L&T Finance Ltd — Q4 FY26 earnings call

Call held 5 May 2026

Management summary

L&T Finance delivered a strong Q4 and full-year FY26, achieving its highest-ever annual PAT and record retail disbursements, driven by robust growth across all retail segments and effective AI-led underwriting. While the Lakshya 2026 RoA target was missed due to past microfinance challenges, the company has set ambitious Lakshya 2031 goals and provided positive FY27 guidance, emphasizing continued growth, stable margins, and further credit cost reduction. Macroeconomic headwinds like geopolitical tensions and El Niño remain watch factors.

Highlights

  • Highest ever annual PAT of ₹3,003 Cr (excl. one-time impact), up 14% YoY, demonstrating strong full-year performance.

  • Q4FY26 PAT of ₹807 Cr, up 27% YoY, indicating robust quarterly profitability.

  • Record quarterly retail disbursements of ₹24,107 Cr, a 62% YoY increase, reflecting strong business momentum.

  • Retail book grew 26% YoY to ₹1,19,508 Cr, and consolidated book grew 25% YoY to ₹1,21,728 Cr, showcasing significant portfolio expansion.

  • Consolidated RoA improved by 18 bps YoY to 2.40% in Q4FY26, and credit costs moderated to 2.64%, a 19 bps QoQ reduction, driven by AI-led underwriting.

Concerns

  • The Lakshya 2026 RoA target of 2.8-3% was not achieved (2.4% in Q4FY26) due to the microfinance crisis, though a target of 2.8% is set for Q4FY27.

  • Ongoing geopolitical tensions (West Asia conflict) and potential El Niño conditions pose downside risks to the macroeconomic outlook and rural economy, requiring continuous vigilance.

Key financials

4 periods

Headline

  • Consolidated PAT (excl. one-time)
    ₹3,003 Cr
    YoY +14%
  • Quarterly Retail Disbursements
    ₹24,107 Cr
    YoY +62%
  • Annual Retail Disbursements
    ₹83,213 Cr
    YoY +39%
  • Retail Book
    ₹1.20L Cr
    YoY +26%
  • Consolidated Book
    ₹1.22L Cr
    YoY +25%

Q4FY26

  • Consolidated PAT
    ₹807 Cr
    YoY +27%
  • Consolidated NIMs+Fees
    10.5%
    YoY +3.1% QoQ +0.58%
  • Consolidated RoA
    2.4%
    YoY +0.18%
  • Consolidated RoE
    11.7%
    YoY +1.6%
  • Credit Costs
    2.6%
    QoQ -0.19%

FY26

  • Consolidated NIMs+Fees
    10.3%
    YoY -2.5%

FY26, after one-time

  • Consolidated RoA
    2.4%
    YoY -0.07%
  • Consolidated RoE
    11.3%
    YoY +0.38%

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

SegmentQuarterly DisbursementsAnnual DisbursementsBook Size
Rural Business Finance₹7,208 Cr₹25,882 Cr₹30,805 Cr
Farmer Finance₹2,037 Cr₹8,674 Cr₹16,970 Cr
Urban Finance (Overall)₹9,850 Cr₹34,514 Cr₹59,048 Cr
Two Wheelers₹2,930 Cr₹10,787 Cr₹14,372 Cr
Personal Loans₹3,786 Cr₹12,220 Cr₹14,666 Cr
Home Loans / LAP₹3,134 Cr₹11,507 Cr₹30,009 Cr
SME Finance₹1,838 Cr₹6,130 Cr₹8,507 Cr
Gold Finance₹2,779 Cr₹6,700 Cr—
Wholesale Business———

Guidance & targets

Growth

  • Book growth CAGR Growth · Lakshya 2031 period · High confidence 20%+
    We will attempt a Book growth CAGR of 20%+ over the Lakshya period

    — Sudipta Roy

  • AUM growth Growth · FY27 · High confidence over 20%
    As we enter FY27, the first year of our 5-year strategic plan Lakshya 2031, we expect the momentum gain in FY26 to sustain, with AUM growth of over 20% supported by robust consumer demand in urban finance, gold loans and our rural franchise, while maintaining a calibrated and quality-led approach to expansion.

