L&T Infrastructure Finance Company Limited

Ratings Facilities Commercial Paper Details of instruments/facilities in Annexure-1 L&T Infrastructure Finance Company Limited November 10, 2017 Amount (Rs. crore) 11,000.00 (Rs. Eleven thousand crore only) Rating 1 CARE A1+ (A One Plus) Rating Action Reaffirmed Detailed Rationale & Key Rating Drivers The ratings factor in strong parentage of L&T Infrastructure Finance Company Limited (LTIFCL) by being a wholly owned subsidiary of L&T Finance Holding Limited (LTFHL), the flagship financial services holding company of the L&T group. By virtue of its parentage, LTIFCL benefits from group synergies in the form of business support from L&T ecosystem; L&T brand identity, integrated treasury, and capital, managerial and operational support. The ratings also take into account LTIFCL s comfortable capitalization levels, diversified resources profile as well as adequate liquidity position. The rating is, however, constrained by low profitability and asset quality pressures. Continued support from the parent, asset quality, capitalization levels and profitability are LTIFCL s key rating sensitivities. Detailed description of the key rating drivers Key Rating Strengths Strong parentage, group synergies and brand identity L&T Infrastructure Finance Ltd. (L&T Infra) is a wholly-owned subsidiary of L&T Finance Holdings Ltd (LTFHL), the flagship holding company of the financial services business of the Larsen and Toubro group and a subsidiary of Larsen & Toubro Limited (L&T). L&T, one of India s leading engineering companies, is the ultimate parent of LTIFC. As on September 30, 2017, L&T held 64.21% stake in L&TFHL. By virtue of parent-subsidiary relationship, L&T Infra benefits from group synergies in the form of business support from the L&T ecosystem with respect to avenues for sourcing of loans, as well as capital, managerial and operational support from parent. Besides, the company also benefits from synergies arising out of L&T s expertise in the infrastructure domain accumulated over the years in Engineering & Construction fields which enables the company in understanding as well as providing financing solutions across all the infrastructure sectors. In addition, shared brand linkages with the L&T group and access to common group treasury help the company to raise resources at competitive rates. Strong resource raising ability through integrated treasury at the group level The financial services companies of the group (under LTFHL) have a common treasury, which is responsible for raising resources for different businesses under various companies. The common treasury provides the companies strength to raise funds at competitive rates through diversified avenues of funding. Comfortable capitalization level LTIFCL has comfortable capitalization level as the Total CAR and Tier I CAR stood at 19.69% (FY16: 19.86%) and 12.89% (FY16: 13.95%) respectively as on March 31, 2017. The capitalization levels were higher than the minimum regulatory requirement of 15% CAR. As on September 30, 2017, company s CAR was 21.56% with Tier I ratio of 14.15%. Diversified borrowing profile and comfortable liquidity position L&T Infrastructure Finance s borrowings constitute mainly of long term funds in the nature of term loans from banks (46%) and NCDs (41%). Loans from banks constitute the majority of the borrowings constituting 46% of borrowing as on Mar.31, 2017 [P.Y.: 54%] while market borrowings comprising of NCDs around 41% of borrowings (P.Y.: 32%). The ALM profile of L&T Infra as on March 31, 2016 is comfortable in the short term period up to 1 year. L&T Infra has unutilised bank lines of Rs.2,152.36 crore to meet any liquidity requirements as on March 31, 2017. In addition, the company has a line of credit of Rs.1,000 crore from ultimate parent L&T Ltd. which provides comfort to the liquidity profile. 1 Complete definition of the ratings assigned are available at www.careratings.com and other CARE publications 1 CARE Ratings Limited

