of fixed nature of the loans, which will affect our estimates.
Faster improvement in macro-environment could result in

faster growth in CV and CE as well as infra business
Our estimate on growth of CE, CV and infra business is hinged on improvement in the
economy post FY14. Any faster improvement could result in faster growth in AUM than
expected and post an upside risk to our valuation.
Changes in the regulatory norms for NBFCs

The notification of 90+ dpd NPA classification norms (currently 180+ dpd) will increase the
provisioning requirement for the company. Further changes in regulatory norms are thus a
monitorable.
Equity dilution risk

We have not factored an equity capital raise as we expect the company to meet its capital
requirements by raising debt and tier-II capital. The company follows a strategy to maintain
about 20%-25% of the consolidated net worth in the form of leverage as preference capital
or other tier-II borrowing. However, with the rising leverage, the company may find it difficult to
raise further tier-II capital. The company may have to raise common equity capital which
poses an equity dilution risk to the investors.
19
Financial Outlook
AUM to clock 23% CAGR over FY13-16
CRISIL Research expects the companys lending AUM to increase at 23% CAGR over FY13-
AUM to clock 23% CAGR over
16 driven by growth in loan book; we expect 18% CAGR in the retail & corporate segment and
FY13-FY16 on a diversified base
26% CAGR in the infrastructure finance segment. New products, housing finance and twowheeler finance, are together expected to contribute ~13% to the loan book mix in FY16, up
from ~6% in FY13.
Figure 23: Expect 23% growth in AUM over FY13-16

( bn)
700
57%
600
60%
45%
50%
500
40%
30%
400
23%
300
22%
24%
30%
20%
200
10%
100
177
257
333
411
502
623
FY11
FY12
FY13
FY14E
FY15E
FY16E
0%
Total
yoy%
NIMs to remain stable; opex to improve

CRISIL Research expects NIMs to remain stable at 5.0% levels in FY16 driven by slight
increase in yields in the retail & corporate division. The increase is attributable to rise in share
of high-yield two-wheeler financing offset by cautious approach in the infrastructure lending.
Further, the increase in borrowing costs due to recent monetary tightening will also impact
NIM in the retail & corporate division (where the loans are primarily at a fixed rate). In the
other income, we expect rise in contribution from fee income from infrastructure lending as
well as investment management; we expect this segment to grow at 46% CAGR over FY1316. Operating income is expected to grow at 27% CAGR to 33 bn in FY16. We expect slight
improvement in operating costs FY14 onwards - to 1.56% in FY16, from 1.68% in FY13 and
1.78% in FY14 - driven by integration of the new businesses. CRISIL Research expects preprovision profit to grow at 31% CAGR over FY13-16 to 24 bn in FY16.
20

RESEARCH
Figure 25:Operating income to grow at 27% CAGR over

Figure 24:NIMs to remain stable
6.0%
FY13-16
( mn)
5.3%
5.3%
5.0%
4.9%
5.0%
5.0%
35,000
45%
39.0%
40%
30,000
4.0%
35%
28.9%
25,000
25.7%
20,000
3.0%
15,000
2.0%
25%
18.4%
20%
13.3%
15%
10,000
1.0%
10%
5,000
12,353
15,923
22,126
26,203
32,940
FY12
FY13
FY14E
FY15E
FY16E
FY12
FY13
FY14E
FY15E
FY16E
Total Operating Income
NIMs (as a % of AAUM)
5%
0%
0.0%
30%
yoy growth
Figure 26: Opex costs to improve

2.5%
1.9%
1.8%
2.0%
1.6%
1.7%
1.6%
FY15E
FY16E
1.5%
1.0%
0.5%
0.0%
FY12
FY13
FY14E
Opex cost (as a % of AAUM)
Asset quality to improve in FY15

