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    L&T Finance Ltd

    LTF
    Financial Services·19 Jan 2026
    Management Summary

    L&T Finance delivered a strong Q3 FY26, achieving its highest ever core PAT of ₹760 Cr, propelled by robust retail disbursements and significant growth in its retail book. The company demonstrated improved profitability through NIMs + Fees expansion and a notable moderation in credit costs, supported by resilient asset quality and recovery in microfinance. While one-time charges impacted reported PAT and RoA, management expressed confidence in achieving its long-term targets for asset quality and profitability, driven by digital initiatives and strategic segment focus.

    Highlights

    6

    • Highest ever quarterly core PAT of ₹760 Cr, up 21% YoY, before one-time exceptional impact.

    • Retail disbursements reached a record ₹22,701 Cr, growing 49% YoY and 20% QoQ.

    • Retail book grew to ₹1,11,990 Cr, up 21% YoY and 7% QoQ.

    • Consolidated NIMs + Fees improved 19 bps QoQ to 10.41%, driven by yield focus and efficient liability management.

    • Core credit cost from operations (excluding one-time charge) moderated to 2.74%, a 24 bps QoQ reduction.

    • Microfinance pan India '0 DPD' collection efficiency improved 20 bps to 99.70%.

    Concerns

    4

    • One-time exceptional impact of New Labour Code amounting to ₹29 Cr on PAT.

    • One-time charge of ₹23 Cr on certain co-borrower provisions impacting credit cost.

    • Consolidated RoA after exceptional items stood at 2.31%, down 10 bps QoQ.

    • Unsecured loan share currently at 44%, above the stated objective of 40%.

    What Changed2

    vs Q4 FY26

    Guidance items12 → 11 (-1)Risks discussed4 → 3 (-1)

    Key financials

    Single quarter

    15 metrics
    1. 01Core PAT₹760 Cr+21%YoY
    2. 02PAT (after exceptional)₹739 Cr+18%YoY
    3. 03Retail Disbursements₹22,701 Cr+49%YoY
    4. 04Retail Book₹1.12L Cr+21%YoY
    5. 05Consol Book₹1.14L Cr+20%YoY

    Segment breakdown

    Rural Business Finance
    ₹28,976 Cr26.2%
    Home Loans & LAP
    ₹28,682 Cr25.9%
    Farmer Finance
    ₹16,671 Cr15.1%
    Two-Wheeler Finance
    ₹13,913 Cr12.6%
    Personal Loans
    ₹12,810 Cr11.6%
    SME Finance
    ₹7,946 Cr7.2%
    Gold Finance
    ₹1,738 Cr1.6%
    Treemap· Share of Book Size

    Capital allocation

    1
    high confidence
    CategoryHeadline
    Liquidity

    Liquidity disclosed

    The company has ₹5,000 Cr in Security Receipts (SRs) on its balance sheet, with full resolution expected within 2-3 years. Management noted having 'surplus capital available' which is deployed into productive assets, including acquiring portfolios.

    Guidance & targets

    11
    CategoryTargetPriority
    Profitability
    RoA
    2.8%-3.0%
    		High
    Credit Cost
    Credit Cost Corridor
    2-2.2%
    		High
    Retailisation
    Retailisation Percentage
    >95%
    		High
    Retail Book Growth
    Retail Book CAGR
    25%
    		High
    NIMs + Fees
    NIMs + Fees Corridor
    10% to 10.5%
    		High
    Gold Loan
    Gold Loan Branches
    330+
    		High
    Unsecured Loan Share
    Secured:Unsecured Ratio
    60:40
    		Medium
    MFI Growth Rate
    MFI Business Growth Rate
    15% to 20%
    		Medium
    Project Cyclops Roll-out
    Personal Loan Business Roll-out
    Full roll-out
    		High
    Project Nostradamus Implementation
    Full stack implementation
    Completed
    		High
    Security Receipts Resolution
    Full Resolution of SRs
    Full resolution
    		Medium

    Credit Cost trajectory

    Next quarter and through FY27
    Current2.74% (core operations, excl. one-time charge)
    TargetContinued moderation towards 2-2.2% corridor

    Why it matters

    Key profitability driver, management expects unabated improvement.

    So, the slippages also have been coming down with every passing quarter. So, I do believe that the credit cost trajectory will continue to improve.

