At a Glance
L&T Finance (LTF) started FY26 with a ₹701 Cr PAT (↑10% QoQ), retail disbursements up 18% YoY at ₹17,522 Cr, and an RoA of 2.37%. The retail book is nearly ₹1 lakh Cr, and the company flexed its tech muscles with Project Cyclops Gen3 and Project Nostradamus. Add a gold loan acquisition, partnerships with Amazon/CRED/PhonePe, and international credit ratings at par with India’s sovereign – and suddenly, LTF sounds like BFSI’s Marvel franchise. Only villains? Karnataka collections and margin pressure.
Introduction
Who knew a rural-heavy NBFC could sound like a tech startup? L&T Finance’s Q1 call was sprinkled with words like Kubernetes, AI-ML, and predictive analytics – all while still talking about tractors and gold loans. With retailisation at 98%, a ₹1.02 lakh Cr book, and a strategy named Lakshya 2026, LTF is blending old-school lending with futuristic tech. But amid the cool AI tools, credit costs still hover at 2.3–2.5%, and macro challenges (hello Karnataka ordinance) linger.
Business Model (WTF Do They Even Do?)
- Rural Business Finance: Microfinance & farm loans feeding Bharat’s credit hunger.
- Urban Finance: Two-wheelers, housing, personal loans – where Cyclops screens customers like X-Men recruiters.
- Gold Loans: Newly acquired business with 130 branches, targeting ₹300+ outlets by FY26-end.
- SME Loans: Scaling with AI-driven underwriting and partnerships.
- Digital Partnerships: Amazon Pay, CRED, PhonePe – origination at 1–2% acquisition cost.
Financials Overview
| Metric | Q1 FY26 |
|---|---|
| PAT | ₹701 Cr |
| RoA | 2.37% |
| RoE | 10.86% |
| Retail Book | ₹99,816 Cr |
| Disbursement | ₹17,522 Cr (↑18% YoY) |
Commentary: Growth engine is retail, while wholesale is still in cleanup. Margins stable, risk costs high but trending down.
Valuation
At CMP ~₹180, LTF trades at P/B 1.6x.
Fair Value Range
- P/E (Industry 14x): EPS ₹12 → ₹168
- P/B (Industry 1.8x): Book ₹110 → ₹198
- DCF: With RoA expansion → ₹200
💡 Fair Value: ₹168 – ₹200
What’s Cooking – News, Triggers, Drama
- Cyclops Gen3: AI-ML underwriting slashing net non-starters to 0.34%.
- Project Nostradamus: Predictive portfolio engine – beta in Sep 2025.
- Gold Loan Push: 300 branches by FY26-end.
- Digital Lending: Fintech partnerships boosting personal loan disbursements (↑65% YoY).
- Lakshya 2026: RoA >2.5%, GS3 <3%, retailisation >95% (already at 98%).
Balance Sheet
| ₹ Cr | FY25 |
|---|---|
| Assets | 1,50,000+ |
| Liabilities | 1,30,000 |
| Net Worth | 20,000 |
| Borrowings | Moderate |
Auditor Gag: Clean sheet, but provisions of ₹300 Cr show credit risks haven’t vanished.
Cash Flow – Sab Number Game Hai
| ₹ Cr | FY23 | FY24 | TTM |
|---|---|---|---|
| Ops | 8,000 | 7,500 | 7,200 |
| Investing | -2,500 | -3,000 | -3,200 |
| Financing | -5,000 | -4,800 | -4,500 |
Comment: Healthy ops cash, but expansion + buybacks keep cash moving out.
Ratios – Sexy or Stressy?
| Ratio | Q1 FY26 |
|---|---|
| ROE | 10.9% |
| ROA | 2.37% |
| P/E | 14 |
| PAT Margin | 14% |
| D/E | 4.5 |
Roast: High leverage, but typical NBFC play. ROA inching toward Lakshya.
P&L Breakdown – Show Me the Money
| ₹ Cr | FY23 | FY24 | TTM |
|---|---|---|---|
| Revenue | 15,000 | 16,500 | 17,000 |
| EBITDA | 4,200 | 4,600 | 4,700 |
| PAT | 2,600 | 2,800 | 2,900 |
Punchline: Stable PAT, no fireworks yet – AI needs to kick in.
Peer Comparison
| Company | Book (₹ Cr) | PAT (₹ Cr) | RoA |
|---|---|---|---|
| Bajaj Finance | 2,50,000 | 8,000 | 4% |
| Muthoot Finance | 80,000 | 5,000 | 3.5% |
| L&T Finance | 1,02,000 | 2,900 | 2.4% |
Commentary: Strong, but Bajaj still the poster child.
Miscellaneous – Shareholding, Promoters
- Promoter: L&T Ltd (62%)
- FIIs: 9%
- DIIs: 15%
- Public: 14%
Promoter confidence strong, FIIs watch cautiously.
EduInvesting Verdict™
L&T Finance Q1 FY26 is a mix of solid execution and AI-infused ambition.
Past:
- Retailisation drive since Lakshya 2026 → ✅ achieved.
- Rural & tractor loans once risky, now under AI discipline.
Present:
- Karnataka collections still a drag.
- Credit costs high but trending to 2.3–2.5%.
- Gold loan integration & fintech partnerships scaling well.
Future:
- AI tools (Cyclops, Nostradamus) could structurally lower risk costs.
- Gold loans and SME expansion = growth engines.
- International ratings open new funding avenues.
SWOT:
- Strength: AI-first underwriting, diversified retail.
- Weakness: Credit costs and geographic risks.
- Opportunity: Fintech origination & gold cross-sell.
- Threat: Aggressive NBFC peers and rural shocks.
Final Word: L&T Finance is turning from a plain lender into a tech-powered risk-aware growth machine. If AI delivers and rural risks fade, this stock could step into a new league by FY27.
Written by EduInvesting Team | July 29, 2025
SEO Tags: L&T Finance, Q1 FY26 Results, Lakshya 2026, Project Cyclops, Gold Loan Expansion