The asset quality has been under pressure due to the subdued macro environment. We
expect the asset quality to remain under pressure in FY14, raising NPAs from 2.2% in FY13 to
3.1% in FY14. However, given the expected improvement in economy, as well as a cautious
approach to lending, we expect asset quality to improve in FY15.
21
Figure 27: Asset quality expected to improve

3.5%
45%
3.1%
2.9%
3.0%
38.9%
2.5%
2.5%
39.7%
2.1%
2.0%
40%
39.2%
35%
37.5%
2.2%
35.2%
1.5%
30%
1.5%
1.0%
0.5%
0.8%
0.9%
FY12
FY13
1.0%
25%
0.8%
20%
0.0%
GNPAs (calc)
FY14E
FY15E
Credit costs
FY16E
Provision coverage (RHS)
Improvement in returns profile expected

CRISIL Research estimates the companys return on average assets (RoAA) to improve from
1.6% as of FY13 to 2.1% in FY16. This is expected to be driven by the following:
Stable NIMs because of slight yield expansion (due to improving mix of high yielding
products in the retail & corporate offset by a decline in yields in the infra segment due to
cautious lending)
Improvement in contribution of other income to the total operating income of the infra
subsidiary
Improvement in opex because of better integration of new acquired businesses and
improvement in credit costs in FY15, as discussed above
Figure 28: RoAA and RoAE to improve from FY13 levels

17.1%
18%
16%
15.5%
14.2%
14%
12.1%
12%
10.1%
10.9%
10%
8%
6%
4%
2.5%
2.0%
1.6%
1.6%
1.9%
2.1%
FY12
FY13
FY14E
FY15E
FY16E
2%
0%
FY11
RoAA
RoAE
Note: FY13 PAT for ROAA and ROEE calculation does not include sale of shares of
Federal Bank
22

RESEARCH
Capital adequacy of subsidiaries to remain at a comfortable

level
We expect the standalone capital adequacy of the subsidiaries to remain comfortable at
17.5% in FY16 of LTF and 16.5% of LTI, well above the regulatory requirement of 15%. This
is on the back of a diversified resource base, strong brand equity, flexible capital structure of
the holding company (as discussed below) and profitability of the subsidiaries.
Holding company structure provides flexibility to raise leverage at the

standalone company level for capital requirement in subsidiaries
The companys holding company structure provides headroom for the standalone parent to
infuse equity capital in its subsidiaries to fund their growth and also to maintain their CAR
requirements by taking debt on the parents balance sheet. This helps the consolidated entity
generate a superior ROE without diluting the stake of existing investors by raising leverage.
E.g. the company raised 7,500 mn as preference equity in FY13 at the standalone level to
meet the funding requirements of its subsidiaries. The parent company had a CAR of 74% as
of FY13 (against the requirement of 30% by RBI). The retail & corporate division had a CAR of
17.4% while the infra lending subsidiary had a CAR of 15.8%.
Moreover, the company follows a strategy, on a long term basis, to maintain about 20%-25%
of the consolidated net worth in the form of leverage as preference capital or other
borrowing. As a result, we have built a preference capital raise of 5,000 mn each in FY15
and FY16.
Figure 29: CAR trend of LTF

20%
18%
16.6%
17.4%
Figure 30: CAR trend of LTI

18.0%
17.6%
17.5%
18%
16%
14%
20%
17.1%
16.8%
16.7%
13.9%
13.8%
2.6%
2.9%
2.9%
FY14E
FY15E
FY16E
15.8%
16%
15.8%
12%
14.9%
15.5%
15.0%
14.9%
14%
10%
8%
8%
6%
16.0%
14.2%
12%
10%
14.6%
6%
2.4%
4%
2%
16.4%
2.6%
2.6%
2.6%
0.8%
2%
0%
FY12
Tier I
4%
FY13
FY14E
Tier II
FY15E
FY16E
CAR (reported)
1.6%
0.3%
0%
FY12
Tier I
FY13
Tier II
CAR (reported)
23
Management Overview
CRISIL's fundamental grading methodology includes a broad assessment of management
quality, apart from other key factors such as industry and business prospects, and financial
performance.
Highly experienced senior management

