L&T Finance Ltd (LTF) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Your passcode has been confirmed. Please wait while you are joined to the conference. The conference is now being recorded.
Moderator: Ladies and gentlemen, good day, and welcome to the L&T Finance Ltd Q2 FY27 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the call, please signal the operator by pressing "*" and then "0" on your touchtone phone. Please note that this conference is being recorded. We have with us today Mr. Sudipta Roy, Managing Director and CEO, Mr. Sachin Joshi, Whole-Time Director and CFO, and Mr. Raju Dodti, Whole-Time Director and COO, and other members of the senior management team. Before we proceed, as a standard disclaimer, no unpublished price-sensitive information will be shared during the call. Only publicly available documents will be referred to for discussions during interaction in the call. While all efforts would be made to ensure that no unpublished price-sensitive information will be shared, in case of any inadvertent disclosure, the same would, in any case, form part of the recording of the call. Further, some of the statements made on today's call may be forward-looking in nature. A note to this effect is provided in the Q2 results presentation uploaded. I would now like to invite Mr. Sudipta Roy to share his thoughts on the company's performance and the strategy of the company going forward. Thank you, and over to you, sir.
Sudipta Roy (L&T Finance Ltd): Thank you. A very good morning, everyone, and thank you for joining us today for the Q2 FY '27 investor call. Joining me on the call today are our Whole-Time Director and Chief Financial Officer, Mr. Sachinn Joshi, and our Whole-Time Director and Chief Operating Officer, Mr. Raju Dodti, along with the members of the senior management team of L&T Finance. On behalf of the entire L&T Finance team, I would like to extend our festive wishes to you and your families and the broader investor community. Similar to our previous earnings call, today's discussion will be divided into two sections. I'll begin by sharing my thoughts on the macroeconomic environment, our business performance during the quarter, and the strategic priorities under Lakshya 2031. Subsequently, our Chief Operating Officer, Mr. Raju Dodti, will update you on the distribution initiatives and the build-out of the gold loan business. Finally, this will be followed by our CFO, Mr. Sachinn Joshi, who will take you through the detailed financial performance for the quarter. Post our commentary, we'll be happy to take questions on the call. Before we delve into the highlights for the quarter, I would like to share our perspective on the macroeconomic environment, particularly the volatility in the geopolitical arena and the impact of the monsoon and the El Nino on the rural economy, which remains an important consideration for the financial services industry in the current operating environment. The global economy continues to be in a state of flux with re-escalation of the conflict in West Asia and a sharp volatility in the crude oil prices. At the same time, strong economic growth data combined with inflation pressures have reinforced expectations for a higher-for-longer policy rates. While this uncertainties warrant warrant close monitoring, India's domestic demand fundamentals and the underlying drivers of consumption continue to remain resilient. Input cost pressures have accentuated, but the pass-through has remained limited so far. Real GDP growth recorded a growth of 7.8% in Q1 FY '27, reflecting strong demand conditions on back of robust private consumption, investments, and export demand. Upgrades in India's GDP growth expectations for the full year FY '27 by RBI, World Bank, OECD, etc., underscored the strength of economic activities despite significant headwinds. Despite intermittent volatility in the domestic financial markets, credit demand also continues to grow at a robust pace. On the rural front, the progress of the southwest monsoon has remained an area of close attention for the financial services industry. As you would be aware, the 2026 southwest monsoon concluded with a cumulative rainfall at approximately 87% of long period average with considerable regional variations. While rainfall improved during July, the deficit in the early part of the season and the below-normal rainfall in several regions have implications for agricultural output, water availability, and