    — Sudipta Roy

Profitability

  • Credit Costs Profitability · Lakshya 2031 period · High confidence 2% or less
    We will endeavor to drive Credit Costs down to a level of 2% or less

    — Sudipta Roy

  • Return on Assets (RoA) Profitability · Lakshya 2031 period · High confidence 3.0% to 3.2%
    We will target to reach a Return on Assets in the range of 3.0% to 3.2%

    — Sudipta Roy

  • Return on Equity (RoE) Profitability · Lakshya 2031 period · High confidence 16% to 18%
    We will strive to deliver a Return on Equity in the range of 16% to 18%

    — Sudipta Roy

  • Credit costs Profitability · Q4FY27 · High confidence 2% to 2.2%
    We expect our NIMs+Fees to remain stable in our guided range of 10% to 10.5%, while credit costs should trend lower in the range of 2% to 2.2% by Q4FY27 as newer portfolios season and our Al-led underwriting frameworks mature

    — Sudipta Roy

  • Return on Assets (RoA) Profitability · exit Q4FY27 · High confidence at least 2.8%

    Previously 2.8% to 3% → at least 2.8%

    As I mentioned earlier, by the last quarter of FY27, we are targeting to achieve a RoA of at least 2.8%.

    — Sudipta Roy

Margin

  • NIMs+Fees Margin · FY27 · High confidence 10% to 10.5%
    We expect our NIMs+Fees to remain stable in our guided range of 10% to 10.5%, while credit costs should trend lower in the range of 2% to 2.2% by Q4FY27 as newer portfolios season and our Al-led underwriting frameworks mature

    — Sudipta Roy

Branch Expansion

  • New gold loan branches Branch Expansion · this year (FY27) · High confidence 400+
    We intend to deploy 400+ new gold loan branches this year, of which at least 100 would be Sampoorna branches.

    — Sudipta Roy

  • New micro-loan branches Branch Expansion · FY27 · Medium confidence 150 to 200
    if you talk about FY27, we intend to, assuming that the external conditions remain normal, we continue to plan setting up about 150 to 200 micro-loan branches

    — Sachinn Joshi

  • New micro-LAP branches Branch Expansion · FY27 · Medium confidence 150 to 200
    further 150 to 200 micro-LAP branches

    — Sachinn Joshi

Wholesale Business

  • SR portfolio resolution Wholesale Business · next three to four years · Medium confidence significant part resolved
    Yes, three to four years. So, there may be a long tail, but yes, larger resolutions, there has been a positive movement which we are seeing. Ultimately, it's with NCLT, so it's anyone's guess, but yes, next two to three years, significant part of the assets will come up for resolution.

    — Sachinn Joshi

What to watch in Q1 FY27

AUM Growth

FY27
Current 25% YoY (Consolidated Book FY26)
Target Over 20%

Why it matters

Indicates the company's ability to sustain growth momentum in the first year of the Lakshya 2031 plan.

As we enter FY27, the first year of our 5-year strategic plan Lakshya 2031, we expect the momentum gain in FY26 to sustain, with AUM growth of over 20% supported by robust consumer demand in urban finance, gold loans and our rural franchise, while maintaining a calibrated and quality-led approach to expansion.

Risks & concerns

  • Geopolitical tensions (West Asia conflict) and volatile global conditions

    medium

    Potential downside risk from ongoing West Asia conflict, particularly regarding fertilizer supply for Kharif season and energy prices, though no visible impact on portfolios yet.

    Management acknowledged

  • El Niño conditions and impact on rural economy

    medium

    Potential headwinds for the rural economy due to El Niño conditions, which could affect agricultural yields and related businesses.

    Management acknowledged

  • Moderation in hiring in IT sector and its impact on retail loan segments

    low

    Concerns about slower hiring in the IT sector potentially affecting two-wheeler and personal loan segments; management believes GCC expansion offsets some slack and uses AI-driven underwriting to mitigate risk.

    Analyst acknowledged

  • Lakshya 2026 RoA target not met

    low

    The RoA target of 2.8-3% for Lakshya 2026 was not achieved (2.4% in Q4FY26) due to the microfinance crisis, but a revised target of at least 2.8% is set for Q4FY27.