The top management of the company - Mr. Y.M.Deosthalee and Mr. N.Sivaraman - is drawn
from L&T (but on the payrolls of LTFH). The management has strong domain knowledge, vast
experience and an established track record of growing businesses.
Strong second line of management

The company has a strong second line of management with CEOs for various business units.
These professionals have significant experience in their respective fields.
Mr. Suneet K. Maheshwari, the MD and Chief Executive of LTI, has about 32 years of
experience in infrastructure and corporate finance, financial advisory, infrastructure and
energy sector reform, investment banking and private equity. Mr. Maheshwari has been
involved with various infrastructure sector reform/PPP initiatives at the national and state
level since 1984.
Mr. Dinanath Dubashi, Chief Executive of LTF, has over 23 years of experience in
various fields of financial services across organisation such as BNP Paribas, Birla
Sunlife, Care Ratings and SBI Capital Markets. He has been with LTF since April 2007
ans has occupied various senior level positions in the organization.
Ms. Ashu Suyash, CEO of L&T Investment Management Ltd, has over 25 years of
experience in the financial services industry. Prior to this she was Country Head and
Managing Director, India, for Fidelitys Asset Management Business in India. She is on
the board of the Association of Mutual Funds of India and the Advisory Board of the
Chartered Institute for Securities and Investment.
Aggressive approach towards diversification

The management is focussed on offering a comprehensive range of products. It has been
aggressive in its approach towards diversification. It has launched new products as well as
acquired new businesses.
24
The senior management team

consists of eminent people with
strong experience

RESEARCH
Corporate Governance
CRISILs fundamental grading methodology includes a broad assessment of corporate
governance and management quality, apart from other key factors such as industry and
business prospects, and financial performance. In this context, CRISIL Research analyses the
shareholding structure, board composition, typical board processes, disclosure standards and
related-party transactions. Any qualifications by regulators or auditors also serve as useful
inputs while assessing a companys corporate governance. Overall, corporate governance at
LTFH exceeds the statutory requirement supported by reasonably good board practices and
involvement of an independent board
Board composition
The companys board consists of eight members, including five independent directors (IDs),
which is in line with the requirements under Clause 49 of SEBIs listing guidelines. The
directors on the board have a rich experience in their own fields. Our interaction with the
independent directors revealed that the independent directors have a good understanding of
Corporate governance exceeds

statutory requirement
the companys business and its processes, and their participation in strategic decision making
is good.
Earlier (as of FY13), there were 11 members on the board. Out of these 11 members, three
members (all of them IDs) have recently taken up positions in the boards of the subsidiaries.
Thus even at the subsidiary level, the board is strong with experienced people at the helm.
Boards processes
The boards processes are well organised with all the necessary committees - audit,
remuneration, investor grievance, shareholders grievance, asset liability and management - in
place to ensure good corporate governance practices. Most of the committees are chaired by
independent directors. The audit committee is chaired by an independent director, Mr. S. V.
Haribhakti, who, during his career span of four decades, has successfully established and led
many services. He is a chartered and cost accountant, and a Certified Internal Auditor,
Financial Planner & Fraud Examiner. Other independent directors include:
Mr. Ajit Kumar Jain retired IAS officer who has served across departments of Ministry of
Finance and Power. He is also the nominee director on board of L&T Ltd
Mr. B.V. Bhargava He has almost three decades of experience in development banking
and project finance
Mr. P.V. Bhide He is a retired IAS officer and has decades of experience across
various departments of Ministry of Finance, Energy and Home Affairs
Mr. Harsh Mariwala He is the Chairman and Managing Director of Marico Ltd and has
three decades of experience in the industry. He was also the president of FICCI during
2010-11
Ms. Kamakshi Rao She is an investment professional with over 15 years of experience.
Her last assignment was with Capital Group of Companies as senior VP responsible for
managing investments across regions
25
The companys independent directors have diverse background viz., finance, policy etc and
are leading professionals in their respective fields.
Related party transactions