Key Rating Weaknesses Low profitability L&TIFCL s Return on Average Total Assets (ROTA) was 0.17% in FY17 as compared to 1.07% in FY16. The company reported PAT of Rs.42 crore on total income of Rs.2,678crore in FY17 as against PAT of Rs.240 crore on total income of Rs.2,436 crore in FY16. During H1FY18, company s PAT was Rs.70 crore on a total income of Rs. 1,384 crore. The profitability declined as company had made voluntary provisions to strengthen the balance sheet and to mitigate the transitioning impact to new NPA recognition norms in FY18. Asset quality pressure Gross NPA and Net NPA ratios increased from 2.36% & 1.66% respectively as on March 31, 2016 (on 150+DPD basis) to 5.30% & 2.91% respectively as on March 31, 2017 (on 120+DPD basis) as on March 31, 2016. Net NPA to Tangible Net worth ratio was 24.47% as on March 31, 2017 as against 12.86% as on March 31, 2016. Outstanding security receipts and standard restructured assets as a proportion to net advances stood at 2.04% [PY: 0.88%] and 6.37% [PY: 6.24%] respectively as on March 31, 2017. As on September 30, 2017, the gross NPA and net NPA ratio of the company were 5.50% and 2.80% respectively. Net NPA to net worth was 20.33% as on September 30, 2017. Analytical approach: CARE has analysed the consolidated financial statements of L&T Finance Holdings & L&T Infrastructure Finance Company Limited owing to financial and operational linkages between the parent and its subsidiaries and common management. Applicable Criteria Criteria on assigning Outlook to Credit Ratings CARE Policy on Default Recognition Rating Methodology: Factoring Linkages in Ratings CARE's Criteria for NBFC Financial ratios - Financial Sector About the Company L&T Infrastructure Finance Company Ltd. Incorporated in April 2006, LTIFCL is a 100% subsidiary of L&T Finance Holdings Ltd., which is a subsidiary of Larsen & Toubro Limited (L&T). LTIFCL provides solutions in the infrastructure financing space (energy, transport, communication, social and commercial infrastructure and others) by effectively leveraging L&T s domain knowledge in engineering & construction fields, through debt, subordinated debt, quasi-equity funding and equity participation, in addition to offering syndication and advisory services. It is registered as a non-deposit taking, systemically important (ND-SI) NBFC under the RBI Act and further classified as Infrastructure Finance Company (IFC) based on the regulatory framework prescribed by RBI. In June 2011, L&T Infra was conferred a Public Financial institution (PFI) status, that allows the company access to the SARFAESI Act, 2002 for recoveries from delinquent customers. LTIFCL has four offices at Mumbai, Delhi, Chennai and Hyderabad. As on September 30, 2017, LTIFC s had a net loan portfolio of Rs. 18,962 crore primarily in energy sector projects. Furthermore, the company has been consciously increasing the share of lower risk operational projects in its loan portfolio. Brief Financials (Rs. crore) FY16 (A) FY17 (A) Q1FY18 (UA) Total income 2,436 2,678 680 PAT 240 42 18 Interest coverage (times) 1.20 1.01 1.04 Total Assets 24,034 24,529 23,930 Net NPA (%) 1.66^ 2.96 * 3.16 # ROTA (%) 1.07 0.17 0.30 A: Audited ^@150dpd; *@120dpd; #@ 90dpd About L&T Finance Holding Limited (parent company) L&TFHL (erstwhile L&T Capital Holdings Ltd.) is RBI registered Non-Banking Finance Company - Core Investment Company (NBFC CIC) and holding company for the financial entities of the L&T group. The board and senior management of 2 CARE Ratings Limited

L&TFHL has representation from the senior management of L&T. The company came up with an Initial Public Offer (IPO) during FY12 (refers to the period April 01 to March 31) and as on September 30, 2017, L&T held 64.21% equity stake in L&TFHL. The group has three key business segments, namely rural finance (comprising farm equipment, two wheeler and microfinance), housing finance (comprising home loans, LAP and real estate finance) and wholesale lending (comprising infra finance and structured corporate loans). Brief Financials (Rs. crore) FY16 (A) FY17 (A) Q1FY18 (A) Total income 7,471 8,572 2,366 PAT(after share of profit and minority interest) 854 1,042 309 Interest coverage (times) 1.51 1.59 1.66 Total Assets (adjusted for Deferred Tax assets) 63,392 71,759 73,720 Net NPA (%) 2.05^ 2.89 $ 3.31* ROTA (%) (PAT/Average Total Assets) 1.48 1.54 1.70 A: Audited; ^at 150 d-p-d, $ at 120 d-p-d, #at 90 d-p-d Status of non-cooperation with previous CRA: Not Applicable Any other information: Not Applicable Rating History for last three years: Please refer Annexure-2 Note on complexity levels of the rated instrument: CARE has classified instruments rated by it on the basis of complexity. This classification is available at www.careratings.com. Investors/market intermediaries/regulators or others are welcome to write to care@careratings.com for any clarifications. Analyst Contact: Name: Abhishek Gupta Tel: 022-67543 558 Mobile: +91-9967750444 Email: abhishek.gupta@careratings.com **For detailed Rationale Report and subscription information, please contact us at www.careratings.com About CARE Ratings: CARE Ratings commenced operations in April 1993 and over two decades, it has established itself as one of the leading credit rating agencies in India. CARE is registered with the Securities and Exchange Board of India (SEBI) and also recognized as an External Credit Assessment Institution (ECAI) by the Reserve Bank of India (RBI). CARE Ratings is proud of its rightful place in the Indian capital market built around investor confidence. CARE Ratings provides the entire spectrum of credit rating that helps the corporates to raise capital for their various requirements and assists the investors to form an informed investment decision based on the credit risk and their own risk-return expectations. Our rating and grading service offerings leverage our domain and analytical expertise backed by the methodologies congruent with the international best practices. Disclaimer CARE s ratings are opinions on credit quality and are not recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell or hold any security. CARE has based its ratings/outlooks on information obtained from sources believed by it to be accurate and reliable. CARE does not, however, guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. Most entities whose bank facilities/instruments are rated by CARE have paid a credit rating fee, based on the amount and type of bank facilities/instruments. In case of partnership/proprietary concerns, the rating /outlook assigned by CARE is based on the capital deployed by the partners/proprietor and the financial strength of the firm at present. The rating/outlook may undergo change in case of withdrawal of capital or the unsecured loans brought in by the partners/proprietor in addition to the financial performance 3 CARE Ratings Limited

