If one looks at the last two investor presentations (on impact of demonitization on business and Q3 2017 results, refer resources section below) by L&T Finance Holdings Limited (LTFH) you can see that there is a focused management at work which knows what it is doing. There is a vision in place and all the actions by the management are in line with the same.
In first of the two presentations (on impact of demonitization shared on Nov 17, 2017), they have clearly stated each business segment, its cash dependency and the impact of demonitization in their eyes. Further, in the follow-up to the same, they have discussed the update to the same in the Q3 2017 results presentation (shared on Jan 24, 2017). This shows two things as per my understanding. One, management was quick to share the impact of a major ‘black swan’ event on their business (not many managements do the same). Second, they are transparent in sharing how business is evolving over time and the steps they are taking so that the business flourishes over time.
I wish to point out about the vision of the company to further highlight the same. They have identified three business segments of focus and are concentrating on the same viz. Rural Business, Housing Business and Wholesale Business. Also, they have identified segments which are pushing down the value of the overall business and are constantly decreasing their exposure to the same. They plan to sell their ‘defocused portfolio’ to third parties so as to completely exit from these segments in the near future. Further, they have identified a set of strategic initiatives that they are taking and have clearly stated how these initiatives will affect the overall ROE of the business.
Its easy to point out that the stock is cheap because of under-performance of the business that lacked focus, till recently that is. However, things appear to have changed and it seems that the numbers are only going to get better from here. Also, the focus of current government on rural upliftment, “housing for all by 2022” and a host of other initiatives for financial inclusion along with favourable macro economic scenario will act as huge tailwinds for the company. A hold for at least the next 10 years for me, unless of course the story changes or/ and the management starts to do silly things.
Market Price at the time of post: Rs. 104.75