Laxmi India Finance Limited — Q1 FY26 earnings call

Call held 14 Aug 2025

Management summary

Laxmi India Finance Limited reported a strong Q1 FY26 with significant AUM and profit growth, driven by strategic branch expansion and a focus on secured MSME and vehicle lending. Despite a slight Q-o-Q dip in Net Interest Income due to increased NPAs and market liquidity tightness, asset quality remains robust. The recent IPO is expected to further enhance capital, improve credit ratings, and support future growth targets, including scaling AUM to ₹5,000-6,000 crores in 3-4 years.

Highlights

  • AUM grew by 29.99% YoY to ₹1,346 crores, demonstrating strong business expansion.

  • Profit Before Tax (PBT) increased by 46% YoY to ₹12.77 crores, and Profit After Tax (PAT) grew by 45.77% YoY to ₹9.62 crores, indicating robust profitability.

  • Asset quality remains strong with Gross NPA at 1.28% and Net NPA at 0.67%, supported by a high Provision Coverage Ratio (PCR) of 47.09%.

  • Cost of borrowing improved by 33 basis points to 11.82%, enhancing Net Interest Margin (NIM) which stands at 9.99%.

  • Successful IPO listing on August 5, 2025, providing capital infusion expected to boost growth and improve credit rating from A- to A-positive.

Concerns

  • Net Interest Income (NII) declined Q-o-Q from ₹40 crores to ₹34 crores, attributed to a slight increase in NPAs and overall liquidity tightness in the market.

  • Operating expenses, particularly employee costs, increased due to aggressive branch expansion, impacting short-term profitability.

  • AUM per branch is currently lower than peers due to the recent addition of many new branches, with optimization expected after 3 years.

Key financials

  1. AUM ₹1,346 Cr +30%YoY
  2. PBT ₹12.77 Cr +46%YoY
  3. PAT ₹9.62 Cr +45.8%YoY
  4. Gross NPA 1.3%
  5. Net NPA 0.67%
  6. NIM 10%
  7. Cost of Borrowing 11.8%
  8. PCR 47.1%
  9. Collection Efficiency 94.9%

What they filed

Q1 FY27: revenue up 34.3%, net profit up 70.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue59 61 74 70 76 +29%79 +30%93 +26%94 +34%
Net profit9 6 15 10 9 +0%10 +67%21 +40%17 +70%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Liquidity Cash ₹15.96 Cr Total liquidity available was ₹73.96 crores as of June 25. Post IPO, the company has approximately ₹225 crores in cash flow, sufficient for 4-5 months of average monthly disbursements of ₹50-55 crores.
    Our cash and cash balance available on June 25 is INR15.96 crores and total Liquidity available INR73.96 crores. Cash flow will be around the INR225 crores what we are having as on date. So this is cash flow what we are having. And I think so this can be deployed in a because our average monthly disbursement is almost INR50 crores, INR55 crores. So we have a good liquidity of at least 4 to 5 months.

Guidance & targets

Growth

  • Overall Growth Growth · FY26 · High confidence 35-40%
    So we have a good growth plan like for almost 35% to 40% growth we are assuming for this financial year

    — Deepak Baid

Profitability

  • Profit Growth Profitability · FY26 · High confidence up by 50%
    and profit almost by -- up by 50%

    — Deepak Baid

  • Return on Equity (ROE) Profitability · coming years · High confidence 15-15.5%
    What we expect is almost a return on equity is 15% to 15% around in the coming years.

    — Deepak Baid

Branch Network

  • New Branches Branch Network · FY26 · High confidence 40-45% more branches
    and opening some more branches to almost 45% to 50%, 40% to 45% more branches we are planning to open in our coming years.

    — Deepak Baid

  • New Branches Branch Network · FY26 · High confidence 30-35 branches
    So approximately 30 to 35 branches will be added in this financial year.

    — Kuldeep Singh Sikarwar

Asset Quality

  • NPA Asset Quality · future · High confidence below 1%
    we'll be able to recover these amounts and we can get our NPAs on a below 1% in future.

    — Deepak Baid

Credit Cost

  • Credit Cost Range Credit Cost · FY26 · Medium confidence floated within the same range
    So in March 25, it was 1.17%, and in June 25, it is 1.13%. So we are expecting it will be floated within the same range.

