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Motilal Oswal Report
L&T Finance Holdings Ltd. reported Q4 FY23 consolidated profit after tax of ~Rs 5 billion (inline), up 47% YoY. Pre- provision operating profit grew by 12% YoY to Rs 12.7 billion (inline), while credit costs came in at ~Rs 5.2 billion. FY23 consolidated PAT grew 52% YoY to ~Rs 16.2 billion.
Q4 FY23 retail PAT grew 58% YoY to ~Rs 4.7 billion. FY23 retail PAT increased 87% YoY to Rs 13.8 billion. Retail return on asset/return on equity stood at ~2.5%/13.8% in FY23.
Management targets to improve the retail mix to ~90% by March 2024, which we believe could be achieved in the next few quarters. Considering the consistent rundown in the wholesale book, we model loan growth of 11%/22% in FY24/FY25E. We estimate a PAT compound annual growth rate of 25% over FY23-FY25, with consolidated RoA/RoE of 2%/10% in FY25.
A strong liability franchise, a well-capitalised balance sheet and a keen intent to further accelerate the sell-down of the wholesale book augur well for L&T Finance to achieve its Lakshya 2026 goals.
We believe L&T Finance is set to transform itself into a primarily retail franchise, which could lead to profitability improvement and RoA expansion.
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