L&T Finance Ltd — Q1 FY27 earnings call

Call held 13 Jul 2026

Management summary

L&T Finance delivered a strong Q1 FY27, achieving its highest ever quarterly PAT of ₹902 crores, up 29% YoY, and a 27% YoY growth in its consolidated book to ₹1,29,634 crores. This performance was supported by robust retail disbursements and improved RoA and RoE, driven by strategic focus on AI-powered underwriting and risk management. While NIMs saw a slight compression due to liquidity management, NIMs+Fees remained stable, and the company maintained a cautious approach in certain segments amidst macroeconomic uncertainties.

Highlights

  • Highest ever quarterly consolidated PAT of ₹902 crores, up 29% YoY.

  • Consolidated book crossed ₹1,29,634 crores, reflecting a healthy YoY growth of 27%.

  • RoA improved to 2.48%, up 11 bps YoY, and RoE increased to 12.71%, up 185 bps YoY.

  • Robust quarterly retail disbursements of ₹23,852 crores, up 36% YoY, driven by all lines of business.

  • Credit cost moderated to 2.54%, reflecting a sequential improvement of 10 bps.

  • NIMs + Fees remained stable at 10.47% despite a competitive operating environment.

  • Gold Finance business grew over 180% YoY to ~₹3,800 crores, with plans to deploy ~500 new branches in FY27.

Concerns

  • NIMs reduced by 24 basis points from 8.78% in Q4 FY26 to 8.54% in Q1 FY27, primarily due to rising debt-equity and higher surplus liquidity.

  • Caution exercised in SME and Gold Loans segments due to geopolitical uncertainties (West Asia war) and new RBI guardrails, leading to slower disbursements in April.

  • Geopolitical uncertainties and worries of an uneven monsoon/El Nino impact were acknowledged as potential volatilities.

Key financials

  1. Consolidated PAT ₹902 Cr +29%YoY
  2. Consolidated Book ₹1.30L Cr +27%YoY
  3. RoA 2.5% +0.11%YoY
  4. RoE 12.7% +1.8%YoY
  5. Retail Disbursements ₹23,852 Cr +36%YoY
  6. Credit Cost 2.5% -0.1%QoQ
  7. NIMs + Fees 10.5%
  8. NIMs 8.5% -0.24%QoQ
  9. WACB 7.2% +0.03%QoQ
  10. Debt-Equity 3.97× +0.24%QoQ
  11. Total Income Growth 29%
  12. PPOP Growth 35%

What they filed

Q1 FY27: revenue up 22.4%, net profit up 30.7% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue4,019 4,098 4,023 4,260 4,336 +8%4,578 +12%4,771 +19%5,213 +22%
EBITDA2,444 2,422 2,442 2,620 2,674 +9%— — —
Net profit697 626 636 701 735 +5%738 +18%809 +27%916 +31%
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.

Segment breakdown

Share of Book Size
Urban Finance (Overall) ₹63,615 Cr 33.5%
Rural Business Finance ₹32,493 Cr 17.1%
Home Loans / LAP ₹31,630 Cr 16.7%
Farmer Finance ₹17,514 Cr 9.2%
Personal Loan ₹16,917 Cr 8.9%
Two Wheelers ₹15,068 Cr 7.9%
SME Finance ₹8,884 Cr 4.7%
Gold Finance ₹3,829 Cr 2.0%

Capital allocation

high confidence
  • Debt Debt disclosed Cost 7.2%
    Actually, Weighted Average Cost of Borrowing (WACB) is up just 3 basis points between the two quarters, you know, moving from 7.17% to 7.20%.
  • Liquidity Liquidity disclosed Surplus liquidity of ₹4,200 Cr was maintained due to geopolitical situation, with overall liquidity at ₹13,000 Cr+. This was reduced to ₹9,000 Cr by quarter-end. LCR declined by 18 percentage points between quarters.
    One reason is of course increased borrowing to fund the growth and the other reason is also due to the geopolitical situation being a bit difficult on account of war in Iran, we had maintained slightly higher surplus liquidity of close to ₹4,200 Cr. The overall liquidity was ₹13,000 Cr +.

Guidance & targets

Growth

  • Book growth CAGR Growth · Lakshya period (5 years) · High confidence 20%+
    We had set ourselves a Book growth CAGR of 20%+ over the Lakshya period.

    — Sudipta Roy

Profitability

  • RoA Profitability · FY31 · High confidence 3.0-3.2%
    Our Return on Assets (RoA) target remains in the range of 3.0-3.2% for FY31.