rural cash flows. However, rainfall spells during the month of August have substantially improved the expectation of a near-normal kharif outcome. In spite of the below-average monsoon, kharif crop sowing is at par with previous years, reporting a marginal 1% year-on-year contraction with a total coverage of 101% of the normal acreage. In most regions, irrigation buffer and stable reservoirs have helped mitigate rainfall shortfalls. While localized drop in crop yields and moderation in rural sentiments remain a latent risk, rural consumption continue to be strong currently, driven by resilient non-farm activities, robust government DBT transfers, and favorable terms of trade for agricultural prices. We are therefore maintaining a close watch on the operating environment across our rural markets with particular attention to geographies where rainfall deficits and water availability could exert greater pressure on borrower cash flows. Sustained momentum in services and broadly stable employment conditions are supporting urban demand as well. Despite cost pressures, manufacturing activities are holding well, as indicated by IIP and PMI figures, and services sector activity remains steady and broad-based owing to buoyant domestic and external demand. Economic momentum thus remains broad-based and is expected to sustain strong demand through the current fiscal year. Coming to this quarter's highlights, I'm pleased to share that L&T Finance has delivered another consistently strong quarter of profitable and quality-led growth. During Q2 FY '27, we recorded our highest ever consolidated profit after tax of Rs. 925 crores, representing a growth of 32% year-on-year against Rs. 902 crores in Q1 FY '27. Our consolidated book now stands at Rs. 1,36,635 crores, reflecting a year-on-year growth of 28% against 1...
Sudipta Roy (L&T Finance Ltd): 29,634 crores in Q1 FY27, with an RoA of 2.6% against 2.48% in the previous quarter. This has been achieved on the back of quarterly retail disbursements of rupees 24,027 crores, up 27% year-on-year with contributions from all our lines of business. The disbursement momentum has been a result of our strong customer acquisition funnel with a 3 crore customer database and our continued focus on granular distribution channels, branch footprint, digital acquisition capabilities, and our AI-powered credit administration framework. Project Cyclops, backed by strengthened risk guardrails, continue to function well. However, we consciously chose to attenuate our rural disbursement momentum and raised risk guardrails in view of uncertain progressions of the monsoon. Now that we have reasonable clarity on the monsoon outcome, we will carefully increase our risk-calibrated rural disbursement momentum. You will remember that over the course of the last few calls, I have been emphasizing on our trajectory of paring down credit cost on account of implementation of structural credit policy measures in our businesses and implementation of Project Cyclops in various businesses. I am pleased to inform that consequently, credit costs has moderated to 2.46% this quarter, reflecting a further sequential improvement of 8 basis points from 2.54% in Q1 FY27, supported by collections excellence and AI-led portfolio management. We would like to reiterate that we are confident of achieving our guided credit cost corridor of 2% to 2.2% by Q4 FY27. Our NIMs and fees, which is another focus area for us, stood stable at 10.48% against 10.47% in Q1 FY27, well within our guided corridor of 10% to 10.5%. This was possible due to reduction in weighted average cost of borrowing achieved successfully through implementation of astute liability management. Opex remained range-bound at 4.08% during the quarter despite continued investments in branch rollouts as well as technology investments. All of this has resulted in an improvement of our RoA to 2.6%, with RoE consequentially increasing to 13.56%. We remain hopeful that our RoA trajectory will achieve our guided objectives of 2.8% to 3% corridor exit Q4 FY27. Before I move on to our progress in Lakshya 2031, I would like to take a few minutes to address a topic that many of you have been tracking, and that is the consultation paper issued by IRDAI on insurance distribution and commission structures. As the framework is still a draft consultation paper, it would be premature to quantify the final impact. The paper proposes to rationalize the commission payouts