The companys related party transactions are primarily resources taken from the group
company in the form of debentures, inter corporate deposits, and interest on corporate
deposits. The company also pays brand license fees to L&T to use its name (2-3% of PAT).
These are done at arm length.
Key transactions (> 100 mn)
Fee income from L&T Infrastructure Development Projects Ltd
Brand license fees paid to L&T
Interest expense on ICD paid to L&T
ICD taken from L&T
ICD taken from L&T Capital
Secured debentures issued by L&T
FY12
FY13
101
77
174
229
64
2,700
179
229
2,000
Security deposit received from L&T General Insurance
135
Term loan/Operating lease given to EWAC Alloys
160
240
Investment in equity shares of Feedback Ventures
379
Issue of redeemable NCD by L&T
600
26

RESEARCH
Valuation
Grade: 2/5
We have valued LTFH by the SOTP method to arrive at a fair value of 65 per share.
26 per share Retail & corporate. The retail & corporate finance business (including
housing finance) has been valued at a P/B multiple of 1.3x FY15E adjusted book value
per share of 20 to arrive at a fair value of 26. We have given a 25% discount to the
FY15 median P/B (adjusted book) multiple of 1.6x of asset financing peers primarily
because of lower returns profile, and pressure on corporate loan book
31 per share Infra lending. The infra lending business has been valued at a P/B
multiple of 1.6x FY15E adjusted book value per share of 20 to arrive at a fair value of
31. The multiple is at a 30% premium to IDFCs FY15 P/B (adjusted) multiple of 1.2x.
We believe this is justified given a decent ROE, better growth potential vs. peer IDFC,
and improvement in fee income
6 per share Investment management. We have valued investment management

business at 5% of its expected FY15 AUM of 213 bn (implying a 37% CAGR over FY13
AUM of 114bn)
2 per share Other businesses including wealth management.
At the current market price of 76, our valuation grade is 2/5 indicating market price has
downside from the current levels.
Implied P/B multiple at a discount to the market multiple

Our implied P/B multiple (on FY15 adjusted book value) is 1.6x. This is at a discount to the
current market FY15 P/B multiple of 2.0x which is also the median multiples over the past six
months. Our multiple is at a discount to the market multiple primarily because the market is
factoring a banking license possibility which we have not factored in our estimates.
Market is providing a premium for banking license

The companys stock re-rated from the levels of 40 (P/B of ~1.6x) to 90, since the news for
the company applying for banking license started doing rounds. Over the past six months, the
stock has remained at high levels of P/B of 2.0x higher than other NBFCs (median FY15 P/B
of 1.6x), implying that the market is factoring a premium because of banking possibility.
If LTFH is provided a banking license then we expect a possible rerating as large and mid,
sized private banks enjoy better multiples than NBFCs. Our analysis of past four years
average P/B of private sector banks and NBFCs indicate that median multiple of private sector
banks is higher at 2.9x against NBFCs at 1.7x.
27
One-year forward P/B band
One-year forward P/B movement

(Times)
()
120
35
100
30
25
80
+1 std dev
20
60
15
10
LNTFH
1.3x
1.8x
2.3x
2.7x
1yr Fwd PE (x)
Source: NSE, CRISIL Research
Feb-14
Dec-13
Jun-13
Aug-13
Apr-13
Feb-13
Dec-12
Oct-12
Jun-12
Aug-12
Apr-12
Feb-12
Dec-11
Oct-11
-1 std dev
Aug-11
Feb-14
Dec-13
Jul-13
Oct-13
May-13
Mar-13
Jan-13
Nov-12
Sep-12
Jul-12
Feb-12
May-12
Dec-11
Oct-11
Aug-11
20
Oct-13
40
Median PE
Source: NSE, CRISIL Research
Peer comparison
P/B (x)
M.Cap
RoE (%)
RoA (%)
Name of company
CMP
bn
FY13
FY14E
FY15E
FY13
FY14E
FY15E
FY13
FY14E
FY15E
Rural Electrification Corporation
185.1
182.8
1.2
0.9
0.76
23.8
25.7
24.40
3.2
3.4
3.22
Power Finance Corporation
156.3
206.3
0.9
0.7
0.60
19.6
22.7
20.80
2.8
3.2
3.00
IDFC
95.7
145.0
1.6
1.0
0.87
14.1
13.8
13.36
2.8
2.8
2.79
1.2
0.9
0.8
19.6
22.7
20.8
2.8
3.2
3.0
Infrastructure finance NBFCs

