In Q2 FY22, all L&T Finance Services (LTFH) businesses witnessed robust disbursement momentum. Rural Finance business saw the highest ever Q2 disbursement at Rs 4,987 crore, rising 51% Q-o-Q (quarter-on-quarter). The total disbursements in the quarter stood at Rs 7,339 crore for the focused businesses.
Collections were normalised across businesses during the quarter, led by smart data analytics, concerted field efforts and gradual unlocking of the economy. Collection Efficiency reached pre-COVID-19 levels across products.
In Retail segment, regular collection efficiencies in Farm have stabilized at 90% & in two-wheelers at 98% for Q2 FY22. Regular collection efficiencies for micro loans have surpassed 99% levels with increased resolutions in higher buckets as well. In Wholesale segment, escrow collections in Real Estate portfolio during Q2 FY22 was normalised, growing 18% Q-o-Q, and are in line with Q3 FY21 and Q4 FY21. In Infra segment, no impact was seen on operational projects in NHAI annuity, Transmission & Renewables. Collections from Toll road portfolio jumped 112% of pre-COVID 19 levels during the quarter.
Liquidity continued to remain comfortable in Q2 FY22 with a well-diversified liability profile. The focus on raising low-cost incremental long-term borrowings continued in Q2 FY22. LTFH raised Rs 5,030 crore of long-term borrowing in Q2 FY22 at a WAC of sub 6%, including Rs 2,195 crore from PSL funding. The firm reported higher NIMs at 7.58% achieved Y-o-Y (year-on-year) through higher retailisation, reduction in cost of borrowing and maintaining lower average liquidity. As of September 2021, the company maintained liquid assets in the form of cash, FDs and other liquid investments to the tune of Rs 13,122 crore.
From FY19 and all through the COVID-19 quarters, LTFH built macro-prudential provisions for unanticipated future events which has held the company in good stead. Continuing this focus, in Q2 FY22, LTFH is prudently carrying additional provisions and OTR provisions of Rs 1,747 crore (2.22% of standard book). These provisions are over and above ECL on GS3 assets and normal ECL on standard assets. The GS3 in absolute terms stood at Rs 4,796 crore in Q2 FY22, remaining almost stable on Q-o-Q basis. In percentage terms, the GS3 and NS3 assets of the company stood at 5.74% and 2.81% respectively with PCR on Stage III assets at 52%. Overall capital adequacy improved to 25.16% (Tier 1: 20.06%) and D/E stood at 4.40 in Q2 FY22.
In Q2 FY22, the rural book saw a growth of 3% Q-o-Q, supported by growth in Farm Equipment Finance. The share of retail portfolio in the overall book grew to 47% in Q2 FY22. In Infrastructure Finance there was a book de-growth on account of lower disbursements and higher sell- down/ prepayments. The focused book stood at Rs 84,466 crore in Q2 FY22. In the Investment Management business overall AUM crossed Rs 80,000 crore in September 2021, increasing 5% Q-o-Q on account of higher inflows. Pure Equity & Hybrid mix for LTFH was at 59% of the AUM as against 47% for the industry.
Commenting on the Q2 financial results, Dinanath Dubhashi, the managing director (MD) and chief executive officer (CEO) of L&T Finance Holdings, said, COVID 2.0 as well as skewed monsoon and other macro-economic factors have had an impact on the business environment in Q2. Despite this, LTFH's Rural Finance business had its best-ever Q2 disbursement and witnessed normalisation in collections and disbursements. The company's ability to successfully deliver on business metrics this quarter as well as throughout the COVID quarters is an important validation of its sound digital and data analytics strategy.
Dubhashi further added, LTFH's strong track record of consistent improvement in collections and disbursements throughout the COVID quarters, is reflected in its Q2 FY22 performance. Disbursement momentum will continue to further pick-up, backed by the company's established ability to scale up product offerings in retail by harnessing our digital and analytics strengths. LTFH is well provisioned for any short- term COVID 2.0 led disruptions and remains steadfast in continuing to be of service to its customers, helping finance their livelihoods and aspirations.
L&T Finance Holdings is a diversified non-banking financial company (NBFC).
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