across the board, with significant cuts in credit links insurance and motor insurance. There is also significant attenuation in the thresholds of commission payouts on standalone insurance products as well. However, to a lesser extent. We understand that the regulator's suggestion on the consultation paper are from a viewpoint of making insurance more affordable for the common man in line of, line with the Government of India's Insurance for All, as part of Viksit Bharat 2047 plan. We believe that there is a significant scope for consultation with the regulator on creating an economic rationale for BFSI entities to continue supporting the insurance industry through their distribution channels. It is to be noted that our credit life, all credit life insurance policies sold in the country are approximately 90% to 95% are sold by banks and NBFC distribution channels, and this touches 60, 65 to 85 million lives in the country annually and accounts for about 35% of all insurance policies issued in India. As an industry, our SRO, FIDC is working with all member NBFCs to kickstart an engagement with the regulator, possibly in collaboration with other financial industry SROs. The salient points of discussion would be a realistic assessment of the distribution cost incurred by the BFSI industry to support distribution of insurance products on behalf of the insurance manufacturers. We would also request the regulator for a glide path for commission optimization to distributors in line with the glide path proposed by the manufacturers in the treatment of expense of management. As an industry, we would pursue all possible channels of dialogue to ensure that the final outcome is balanced and positive for all stakeholders, consumers, distributors and manufacturers of insurance. As an organization, we look at all possible means of revenue optimization, including new initiatives like the cross-sell deepening as well as the payments business, focusing on value-added agentic commerce. In summary, the
Sudipta Roy (L&T Finance Ltd): confidence to navigate the IRDAI consultation paper-related impact with minimal disruption to our Lakshya 2031 goals. We'd also like to apprise you about two very important initiatives that we have stated in Q2 FY started in Q2 FY '27, which we expect to gather pace over the next couple of quarters. The first is Project Hercules, our increased focus on reducing cost of customer acquisition through focus cross-sell initiatives to our existing customer base leveraging our extensive agentic agentic AI expertise. You may be aware that L&T Finance has one of the largest customer bases in the NBFC industry at 3 crore customers and an equally large number of prospects who have applied for products from our company at some point in time and were found to be not eligible at that instance. In fact, our microfinance customers, tractor customers, and two-wheeler customers have borrowed more than 50,000 crores worth of gold loans prompted our entry into the gold loan business. To effectively tap into the demand of this large base of customers, an integrated agentic AI-based cross-sell engine called Hercules is being built and implemented in phases. Quarter 2 FY '27 saw the implementation of phase 1 of Hercules cross-sell engine across a few important lines of business with promising initial results. For example, for conversion of gold loans cross-sell leads generated by other businesses is currently running at 14% plus as of the first week of October '26. The full complement of Hercules with agentic AI workflows will be implemented by early December '26 and will be showcased to the investors during the L&T Finance Investor Digital Day on the 15th of December '26. We expect the momentum of cross-sell volume build-up to further improve in quarter 4 FY '27 and add to our low acquisition cost disbursment build-up in FY '28. The second major initiative is our payments platform, which is being rapidly built to provide an agentic commerce experience to our customers, will also be a driver for increased new customer acquisition velocity. Our UPI stack is live and currently undergoing closed user group testing. We're implementing the agentic commerce payments stack in partnership with Pine Labs and will unveil this effort in RAISE 2026. We have also applied for a prepaid issuer license, and we expect to bring a host of AI-enabled prepaid payment products in FY '28, subject to the receipt of the PPI license from RBI. I would