M&M Financial services
250.0
142.2
2.4
2.7
2.30
24.4
19.5
20.60
4.0
3.2
3.37
Shriram Transport
590.5
134.0
1.9
1.7
1.40
19.9
16.6
18.10
3.2
2.5
2.50
Shriram City Union
971.0
57.6
2.5
2.1
1.80
22.7
19.8
16.80
3.1
3.0
2.70
1,553.4
77.9
1.7
1.9
1.61
21.9
19.8
20.24
3.8
3.6
3.54
Sundaram Finance
605.4
67.3
2.0
2.2
1.81
23.6
21.8
21.30
2.8
2.9
3.10
Cholamandalam Investment
234.0
33.5
2.0
1.5
1.28
18.1
17.2
18.36
1.9
1.8
1.84
Magma Fincorp
72.3
13.7
0.9
0.8
0.70
11.1
10.2
11.80
1.3
1.1
1.30
2.0
1.9
1.6
21.9
19.5
18.4
3.1
2.9
2.7
Bajaj Finance
Asset financing NBFCs

HDFC
811.4
1,265.3
4.0
4.6
4.04
23.6
21.1
22.00
2.9
2.5
2.57
LIC Housing Finance
209.2
105.6
1.7
1.4
1.21
17.1
18.9
19.10
1.4
1.5
1.60
2.9
3.0
2.6
20.4
20.0
20.6
2.1
2.0
2.1
Housing finance NBFCs

State Bank of India
1,506.0
1,124.3
1.1
0.8
0.73
15.5
10.9
11.88
0.9
0.7
0.74
Bank of Baroda
537.3
230.7
0.9
0.7
0.60
15.1
13.4
13.66
0.9
0.8
0.77
Punjab National Bank
538.0
194.8
0.8
0.6
0.51
15.7
11.3
13.09
1.0
0.7
0.84
Canara Bank
214.5
98.9
0.7
0.4
0.36
12.1
9.6
10.91
0.7
0.5
0.57
Union Bank
102.1
64.3
0.8
0.4
0.35
13.6
9.9
11.66
0.8
0.5
0.56
0.8
0.6
0.5
15.1
10.9
11.9
0.9
0.7
0.7
PSU Banks
HDFC Bank
671.1
1,608.2
4.1
3.7
3.14
20.3
21.3
22.16
1.8
1.9
1.99
ICICI Bank
1,031.1
1,190.6
1.8
1.6
1.50
13.1
13.7
14.10
1.6
1.7
1.67
Axis Bank
675.8
520.2
3.2
2.8
2.46
15.5
14.5
14.88
2.1
2.0
2.19
1,236.8
580.5
1.8
1.5
1.34
18.5
16.7
16.66
1.7
1.6
1.64
IndusInd Bank
402.7
211.5
2.8
2.4
2.10
17.2
16.8
17.87
1.6
1.7
1.75
Yes Bank
302.3
109.0
2.6
1.5
1.24
24.8
24.2
23.09
1.5
1.5
1.51
2.7
2.0
1.8
17.8
16.7
17.3
1.6
1.7
1.7
2.7
2.5
2.2
10.1
10.9
14.2
1.6
1.6
1.9
Kotak Mahindra Bank
Private Sector Banks

