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Target: ₹205
CMP: ₹182.85
L&T Finance’s (LTFH’s) core retail business performance continues to trend well capitalising on strong macros resulting in RoA of 3.4 per cent in FY24 versus a consolidated RoA reported at 2.3 per cent. The new management focus is to converge with retail business metrics gradually over the medium term resulting in uplifting of growth as well as RoE trajectory which is key positive.
Moreover, the company is looking to balance the asset quality outcome in the existing retail business segment through technology, focusing more on prime customers and strengthening the collection force in unsecured business unlike in the past cycle where business saw huge volatility in asset quality. Thus, a higher delta of RoA improvement is expected to come from lower credit cost as company do not expect further markdown in the Wholesale book/ SR and further strengthening the retail portfolio.
Additionally, the company is confident to recoup the losses in the SR portfolio through recoveries over the medium term. The combined wholesale and net SR book stands at about 14 per cent of loans currently.
L&T Finance has re-oriented itself into a retail franchise, led by a favourable cycle. The company is now looking at balancing the business matrices while pursuing growth. The focus is on creating a sustainable and a predictable retail franchise, but execution remains key monitorable.
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