    Management acknowledged

Q&A highlights

8 direct
Impact of West Asia conflict and El Niño on business segments Direct
As of now, we really do not see any significant worsening either of any or impact rising out of the West Asia crisis on any of our portfolios, whether it be SME or any other portfolio like Rural Business Finance vertical or Tractors or Two wheelers. As of now, there is no visible impact. However, we continue to be cautious.

Addresses macro-economic risks and their potential impact on loan book quality, especially rural and SME segments, with management indicating vigilance despite no immediate visible impact.

Asked by Shreya Shivani

AI capabilities and their impact on cost ratios and future efficiency Direct
In terms of the Lakshya 31, the opex to book range, I think we are looking at a range of 3.75% to 4% range, primarily keeping in mind the investments that will be required because over the next 5 years, there will be further investments in technology which will be required, investments in setting up branches, gold loan, micro-loan, micro-LAP, these are the businesses which we will continue investing in and the branch network -- setting up the branch network comes at a cost.

Clarifies the long-term cost structure and the trade-off between AI/tech investments and operational efficiency, setting expectations for future opex.

Asked by Kunal Shah

ECL model refresh, contingency buffer, and Stage 1 provisioning Direct
The requirement naturally increases because ECL model runs at a lag. We have actually this quarter come out of this whole challenge with March ending at 99.8% collection efficiency, right? But the ₹125 Cr which was remaining is anyways part and parcel. Earlier it was separately available, now it is part and parcel of Stage 1 and 2 as part of the ECL model itself. So, it's not gone anywhere.

Explains the accounting treatment of provisions, especially the subsuming of macro-prudential provisions into the ECL model and the increased Stage 1 coverage, impacting future credit cost trajectory.

Asked by Kunal Shah

Fee income growth relative to disbursement growth Direct
No, fee income does not include any MTM losses. Primarily there is an amount of liquidity income. So, depending on the liquidity that is kept, we have the income coming in as part of the interest cost. And if there is a negative carry on that, that comes over here. So otherwise, the disbursement trajectory, the processing fee and the CLI income remain range-bound in that.

Clarifies the components of fee income and why it might not directly correlate with disbursement growth, impacting overall NIMs+Fees.

Asked by Pranuj Shah

AI's impact on job markets and its implications for two-wheeler and personal loan growth/asset quality Direct
So, the fact is that, and we are in the hiring market almost every day, it's still as difficult to get qualified talent as it was 2 years back, right? So, maybe there might be a little bump in the freshly minted engineers getting hired into some of those, some of the big Indian IT services firms, but the hiring by the GCCs expanding is quite strong.

Addresses a macro concern (IT job market) and how the company views its impact on key retail segments, highlighting risk mitigation through underwriting.

Asked by Avinash Singh

Lakshya 2031 RoE guidance and the contribution from SR portfolio resolution Direct
So, first thing is, we have not taken into account any gains coming out of SR portfolio because earlier we had guided that as and when such gains come in, we will actually utilize the, those credits to take care of the, further macro-prudential provisions to be created.

Clarifies that the ambitious RoE target does not factor in potential gains from SR resolution, indicating a conservative approach to provisioning.

Asked by Chintan Shah

Co-lending strategy for fee income expansion Direct
Yes, we remain open to doing co-lending frameworks, but obviously at terms which, we think are favorable to our business philosophy.

Indicates the company's openness to co-lending for customer acquisition and fee diversification, but with a cautious, risk-aligned approach.

Asked by Chintan Shah

Credit cost assumptions for two-wheeler and personal loans to achieve sub-2% target Direct
Overall, at a balance sheet level, we still, we still sign up to that 2% to 2.2% corridor by Q4FY27 and over the Lakshya period, sub 2% is what we are signing up on. But having said that, the initial trends on the Cyclops portfolios, especially in SME, tractor, and two-wheeler, are very, encouraging, which gives us the confidence to stick out our neck and give that commitment.

Reaffirms the aggressive credit cost targets and links them to the success of AI-driven underwriting (Project Cyclops).