L&T Finance Holdings
Source: Industry, CRISIL Research
28
72
123.6

RESEARCH
Company Overview
Incorporated in 2008, L&T Finance Holding Company (LTFH) offers a comprehensive portfolio
of financial products and services through its wholly owned subsidiaries. The company is
present in most categories of retail lending; infrastructure lending across sectors; and
investment management services such as mutual fund and wealth management. Prior to
March 2009, the company had minimal operations with some passive investments. It
subsequently, acquired 100% stake in L&T Finance Limited (LTF), L&T Infrastructure Finance
Limited (LTI) and L&T Fincorp.
The company came up with an IPO in FY12, consequent to which L&Ts stake was diluted to
82.64%. However, L&T continues to hold a controlling stake in the company and backs the
management team. The company entered the housing finance space by acquiring
shareholding in Indo Pacific Housing Finance. Post the acquisition, the company was
rechristened as L&T Housing Finance Ltd. In November 2012, the company acquired Fidelity
AMC. Post the acquisition, the schemes of Fidelity Mutual Fund was transferred to L&T Mutual
Fund. In January 2013, the company acquired 100% stake of Family Credit Ltd. (FC) from
Frances Socit Gnrale Consumer Finance. FC is an NBFC having presence across twowheeler financing.
L&T Finance Holdings Corporate Structure

L&T Finance Holdings
L&T Finance
L&T Access
L&T
Vrindavan
L&T HFC
Family Credit
L&T Infra
Finance
L&T Fincorp
L&T Capital
markets
L&T Invest.
Mgmt.
L&T MF
Trustee
Overview of the subsidiaries

Primary subsidiaries of the company are LTF and LTI which are housed separately because of
their special status.
LTF was incorporated in 1994 and classified as an AFC through which it can take more
exposure to a single party by an additional 5% of its owned funds vis--vis other non
AFC NBFCs. It is housed as a separate entity because ~60% of LTFs book has to be
asset backed for the AFC status.
LTI was incorporated in 2006 and is an IFC as well as a PFI. The company is housed
separately because the company needs to maintain ~75% of assets in infra projects for
the IFC status. The IFC status provides the company access to cheaper funds.
L&T Fincorp was incorporated in 1997 and primarily does corporate lending.
L&T Access is a distribution company in the group and its primary business is distribution
of insurance products.
L&T Vrindavan (L&T Unnati earlier) is the subsidiary that houses the real estate of the
group
29
Family Credit was acquired from Frances Socit Gnrale Consumer Finance; it is into
two-wheeler financing.
L&T HFC is the erstwhile IndoPacific HFC, acquired in 2012. The subsidiary provides
housing finance loans, LAP as well as builder loans
L&T Capital Markets provides wealth management solutions.
L&T MF is the investment management arm of L&T Finance Holdings and provides
mutual fund services. The company has grown through the inorganic route by acquiring
DBS Cholamandalam AMC in 2010 and then Fidelitys mutual fund business in 2012.
Key Milestones
1994
Incorporation of L&T Finance Ltd (LTF)
2007
LTF started CV financing

L&T Infrastructure Finance Company Ltd established
2008
LTF forays into microfinance & capital market products
2010
LTF acquire DBS Cholamandalam Asset Management Ltd
2011
IPO; the company became the first listed subsidiary of L&T
2012
LTF acquires Indo Pacific Housing Finance Ltd, enters housing finance
Acquires Fidelity's Mutual Fund
Acquires Family Credit
2013
30
Incorporates L&T Capital Markets - a platform for wealth management

RESEARCH
Annexure: Financials (Consolidated)