    — Sudipta Roy

  • RoA threshold Profitability · Q4FY27 · High confidence 2.8%
    We remain committed to work on achieving the 2.8% RoA threshold in Q4FY27 as communicated earlier.

    — Sudipta Roy

  • RoE Profitability · FY31 · High confidence 16-18%
    Against a Lakshya 31 RoE target of delivering a Return on Equity (RoE) in the range of 16-18% by FY31, RoE increased to 12.71% in Q1FY27 from 10.86% (RoE after macro prudential provisions) in Q1FY26.

    — Sudipta Roy

Credit Cost

  • Credit Cost Credit Cost · Lakshya period · High confidence 2% or less
    Second, on the Credit Cost front, we will endeavour to drive Credit Costs down to a level of 2% or less over the Lakshya period.

    — Sudipta Roy

  • Credit Cost Credit Cost · Q4FY27 · High confidence 2% to 2.2%
    my first port of call is to get it to between 2% to 2.2%. That's my first port of call.

    — Sudipta Roy

Cost of Funds

  • WACB Cost of Funds · FY27 · Medium confidence 7.35% and 7.40%

    From 7.35% today

    So yearly WACB may actually go up from 7.35% for FY26 to maybe about anywhere between 7.35% and 7.40% that is what we are currently envisaging.

    — Sachinn Joshi

Margin

  • NIMs + Fees corridor Margin · Ongoing · High confidence 10% to 10.5%
    In terms of NIMs implications, you know, we stick to the corridor of 10% to 10.5%, which we have given.

    — Sachinn Joshi

Branch Expansion

  • Gold Finance new branches Branch Expansion · FY27 · High confidence ~500
    Following the launch of 200 branches in FY26, we are now working on deploying ~500 new branches in FY27, accelerating our velocity to ~1.4 branches addition daily.

    — Sudipta Roy

Technology Implementation

  • Project Cyclops in RBF vertical Technology Implementation · Before conclusion of FY27 · High confidence Completion
    We have started the work of implementing Project Cyclops in our RBF vertical and is expected to complete before the conclusion of FY27.

    — Sudipta Roy

  • Project Cyclops in Rural Business Finance and Mortgage businesses Technology Implementation · FY27 · High confidence Live
    We intend to take Project Cyclops live in our Rural Business Finance and Mortgage businesses during FY27.

    — Sudipta Roy

  • Project Nostradamus in RBF, SME and Farm businesses Technology Implementation · FY27 · High confidence Implementation
    Project Nostradamus is currently live in Two-Wheeler and Personal loans in a beta-mode and we intend to implement this for our RBF, SME and Farm businesses in FY27.

    — Sudipta Roy

  • Project Hercules rollout Technology Implementation · Q3FY27 · High confidence Rollout
    We are targeting rollout of this platform by Q3FY27.

    — Sudipta Roy

  • Cloud migration Technology Implementation · Starting Q3 and Q4 of FY27 · High confidence Migration of workloads from public to internal private cloud
    Moving forward, we are aggressively prepared for massive cloud consolidation, targeting the migration of workloads from public to our internal private cloud infrastructure starting in Q3 and Q4 of FY27.

    — Sudipta Roy

Business Development

  • Payments business build-out Business Development · Next three to four years · High confidence Continued build
    So, payments will be a step-by-step build, it will not be an all-rushing build, it will be a careful calibrated build which will continue to build for the next three to four years because this is something that we are committed to in long term as a goal for diversifying our fee revenues and this is something that we will deliver during the Lakshya 31 period.

    — Sudipta Roy

Risk Management

  • CGFMU coverage for Micro Finance Risk Management · Current year · High confidence 35% to 40%
    Just to add, since we are taking it for the first time, in this year itself, we will cover about 35% to 40% of the total disbursement that we make in the current year for Micro Finance.

    — Sachinn Joshi

What to watch in Q2 FY27

Gold Finance growth trajectory

Q2FY27
Current Disbursements up 26% YoY, book up 182% YoY, but April saw fall due to RBI guardrails.
Target Normal growth trajectory in Q2FY27.

Why it matters

Indicates successful adjustment to new RBI regulations and continued segment expansion, crucial for overall book growth.

I expect the Gold loans business to have a normal growth trajectory in Q2FY27 because that period of adjustment and learning in Q1FY27 is behind us.

Risks & concerns

  • Geopolitical uncertainties and global economic volatility

    medium

    Global economy navigating geopolitical uncertainties, fluctuations in energy prices, supply chain disruptions, and changing trade dynamics.