now like to share an update on our Lakshya 2031 goals, which marks our leap from transformation to delivery. I'm pleased to say that we have began this journey on a strong footing. While our profitability metrics continue to improve quarter after quarter, our immediate focus remains on maintaining consistency in execution. We recognize that Lakshya 2031 is a 5-year journey, and therefore, our endeavor remains focused on delivering sustainable growth while steadily improving credit cost, profitability, and returns over the course of the strategic plan. Book growth. We have set ourselves a book growth CAGR of 20% plus over the Lakshya period, against which we have achieved a robust 28% growth in quarter 2 FY '27, supported by disbursement momentum across secured and unsecured products: 72% year-on-year in personal loans, 24% year-on-year in two-wheeler finance, 22% year-on-year in rural business finance, 20% year-on-year in mortgage loans, 27% year-on-year in SME finance, and 9% year-on-year in farmer finance. Second, on the credit cost front, we continue to drive credit cost down to a level of 2% or less over the Lakshya period. In quarter 2 FY '27, our credit cost stood at 2.46%. Our participation in the central government credit guarantee schemes, CGFMU and CGTMSE, continues to create an incremental safety net for select cohorts of our rural business finance and SME portfolios as outlined in slide number 36 of our investor presentation. The continued moderation of credit cost and improving asset quality during the quarter provide us confidence that the structural interventions are delivering the intended outcomes. Our return on assets target remains in the range of 3% to 3.2% for FY '31. Against that, we recorded an ROA of 2.6% in quarter 2 FY '27 versus 2.41% after utilization of macroprudential provisions in the corresponding quarter in FY '26, up 19 basis points year-on-year. We remain committed to work on achieving the 2.8% to 3% ROA corridor threshold in quarter 4 FY '27 as communicated earlier. On return on equity front, against the Lakshya '31 target in the range of 16% to 18% in FY 30 by FY '31, ROE increased to 13.56% in quarter 2 FY '27 from 11.31%, which was the ROE after macroprudential provisions in quarter 2 FY '26, up by 223 basis points on a year-on-year
Sudipta Roy (L&T Finance Ltd): In my last call, I had outlined three strategic objectives for FY27: driving cross-sell and up-sell, enhancing productivity, and embedding a strong tech DNA across the organization. We continue to drive the key outcomes defined by these pillars, as they remain critical to achieving our short term and long-term business targets while building sustainable capabilities for future growth. While I have already spoken in detail about our cross-sell engine, Project Hercules, I wanted to highlight the momentum we are seeing in the other initiatives. On the second objective, driving organizational productivity, it has gathered speed. We are actively enhancing productivity across all our business lines, with a primary focus on empowering our frontline employees through customized performance dashboards. Thirdly, in line with our strategic objectives of embedding AI-powered tools across the organization, we have made significant efforts to inculcate a tech DNA upgrade throughout our workforce. As part of our initiative to upgrade the tech DNA, LTF launched the AI Citizen program, equipping 1,200 plus employees with the Google Enterprise Agent platform and continuous and a continuous learning ecosystem with dedicated training sessions by industry experts. The goal here is to build custom agents that exponentially boost operational productivity. Following this exclusive training, this initiative is rapidly expanding enterprise-wide to build a robust network of AI champions, ensuring that AI is not just a central technology function, but a democratized tool actively used utilized by our employees. It is worth mentioning that in a short span of this project going live, 5,730 agents working on a regular business tasks have already been created by our employees. These strategic objectives are stren- central to our structural evolution into a risk first, tech first, AI native, multi-product retail financier of choice. I will now request Mr. Raju Dodti, our Whole-Time Director and Chief Operating Officer, to take you through an update on the expansion of our gold loans business and the branch infrastructure rollout execution.