Asked by Hardik Shah

3 min read 7 chapters

Detailed narrative

Q4 & FY26 Performance Overview

L&T Finance concluded FY26 with its highest-ever annual profit after tax of ₹3,003 Cr (excluding a one-time impact), marking a 14% YoY increase. The company reported a Q4FY26 PAT of ₹807 Cr, up 27% YoY, driven by record quarterly retail disbursements of ₹24,107 Cr, a 62% YoY increase. The retail book grew 26% YoY to ₹1,19,508 Cr, contributing to an overall consolidated book of ₹1,21,728 Cr, up 25% YoY. Consolidated RoA for Q4FY26 stood at 2.40%, an 18 basis points YoY improvement, while credit costs moderated to 2.64%, a 19 basis points reduction from the previous quarter.

Macroeconomic Outlook & Risks

Despite ongoing geopolitical tensions and volatile global conditions, India's economic activity remains resilient, with real GDP growth placed at 7.60% in FY26. Domestic demand is strong, supported by structural reforms and favorable financial conditions. However, the company remains cautious about potential downside risks from the West Asia conflict, particularly regarding fertilizer supply for the Kharif season and energy prices, and the potential impact of El Niño conditions on the rural economy. Management noted no visible impact on portfolios from the West Asia crisis so far but remains vigilant.

Strategic Plan: Lakshya 2031 & FY27 Outlook

L&T Finance unveiled its Lakshya 2031 strategic plan, aiming for a Book growth CAGR of 20%+, credit costs of 2% or less, RoA between 3.0% and 3.2%, and RoE between 16% and 18%. For FY27, the company expects AUM growth of over 20%, stable NIMs+Fees in the 10-10.5% range, and credit costs trending lower to 2-2.2% by Q4FY27. The Lakshya 2026 RoA target of 2.8-3% was not met (achieved 2.4% in Q4FY26) due to the microfinance crisis, but management is hopeful of achieving 2.8% by Q4FY27.

AI & Digital Transformation

The company continues to invest heavily in proprietary AI tools for sales, underwriting, collections, and operations, considering itself a pioneer in AI adoption in the Indian BFSI sector. Project Cyclops has outperformed industry benchmarks in the Two-Wheeler portfolio, and Project Nostradamus, an AI-driven portfolio management engine, is live in Two-Wheeler finance and will be extended to Personal Loans, Rural Business Finance, SME, and Farm businesses. These AI interventions have significantly lowered collection costs across urban finance products and improved productivity across all business lines.

Retail Business Performance

All retail segments demonstrated strong growth. Rural Business Finance saw quarterly disbursements up 41% YoY to ₹7,208 Cr, with its book reaching ₹30,805 Cr. Urban Finance, comprising Two-Wheelers, Personal Loans, and Home Loans/LAP, recorded a 61% YoY jump in quarterly disbursements to ₹9,850 Cr, and its book grew 29% YoY to ₹59,048 Cr. Personal Loans showed exceptional growth with quarterly disbursements up 98% YoY to ₹3,786 Cr, and its book up 70% YoY to ₹14,666 Cr, driven by digital channels. Gold Finance also saw significant quarterly disbursement growth of 97% QoQ to ₹2,779 Cr.

Wholesale Business Update & SR Resolution

The wholesale book continued its planned reduction, decreasing by 14% YoY from ₹2,582 Cr in FY25 to ₹2,220 Cr in FY26. The net security receipts (SR) book also reduced by 18% YoY from ₹5,862 Cr in FY25 to ₹4,808 Cr in FY26, primarily due to asset monetization and recoveries. Management expects significant resolution of the SR portfolio within the next three to four years, which will eventually aid in RoA expansion by releasing the drag from funding costs.

ECL Model Refresh & Provisioning Strategy

The annual ECL model refresh resulted in a release of ₹301 Cr of provisions, which were management overlays, with a corresponding increase in Stage 1 provisioning. Macro-prudential provisions of ₹125 Cr were subsumed into the ECL model, leading to an improved provision coverage on performing Stage 1 book from 0.52% to 0.80%. While Stage 3 PCR decreased from 73% to 68%, management asserts this is an adequate level of coverage and reflects prudent credit risk management, with remaining overlays in Stage 3.

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