    Management acknowledged

  • Uneven monsoon and El Nino impact on rural economy

    medium

    Impending worries of an uneven monsoon coupled with the impact of El Nino, though current reservoir levels are sufficient and rural demand indicators remain resilient.

    Management acknowledged

  • Volatility in the economy leading to prudence over aggressive expansion

    medium

    Company chose disciplined underwriting and superior portfolio quality, proactively tightening credit guardrails and foregoing some potential disbursements.

    Management acknowledged

  • Potential regulatory changes in the insurance industry affecting commission income

    medium

    Aware of developments regarding insurance commissions, viewing it as an industry-wide issue, and factored into plans.

    Analyst acknowledged

  • RBI guardrails for Gold Finance business

    low

    New RBI guardrails led to a fall in origination volumes in April, requiring adjustment and learning.

    Management acknowledged

  • Competitive operating environment

    low

    Despite competitive pressures, the business model demonstrated resilience in NIMs + Fees.

    Management acknowledged

Q&A highlights

7 direct
NIMs vs NIMs+Fees and impact of liquidity Direct
So, we can see clearly that the NIMs have reduced by 24 basis points from 8.78% in Q4 to 8.54% in Q1FY27. The yields, if you look at, have actually gone up by one basis point, but our debt-equity has been rising, which is leading to interest costs going up by 25 basis points... However, what is worth noting is that this surplus has been deployed in various instruments on which we have also earned an income and which has been booked under the head fee and other income.

Clarifies the apparent discrepancy between declining NIMs and stable NIMs+Fees, attributing it to strategic liquidity deployment and rising cost of funds.

Asked by Kunal Shah

Personal Loan growth drivers and guardrails; slower SME/Gold Loan disbursements Direct
Personal Loans continue to, you know, do well and that is primarily because the sort of the thorough and disciplined execution of our implementations with the digital partners... On your question on SME and Gold Loans, yes, SME we have been cautious during this quarter primarily because, you know, we were cautious about the fallout of the, you know, West Asia war on certain business lines as well as certain sectors, so we have been cautious and we sort of on our own cut disbursements in some of the SME sort of cohorts.

Explains the strategy behind strong Personal Loan growth (digital partners, salaried focus) and the reasons for caution and slower growth in SME and Gold Loans (geopolitical risks, new RBI guardrails).

Asked by Kunal Shah

RoA/RoE improvement drivers and El Nino impact on rural portfolio Direct
Out of that I do believe that 20 basis points will come from the disappearance of the drag of the ARC portfolio and that will happen over a couple of years from now... I do believe that about 30 to 40 basis points will come from efficiency in credit cost as well as credit-related cost, which I call the cost of credit administration, specifically collections cost etc... I see nothing wrong in the economy. In fact, I was in Jabalpur about three weeks back and wherever I went, in fact the particular Two Wheeler dealer which is also one of the largest auto dealers in Jabalpur, he said that he has had a record May and June, he just does not have stocks.

Provides a detailed breakdown of how the company expects to achieve its RoA/RoE targets and offers a reassuring perspective on the potential impact of El Nino on the rural economy.

Asked by Avinash Singh

Opex trajectory and strategy for the new payments business Direct
I do believe that a large proportion of our urban businesses will see efficiencies in head count as well... Our business is not to burn money to try to get customers. There are certain organizations who give cashbacks on UPI etc. and burn money and try to get customers, that is not our model. Our model is to independently go, first and foremost serve our own customers.

Clarifies how AI investments will lead to opex efficiencies and outlines a differentiated, value-accretive strategy for the new payments business, avoiding cash-burn models.

Asked by Abhijit Tibrewal

Personal Loan competitors/yields and AI investments cost Direct
Our average yield remains at about 16% and plus... Overall, we have spent roughly about 38 Cr to build Cyclops and overall we have spent roughly about ₹33 Cr for Nostradamus and ₹37 Cr for Cyclops, but the fact is that we are still in the process... our overall IT cost is between about 100 to 120 Cr a quarter is our overall IT cost trajectory.

Provides insights into the competitive landscape and yield profile of Personal Loans, and quantifies the significant investment in AI platforms and ongoing IT costs.

Asked by Chintan Shah

Wholesale NPA increase and health of remaining book Direct
The GS3 small increase that you are referring to, is actually part of a settlement that we have already done and whatever hit is to be taken has been already factored in. So, there is no further increase, it's actually transitioning between the two quarters... As far as the other assets on the book are concerned, they are all standard assets, so we do not really expect any hits coming out of that.