Income Statement
( m n)
Net Interest Income
Non Interest Income
Ratios
FY12
11,475
FY13
14,396
FY14E
19,804
FY15E
22,812
FY16E
28,207
878
1,526
2,323
3,390
4,733
12,353
15,923
22,126
26,203
32,940
Operating Expenses
3,560
5,300
7,125
7,653
Staff Costs
1,518
2,057
2,629
Other Operating Expenses
2,042
3,244
Total Operating Incom e
FY12
FY13
FY14E
FY15E
FY16E
Spread Analysis
13.2%
12.8%
13.7%
13.5%
13.5%
Cost of borrow ings
Yield on AUM
9.2%
9.4%
9.8%
10.2%
10.1%
9,179
Spread
4.0%
3.4%
3.8%
3.4%
3.3%
3,153
3,676
Net Interest Margin (NIM)
5.3%
4.9%
5.3%
5.0%
5.0%
4,496
4,501
5,503
Return Ratios
Pre- provision profit (PPP)
8,794
10,622
15,001
18,549
23,761
ROA (%)
2.0%
1.6%
1.6%
1.9%
2.1%
Provision & Contingency
1,834
2,734
5,429
4,712
4,726
ROE (%)
12.1%
10.1%
10.9%
14.2%
17.1%
Profit before depreciation and tax
24.0%
6,959
7,888
9,572
13,837
19,035
Depreciation On Fixed Assets
117
169
308
337
374
Assets under Management (AUM)
Extra-ordinary gain / (Loss)
2,180
Disbursements
PBT
6,842
9,899
9,264
13,499
18,661
Provision for tax
2,295
2,594
3,057
4,455
6,158
Reported Net Profit
4,548
7,305
6,207
9,045
12,503
2,180
4,548
5,125
6,207
9,045
12,503
Extra-ordinary gain / (Loss)

Adjusted Net Profit
Grow th ratios
45.1%
29.8%
23.3%
22.2%
-10.7%
4.0%
9.2%
10.9%
17.9%
Net Interest Income
12.2%
25.5%
37.6%
15.2%
23.6%
Non Interest Income
30.4%
73.9%
52.2%
46.0%
39.6%
13.3%
28.9%
39.0%
18.4%
25.7%
Operating Expenses
40.2%
48.9%
34.4%
7.4%
19.9%
Staff Costs
60.9%
35.5%
27.8%
19.9%
16.6%
5.2%
20.8%
41.2%
23.7%
28.1%
Provision & Contingency
10.0%
49.1%
98.5%
-13.2%
0.3%
Adjusted Net Profit
14.5%
12.7%
21.1%
45.7%
38.2%
Pre- provision profit (PPP)
Balance sheet
( m n)
Equity share capital
FY12
17,148
FY13
17,168
FY14E
17,168
FY15E
17,168
FY16E
17,168
Adjusted EPS
-5.4%
12.6%
21.1%
45.7%
38.2%
Book Value
37.5%
31.0%
8.5%
19.6%
20.3%
7,500
7,500
12,500
17,500
Asset Quality
Total Share Capital
17,148
24,668
24,668
29,668
34,668
Gross NPA %
2.1%
2.2%
3.1%
2.9%
2.5%
Reserves
29,964
37,119
42,394
50,534
61,787
Net NPA (%)
1.3%
1.4%
1.9%
1.8%
1.6%
Shareholders Funds
47,111
61,786
67,062
80,202
96,455
Valuation Data
28.7
17.9
21.0
14.4
10.4
211,813
284,792
345,865
419,447
517,976
2.9
2.6
2.5
2.2
1.9
9,213
17,757
23,245
27,296
32,812
Preference capital
P/E (x)
Borrow ings
Other Liabilities & Provisions
P/ABV (x)
Key Param eters
Deferred tax liability
199
121
121
121
121
Sources of funds
268,337
364,457
436,294
527,066
647,364
Total lending AUM ( mn)
256,690
333,094
410,648
501,947
622,649
Disbursements ( mn)
220,281
229,175
250,216
277,472
327,091
Cash & Bank Balances
1,127
3,716
28
815
860
Capital adequacy ratio
18.1%
20.9%
18.1%
17.8%
17.2%
Investments
7,749
18,500
19,281
20,102
20,964
Tier I capital ratio
17.6%
17.4%
15.7%
14.6%
13.6%
251,904
324,501
397,132
483,719
599,695
Tier II capital ratio
0.6%
3.5%
2.4%
3.2%
3.6%
2,820
9,572
10,168
10,936
11,930
Efficiency ratio
29.8%
34.3%
33.6%
30.5%
29.0%
1.7%
1.9%
2.0%
1.8%
1.7%
4.5
5.4
5.9
6.4
6.8
Capitalisation ratios (calc)
Net Loans and advances