and other relevant factors. Annexure-1: Details of Instruments/Facilities Name of the Date of Instrument Issuance Commercial Paper- Commercial Paper Coupon Rate Maturity Date Size of the Issue (Rs. crore) Rating assigned along with Rating Outlook - - 7days -1 year 11,000.00 CARE A1+ Annexure-2: Rating History of last three years Sr. No. Name of the Instrument/Bank Facilities 1. Short Term Instruments-CP/STD 2. Debentures-Non 3. Bonds-Infrastructure Bonds 4. Fund-based - LT-Term Loan 5. Fund-based - LT- Working Capital Limits 6. Non-fund-based - LT- BG/LC 7. Bonds-Infrastructure Bonds Type Current Ratings Amount Rating Outstanding (Rs. crore) ST 11000.00 CARE A1+ assigned in 2017-2018 Rating history assigned in 2016-2017 - 1)CARE A1+ 2)CARE A1+ 3)CARE A1+ (16-Sep-16) assigned in 2015-2016 assigned in 2014-2015 1)CARE A1+ 1)CARE A1+ (14-Dec-15) 2)CARE A1+ (17-Nov-15) 3)CARE A1+ (24-Apr-15) LT 8000.00 CARE - 1)CARE 1)CARE AA+ 1)CARE AA+ (17-Nov-15) 3)CARE AA+ (16-Sep-16) LT - - - 1)Withdrawn 1)CARE AA+ 1)CARE AA+ (16-Sep-16) (17-Nov-15) LT - - - 1)Withdrawn 1)CARE AA+ 1)CARE AA+ (16-Sep-16) (17-Nov-15) LT 1800.00 CARE - 1)CARE 1)CARE AA+ 1)CARE AA+ (17-Nov-15) 8. Bonds-Subordinated 9. Debt-Perpetual Debt LT 400.00 CARE - 1)CARE AA; 1)CARE AA 1)CARE AA AA; 2)CARE AA (17-Mar-16) 2)CARE AA (14-Dec-15) 3)CARE AA (17-Nov-15) 10. Debentures-Non 11. Debentures-Non (14-Oct-14) 12. Debt-Subordinate Debt (29-Dec-14) 4 CARE Ratings Limited

13. Debentures-Non LT 9500.00 CARE 14. Debt-Subordinate Debt LT 1500.00 CARE 15. Debt-Subordinate Debt LT 200.00 CARE 16. Commercial Paper- Commercial Paper (IPO Financing) ST 5000.00 CARE A1+ - 1)CARE 1)CARE (17-Jul-17) 1)CARE 1)CARE AA+ 1)CARE AA+ (14-Dec-15) (29-Dec-14) (17-Nov-15) 3)CARE AA+ (24-Apr-15) 1)CARE AA+ 1)CARE AA+ (17-Nov-15) (05-Feb-15) (24-Apr-15) 1)CARE (17-Jul-17) - - - - - - - 5 CARE Ratings Limited

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