    — Gopal Krishan Sain

AUM

  • AUM Size AUM · 3-4 years · High confidence ₹5,000-6,000 crores
    So with this growth, I think so, within this 3 to 4 years or 3 to 5 years, we can be easily touch to INR5,000 crores to INR6,000 crores AUM size.

    — Deepak Baid

What to watch in Q2 FY26

NPA Trend

next quarter / future
Current Gross NPA 1.28%, Net NPA 0.67%
Target NPA below 1%

Why it matters

Asset quality is paramount for financial services; tracking the reduction towards the sub-1% target will indicate effective risk management and improving market conditions.

So we believe that we will be able to cover all in the coming quarters. ... we'll be able to recover these amounts and we can get our NPAs on a below 1% in future.

Risks & concerns

  • Monetary instruments effect / liquidity crunch

    medium

    The overall tightness in monetary instruments and liquidity crunch in the market impacted Q1 FY26, contributing to the slight increase in NPAs.

    Management acknowledged

  • Net Interest Income (NII) decline Q-o-Q

    low

    NII saw a slight dip from ₹40 crores to ₹34 crores Q-o-Q, primarily due to a 10-15 bps increase in NPAs, though management expects recovery.

    Management acknowledged

  • Increased operating expenses

    low

    Operating expenses, particularly employee costs, rose due to the ongoing branch expansion strategy, which is a planned investment for future growth.

    Analyst acknowledged

  • Lower AUM per branch compared to peers

    low

    The AUM per branch is currently lower due to the recent addition of many new branches; optimization and higher AUM per branch are expected after 3 years of operation.

    Analyst acknowledged

  • Collateral with title disputes

    low

    Management stated they have a stringent process for assessing properties and do not consider collaterals with any kind of title disputes, avoiding such cases.

    Analyst downplayed

Q&A highlights

6 direct
Decline in Net Interest Income Q-o-Q Partial
Akash, yes, a little bit dip is because of the high, only 10 to 15 bps high on our NPA side. But we have seen that interest income has a little bit processed off that gap. Disbursement is on a higher side. So we have raised the disbursement of INR164 crores, which is 7.24%. So a little bit consensus, because this is like industry, a little bit NPA is high, but we are confident on our NPA numbers because we have a good security and our NPA is very low. So we believe that we will be able to cover all in the coming quarters.

Analyst questioned the Q-o-Q decline in NII despite Y-o-Y growth, and management attributed it to a slight NPA increase and market liquidity, expressing confidence in recovery.

Asked by Akash Jain

Increase in operating expenses and employee cost Direct
So Akash, as I told that we are having a direct connect, we open our direct branches in our Tier 2, Tier 3 cities of the state. So we have a plan. We plan like we open our branches and we directly connect for customers. So we so this is because of that, we have open branches in our last year also almost -- how much branches we have added, 35? ... 23 branches. So 23 branches we have added and this year we have a plan to add almost 35 to 44 branches in the coming years.

Analyst inquired about rising operating expenses, and management clarified it's due to strategic branch expansion, which is a key growth driver.

Asked by Akash Jain

Branch break-even period Direct
So Akash, this would be, our breakeven actually achieves on the end of the AUM of INR1.5 crores to INR2 crores. The breakeven consists of the branch expenses, the employee cost, infrastructure running cost and the revenue of operations at the branch level.

Provides insight into the operational efficiency and profitability timeline for new branches, which are a significant part of the company's growth strategy.

Asked by Akash Jain

Credit cost outlook for FY26 Direct
Actually, the credit cost range depends on the several factors, like macroeconomic factor, portfolio behavior, collection pattern. So in March 25, it was 1.17%, and in June 25, it is 1.13%. So we are expecting it will be floated within the same range.

Analyst sought guidance on credit cost, a critical metric for financial services, and management provided a stable outlook based on current trends.

Asked by Jehan

Lower AUM per branch compared to peers Partial
Yes, sure, but we have recently added number of branches. Last year also, 23 branches were added.. So these incremental number of branches definitely will reduce the AUM per branch, but the optimization will happen after 3 years of opening the branch. So our branches, which are more than 3 years old, are having good AUM base per branch. But definitely, this will also improve. And yes, this growth will not that much because every year we have a plan to increase the branches.