Net Fixed Assets and Capital WIP
Deferred tax asset
Other Assets
Application of funds
809
1,390
1,390
1,390
1,390
3,938
6,778
8,295
10,103
12,526
268,347
364,457
436,294
527,066
647,364
Cost to Income ratio

Opex/ average assets
Leverage (x) - D/E
Quarterly Financials - Consolidated

Per share
Adj EPS ()
Adj Book Value ()
Dividend per share ()
Actual o/s shares
( m n)
FY16E
Total operating income
Q4FY13
Q1FY14
Q2FY14
Q3FY14
5,035
4,937
5,485
5,179
2.7
4.3
3.6
5.3
7.3
Change (q-o-q)
25.8
33.6
35.0
42.0
51.0
Adjusted PAT
2,946
FY15E
4,024
FY13
1,715
FY14E
Q3FY13
FY12
2%
25%
1,707
-2%
1,447
11%
1,557
-6%
1,097
0.7
0.5
0.5
0.6
Change (q-o-q)
105%
-42%
-15%
8%
-30%
1,717
1,717
1,717
1,717
Adjusted EPS
1.7
1.0
0.8
0.8
0.6
31
Focus Charts
AUM growth trend
700
NIM trend
6.0%
57%
60%
600
5.3%
5.3%
4.9%
45%
40%
30%
400
23%
300
30%
24%
22%
200
100
177
257
333
411
502
623
FY11
FY12
FY13
FY14E
FY15E
FY16E
Total
FY15E
FY16E
4.0%
3.0%
20%
2.0%
10%
1.0%
0%
0.0%
FY12
FY13
yoy%
FY14E
NIMs (as a % of AAUM)
Operating income trend
Asset quality trend
( mn)
3.5%
35,000
40%
35%
28.9%
25.7%
20,000
30%
25%
18.4%
20%
13.3%
15%
10,000
10%
5,000
12,353
15,923
22,126
26,203
32,940
FY12
FY13
FY14E
FY15E
FY16E
5%
0%
3.0%
2.5%
39.7%
2.1%
2.5%
40%
37.5%
35%
39.2%
2.2%
35.2%
30%
1.5%
1.0%
0.5%
2.9%
38.9%
2.0%
1.5%
45%
3.1%
45%
39.0%
30,000
15,000
5.0%
50%
500
25,000
5.0%
5.0%
0.8%
0.9%
FY12
FY13
1.0%
25%
0.8%
0.0%
yoy growth
20%
GNPAs (calc)
FY14E
FY15E
Credit costs
FY16E
Provision coverage (RHS)
RoA/RoE trend
Performance of L&T Finance Holdings (LTFH) vs CNX500

180
14.2%
14%
160
12.1%
12%
10.1%
200
140
10.9%
120
10%
100
8%
80
60
6%
2.5%
40
2.0%
1.6%
1.6%
1.9%
2.1%
2%
20
RoAA
RoAE
CNX 500
-Indexed to 100
32
LNTFH
Dec-13
Oct-13
Aug-13
Jun-13
Apr-13
Feb-13
FY16E
Dec-12
FY15E
Oct-12
FY14E
Jun-12
FY13
Aug-12
FY12
Apr-12
FY11
Feb-12
0%
Aug-11
4%
Dec-11
16%
17.1%
15.5%
Oct-11
18%
Feb-14
( bn)
RESEARCH
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RESEARCH
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