L&T Finance plans to maintain annual growth of more than 20% in assets under management (AUM) through FY31, supported by a wider product mix and stronger distribution. However, proposed changes to insurance distribution commission rules could affect revenue if implemented in their current form.
The company plans to boost productivity through multi-product Sampoorna branches, Hercules-led cross-selling, digital customer acquisition and its payments platform. According to Motilal Oswal Financial Services, management expects revenue diversification, cross-selling and business model adjustments to help offset potential regulatory pressure.
Gold loans are expected to be a major growth driver. L&T Finance targets a 14–15% AUM share from this segment, equivalent to ₹40,000 crore–₹45,000 crore, by FY31. Its gold loan book grew 242% year on year in Q2 FY27. Loans against property, personal loans, SME lending and affordable housing are also expected to support expansion.
The total loan book grew 28% year on year and 5.4% quarter on quarter to around ₹1.37 lakh crore in the September quarter. Disbursements rose 27% to ₹24,000 crore. Two-wheeler finance disbursements increased 26% to ₹3,170 crore, gold finance surged 229% to ₹3,240 crore, and personal loan disbursements rose 45% to ₹4,230 crore.
Retail loans grew around 29%, led by personal loans, which increased 72%. Rural business loans rose 22%, while SME loans grew 27%. Wholesale loans remained broadly stable at around ₹2,000 crore.
Profit after tax increased 32% year on year to ₹970 crore. Net interest income rose around 33% to ₹3,190 crore, while profit before provisions and tax grew 31% to ₹2,150 crore. Operating expenses increased around 28% to ₹1,370 crore, and the cost-to-income ratio rose 20 basis points sequentially to 38.9%.
Margins and asset quality remain stable
Net interest margin plus fee income remained at around 10.5%. Borrowing costs fell 25 basis points sequentially to 6.95%, supported by favourable liquidity and lower market rates in July and August. This provides some protection against expected interest rate increases.
The gross stage 3 ratio improved to 2.75%, down 10 basis points sequentially, while the net stage 3 ratio fell 5 basis points to 0.85%. L&T Finance expects credit costs to moderate to 2–2.2% by Q4 FY27, supported by better credit metrics, disciplined underwriting, AI-led collection efficiency, calibrated rural disbursements and insurance-backed portfolio protection.
The brokerage estimates loan book growth of around 24% and profit after tax growth of 28% annually over FY26–FY28. It expects return on assets to reach 2.6% and return on equity to reach 15% in FY28. It maintains a buy rating with a target price of ₹330, based on 2.2 times estimated book value per share for September 2028.
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