Reassures investors that the reported increase in wholesale NPA is a one-off settlement effect and the remaining wholesale book is healthy, with no expected slippages impacting credit cost guidance.

Asked by Abhishek Murarka

FLDG model for Personal Loans and CGFMU/CGTMSE coverage strategy Direct
No, we don't work on a FLDG model with any one of them. So, it's completely our own credit... we started taking CGFMU coverage for our Micro Finance portfolio, especially, see, we have not taken it for 100% of our portfolio. So, we have done a sort of risk metrics analysis, and we are taking coverage on a certain section of our portfolio.

Highlights the company's commitment to its own credit underwriting standards for Personal Loans and a targeted, risk-based approach to government guarantee schemes (CGFMU/CGTMSE) for specific vulnerable cohorts.

Asked by Piran Engineer

3 min read 6 chapters

Detailed narrative

Strong Financial Performance and Growth Drivers

L&T Finance reported its highest ever quarterly consolidated Profit After Tax (PAT) of ₹902 crores in Q1 FY27, representing a 29% YoY growth. The consolidated book expanded by 27% YoY to ₹1,29,634 crores, driven by robust retail disbursements of ₹23,852 crores, which were up 36% YoY. This performance led to an improved Return on Assets (RoA) of 2.48% (up 11 bps YoY) and Return on Equity (RoE) of 12.71% (up 185 bps YoY), reflecting strong execution and a diversified retail franchise.

AI and Digital Transformation as Strategic Pillars

The company continues its aggressive push towards becoming an AI-native financial institution, leveraging over 1,000 technology and data science professionals. Key AI initiatives include Project Cyclops, an AI-powered underwriting engine now live in Two-Wheeler, SME, Farm, and Personal Loans, with planned expansion to Rural Business Finance and Mortgage in FY27. Project Nostradamus, an enterprise-wide portfolio intelligence tool, is in beta-mode for Two-Wheeler and Personal Loans and will be implemented for RBF, SME, and Farm businesses in FY27. Flagship co-pilots like Project Helios and Orion are streamlining underwriting and portfolio management, while Project Argus enhances fraud screening.

Segmental Performance Highlights

Rural Business Finance disbursements grew 24% YoY to ₹6,961 crores, with the book reaching ₹32,493 crores (up 22% YoY). Urban Finance, comprising Two-Wheelers, Personal Loans, and Mortgage Loans, saw a 57% YoY jump in disbursements to ₹10,787 crores, and its book grew 32% YoY to ₹63,615 crores. Personal Loans recorded stellar 126% YoY disbursement growth to ₹4,380 crores, with the book up 80% YoY to ₹16,917 crores. Gold Finance demonstrated exceptional growth, with its book size increasing by over 180% YoY to ~₹3,800 crores, supported by rapid branch expansion.

Credit Quality and Risk Management Focus

Credit cost moderated to 2.54%, showing a sequential improvement of 10 basis points, attributed to strengthened underwriting, collections excellence, and AI-led portfolio management. The company proactively tightened credit guardrails, foregoing ₹1,000-1,200 crores in potential disbursements to protect asset quality. L&T Finance is also participating in Central Government's Credit Guarantee Schemes (CGFMU and CGTMSE) for select cohorts of Rural Business Finance and SME portfolios to build an incremental safety net against cyclical volatility.

Macroeconomic Outlook and Liquidity Management

Despite global geopolitical uncertainties and concerns about an uneven monsoon/El Nino, L&T Finance remains confident in India's macroeconomic resilience. The company's on-ground assessment in rural geographies indicates normal economic momentum and sufficient reservoir levels. While NIMs saw a 24 bps reduction due to rising debt-equity and higher surplus liquidity, NIMs + Fees remained stable at 10.47%, as surplus liquidity was deployed in income-generating instruments. The Weighted Average Cost of Borrowing (WACB) increased marginally by 3 bps to 7.20%.

Strategic Objectives and Future Outlook

L&T Finance is focused on three key strategic objectives for FY27: driving cross-sell and up-sell using a proprietary multi-agentic framework, enhancing productivity through customized dashboards, and embedding a Tech DNA across the organization. The company aims to achieve a 2.8% RoA threshold by Q4 FY27 and targets a 3.0-3.2% RoA and 16-18% RoE by FY31. The new payments business, currently in a build-out phase, is expected to diversify fee revenues over the next three to four years, focusing on value-accretive agentic commerce models.

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