Sharekhan's research report on Larsen and Toubro finance holdings
With the management’s strong intent, LTFH is set to transform into a retail franchise as the company is aggressively reducing the wholesale book, while retail book has been growing at a brisk pace, supported by a favourable credit cycle. Management expects a modest impact of the RBI’s latest revised norm of increasing 25bps risk weight for retail unsecured loans, given the low share (8% of book) and healthy capital positioning (CAR at 25%). Retail AUM is estimated to grow at a CAGR of 25% over FY24-26E. However, accelerated reduction in the wholesale book is expected to restrain overall AUM at a ~20% CAGR. The company expects ~15 bps increase in CoB, though strong yield on book to keep NIM at the healthy level.
Outlook
PAT is estimated to grow at 25% CAGR over FY23-26E which will drive 100 bps expansion in RoA to 2.8% by FY26E. At CMP, the stock trades at 1.4x/1.2x FY2025E/ FY2026E BV estimates.
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