Analyst challenged the company's efficiency metric, and management explained it as a temporary effect of rapid expansion, with future optimization expected.

Asked by Jehan

Recovery mechanism in case of default Direct
Yeah, so Akash, we have a very strong in-house team who's visiting the customers and getting this collection done. So we are using the application where we can track the collection, we can track the executives, and we can track the customer payments. So here we are using different, different like after default, we have a telecaller team who calls the customers, we have a field team who visit the customers and collect the money, and maximum amount is collected through API. ... So with this, we have a plan to do now, we are coming up with new application that is a UPI match. Now in India, maximum transaction is done through UPI. So what we are planning is that we are connecting their UPI to our UPI match. So that will improve our collection efficiency and maximum collection will be done through UPI side.

Analyst inquired about the critical aspect of recovery, and management detailed their robust in-house and tech-driven collection process, including future UPI integration.

Asked by Akash Jain

NPA trend over next couple of quarters Direct
So we have already explained that NPA trend will definitely reduce as the monetary instruments are liberal, the trends in the industry is growing up, the liquidity in the market, so the repayment behavior, the payment capacity of the customers are increasing. So definitely this trend will lower down in future.

Analyst sought forward-looking guidance on asset quality, and management expressed confidence in a declining NPA trend due to improving macroeconomic conditions.

Asked by Aditi Roy

Impact of IPO money on profitability and ROE Direct
Yes, of course. Because our average lending rate is 21.5% And this is a complete secured book, we are building it. So we are having a secured lending site with at a 21%, 21.5% is a very good. I think so the good IR and we are able to make a good NIM. So of course with this IPO money and this will increase the profitability. What we expect is almost a return on equity is 15% to 15% around in the coming years.

Analyst questioned the financial benefits of the recent IPO, and management confirmed expectations of increased profitability and a target ROE of 15-15.5%.

Asked by Anonymous Attendee

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Detailed narrative

Q1 FY26 Financial Performance Highlights

Laxmi India Finance Limited reported a robust Q1 FY26, with Assets Under Management (AUM) growing by 29.99% year-on-year to ₹1,346 crores. Profit Before Tax (PBT) saw a significant increase of 46% to ₹12.77 crores, and Profit After Tax (PAT) grew by 45.77% to ₹9.62 crores. The Net Interest Margin (NIM) stood at 9.99%, and the Return on Assets (RoA) was 2.75%, with Return on Net Worth at 14.67%. The cost of borrowing improved by 33 basis points to 11.82%, reflecting better financial health.

Asset Quality and Recovery Mechanism

The company maintained strong asset quality with a Gross NPA of 1.28% and Net NPA of 0.67%, supported by a Provision Coverage Ratio (PCR) of 47.09%. Management expressed confidence in reducing NPAs below 1% in the future, citing improving monetary conditions and customer repayment behavior. The recovery mechanism is robust, utilizing an in-house team, telecallers, field visits, and API integration for tracking and collection. Plans are underway to integrate UPI for enhanced collection efficiency, aiming for maximum collection through this channel.

Strategic Growth and Branch Expansion

Laxmi India Finance is focused on expanding its presence in semi-urban and rural markets, with operations spread across five states and a network of 159 branches. The company plans to add 30-35 new branches in FY26, aiming for 40-45% more branches. This expansion, while increasing operating expenses in the short term, is expected to drive future growth. Each new branch is anticipated to break even at an AUM of ₹1.5-2 crores, with optimization expected within three years of opening.

Impact of Recent IPO and Capital Infusion

Following its successful IPO on August 5, 2025, the company now has approximately ₹225 crores in cash flow, providing liquidity for 4-5 months of average monthly disbursements. This capital infusion is expected to significantly boost profitability and improve the Return on Equity (ROE) to 15-15.5% in the coming years. The company's credit rating has already improved from A- to A-positive, which will further reduce the cost of borrowing by an estimated 100-125 basis points in the coming months.

Future Outlook and Long-Term Vision

The company projects an overall growth of 35-40% for FY26, with profit expected to increase by 50%. The long-term vision includes scaling the AUM to ₹5,000-6,000 crores within the next 3-4 years, driven by continued focus on secured MSME and vehicle finance segments. Management emphasized their tech-driven approach, utilizing various applications for loan origination, management, and collection, to ensure efficiency and robust asset quality.

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