L&T Finance Holdings Ltd (LTFH) on Thursday reported a 73 per cent decline in net profit at Rs 148 crore in the first quarter ended June of the current fiscal year due to higher contingency provisioning. The non-banking finance company (NBFC) had posted a net profit of Rs 549 crore in the corresponding April-June quarter of previous fiscal year.
LTFH further strengthened its balance sheet through provisions of Rs 577 crore over and above GS3 (gross stage 3) provisioning. Adjusted for above provisions, profit after tax (PAT) for Q1 FY21 stood at Rs 580 crore, the company said in a release.
Stage 3 loans are classified as non-performing assets (NPAs).
"Profitability for the quarter was largely impacted due to interest cost on enhanced liquidity, lower fee income and most importantly, incremental provisions taken to strengthen the balance sheet against the after effect of the pandemic," it said.
Total income fell to Rs 3,397.53 crore in June quarter as against Rs 3,689.50 crore in the same period of 2019-20.
LTFH said it witnessed faster than expected recovery in rural segments with 19 per cent year-on-year growth in farm equipment financing during the month of June.
Besides, there has been strong uptick in collections as a progressive improvement from April to June, while there has been a reduction in moratorium on retail lending book from 79 per cent in March to 44 per cent in June.
Gross NPAs (GS3) fell to 5.72 per cent from 5.24 per cent a year ago, and net NPAs (NS3) reduced to 1.71 per cent from 2.48 per cent as on June 30, 2020, it said. Provision coverage ratio improved to 69 per cent from 58 per cent.
The company remained resilient in Q1FY21, enduring the challenges posed by COVID-19, by maintaining enhanced levels of liquidity, higher focus on restoring collection rhythm, including digital modes of collection, and re-initiating disbursements with tightened credit norms, it said.
"The results of this quarter should be seen less as a quarterly result and more from the viewpoint of fortifying the company from any challenges arising in post-Covid scenario. Also, the various parameters should not be viewed on absolute levels but on the basis of progressive development from April to June as the company took advantage of gradual unlocking of markets," LTFH MD and CEO Dinanath Dubhashi said.
Enhanced provisioning, stronger risk controls, ample liquidity, along with a resilient business model and the revival seen in the rural economy from June onwards, gives the company the confidence to bounce back faster to pre-Covid levels than anticipated, Dubhashi said.
Shares of LTFH on Thursday closed 1.73 per cent lower at Rs 59.80 apiece on the BSE.
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