    How to verify

    key_financials.metrics[label='Core Credit Cost (excl. one-time charge)']

    Risks & concerns

    3
    RiskSeverity

    Impact of ECL model revisit on credit cost

    The annual ECL model revisit in Q4 FY27 could impact credit costs, but management anticipates a positive outcome due to seasoned Cyclops-underwritten book. — Analyst acknowledged

    medium

    Macro-prudential provisions build-back

    Management aims to build back macro-prudential provisions as fast as possible, especially from SR resolutions, and will apply them to the overall unsecured asset business. — Management acknowledged

    low

    Unsecured loan portfolio quality from digital tie-ups

    Concerns about asset quality in Personal Loans from digital tie-ups were addressed by management emphasizing focus on prime segments and positive impact of Project Cyclops, with gross non-starter rate at 2.69% in December. — Analyst downplayed

    medium

    Q&A highlights

    8

    “So, FY27 Q4, we believe will be a much better revisit. We are, in fact, waiting for that day and that quarter because by then, most of our book would have been seasoned through the using the Cyclops underwriting tool, which would mean that directionally, the overall models would start taking into account the benefit flowing through slowing down of slippages, which are quite evident.”

    Clarifies the long-term outlook for credit costs and the anticipated positive impact of Project Cyclops on future ECL model adjustments.

    asked by Mahrukh Adajania

    2 min read6 chapters

    Detailed Narrative

    01

    Strong Q3 FY26 Performance Driven by Retail Growth

    L&T Finance delivered its highest ever quarterly core PAT of ₹760 Cr, marking a 21% YoY increase, despite a one-time📎 exceptional impact of ₹29 Cr from the New Labour Code. This was fueled by record retail disbursements of ₹22,701 Cr, up 49% YoY and 20% QoQ, leading to a retail book growth of 21% YoY to ₹1,11,990 Cr. The company's overall consolidated book reached ₹1,14,285 Cr, growing 20% YoY and 7% QoQ.

    02

    Margin Expansion and Moderating Credit Costs

    Consolidated NIMs + Fees improved by 19 bps QoQ to 10.41%, driven by stable yields, reduced cost of borrowings (lowest ever WACB at 7.25%), and efficient liability management. Credit cost moderated from 2.98% in Q2FY26 to 2.83% in Q3FY26, a 15 bps QoQ reduction. Excluding a one-time📎 charge of ₹23 Cr for co-borrower provisions, the core credit cost from operations was 2.74%, a 24 bps QoQ reduction, aligning with the target of 2-2.2% by Q4FY27.

    03

    Resilient Asset Quality and Microfinance Recovery

    The core retail franchise demonstrated resilience, with consolidated GS3 and NS3 maintained at 3.19% and 0.92% respectively. The microfinance sector showed sustained recovery, with Karnataka monthly collection efficiency improving from 99.18% in September'25 to 99.56% in December'25 and pan-India '0 DPD' collection efficiency rising 20 bps to 99.70%. This improvement led to NIL utilization of macro-prudential provisions during the period.

    04

    Digital Initiatives and Project Cyclops Impact

    Project Cyclops is now implemented in Personal Loans and will be fully rolled out by Q4FY26, showing early green shoots in Two-Wheeler, Farm, and SME businesses with Net Non-Starter (NNS) rates significantly reduced (e.g., Two-Wheeler NNS from 2.36% in Dec’24 to 0.41% in Dec'25). Project Nostradamus, an AI-driven real-time portfolio management engine, went live in beta mode for Two-Wheeler Finance, and two new AI initiatives, Project Helios and Project Orion, are being implemented to enhance underwriting and portfolio monitoring.

    05

    Gold Loan Business Expansion and Strategic Focus

    The newly acquired Gold Loan business gained significant momentum, with quarterly disbursements of ₹1,408 Cr, up 43% QoQ, and a closing book of ₹1,738 Cr. The company expanded its geographical footprint by adding 64 new Gold Loan branches this quarter, with plans to establish over 330+ branches by the end of FY26. This expansion is central to the strategy of integrating Gold Finance into multi-product 'Sampoorna' branch network, with 11 new Gold Loan branches already in this format.

    06

    Lakshya 2026 Goals Progress and Future Outlook

    L&T Finance achieved 98% retailisation in Q1FY26, maintaining it in Q3FY26, and exceeded its retail book growth target with a 28% CAGR between FY22-FY25 against a 25% target. The company remains confident in achieving its RoA target of 2.8%-3.0% by Q4FY27 and its credit cost target of 2-2.2% by Q4FY27. The full resolution of ₹5,000 Cr in Security Receipts is expected within 2-3 years, with Lakshya 31 plans to be announced in the April quarter.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.