Raju Dodti (L&T Finance Ltd): Thank you, Sudipta. And a very good morning, everyone. I will walk you through the gold loan business performance and our branch expansion strategy of the company for the quarter. Central to our distribution strategy is the transformation of our legacy phygital network to a multi-product sales and service-ready network. This approach moves our focus from transactional lending to a holistic relationship management, enhancing customer lifetime value by positioning every branch as a gateway to our full suite of financial solutions. Specifically, as we have shared in previous quarters, we have commenced with the integration of our Gold Finance branches into the multi-product Sampoorna branch format. Since inaugurating our first Sampoorna branch in Ujjain, we have accelerated our model shift from single-product touch points to integrated service hubs. This also ties in with our overarching cross-sell goal wherein Hercules supports both the Sampoorna initiative, as well as the digital fulfillment of cross-sell funnel, as Sudipta just mentioned. I'm pleased to share our current progress on this front. We have successfully scaled our network to a total of 150 Sampoorna branches across the country. A short timeline of 18 months since this concept was launched in FY25. This comprehensive ecosystem currently includes 33 Sampoorna branches integrated with gold loan business as well. This rapid rollout keeps us firmly on track with our broader expansion goals and our ongoing commitment to scaling our integrated phygital presence. I'm happy to share our good progress in building the gold loan business. We registered a robust quarterly disbursement of Rs. 3,237 crore, representing a 229% YoY growth, with our closing book reaching Rs. 5,043 crore, up 242% YoY. This performance is driven by our rapid branch expansion, having launched 172 new branches in H1 of FY27, to reach 502 active branches, with 110 branches already crossing 15 crore in POS, as of September of 30, 2026. To create granular awareness and to support the growth in our business volumes, we launched an integrated Gold Loan campaign, featuring our brand ambassador, Jasprit Bumrah. Additionally, our organic brand integration
Raju Dodti (L&T Finance Ltd): TVF's Family Kirana store season two was a success crossing over 15 million views. Furthermore, as the co-presenting sponsor for India versus Sri Lanka test series on Sony TEN, we secured a 34 million reach. We believe that these outreach programs while creating brand equity will also help us boost business volumes and propel the growth of this business line. I will now request Mr. Sachin Joshi, our whole time Director and CFO, to take you through the financial updates.
Sachin Joshi (L&T Finance Ltd): Thank you, Raju. As always, I'll be walking you all through the financial performance of the company for the quarter. First, talking about the quarterly performance. Consolidated NIM plus fee for the quarter stood at 10.48% versus 10.22% for Q2 FY26. Consolidated PAT for the quarter was at 975 crores, up 33% year-on-year. Quarterly retail disbursements stood at 24,027 crores, up by 27% year-on-year. Retail book stands at 1,34,600, up 29% year-on-year. Our consolidated book stands at 1,36,635 crores, up 28% year-on-year. Our consolidated ROA stands at 2.60%, up 19 basis points year-on-year. And our consolidated ROE stands at 13.56%, up 223 basis points year-on-year. Talking about the businesses, Rural Business Finance registered quarterly disbursements of 6,356 crores, up 1% year-on-year, mainly on account of improved collection efficiency and sectoral trends. The book size reached 33,465 crores, which was up 22% year-on-year in Q2 FY27. In the Farmer Finance vertical, the quarterly disbursements stood at 1,643 crores, down 1% year-on-year. The book size reached 17,397 crores, reflecting a growth rate of 9% year-on-year. As Sudipta mentioned earlier, we consciously maintained a calibrated disbursement momentum in our rural businesses during the quarter and raised the risk guardrails, keeping impact of the macroeconomic factors in mind. The coverage of select customer cohorts with CGFMU insurance cover and parametric insurance will enable us in de-risking the rural portfolio. We will continue to closely monitor the developments in this space, and are carefully increasing our risk-calibrated rural disbursement momentum in the third quarter. On Urban Finance, the segment which comprises of two-wheeler, personal loans and mortgage loan mortgage loans, it saw a 27% year-on-year jump in overall quarterly disbursements to 10,328 crores. As a result, the overall Urban Finance book size increased to 67,668 crores in Q2 FY27, translating into a 32% YoY growth. The two-wheeler business registered quarterly disbursements of 3,170 crores in the quarter, up 26% year-on-year. The book size increased to 16,158 crores, up 24% YoY. With 92% of two-wheeler disbursements in the prime segment in Q2 FY27, we continue to prioritize high-quality growth and optimize risk-adjusted returns. In the personal loans business, we achieved our highest-ever quarterly disbursement of 4,233 crores, translating into a stellar growth of 45% year-on-year, with the book size at 18,664 crores, an increase of 72% YoY. During the quarter, we operationalized our personal loan originations with Airtel and overall large partnerships constitute 40% of our personal loan originations. In the housing or mortgage loans business, we achieved a quarterly disbursement of 2,926 crores, up 8% year-on-year. The book size reached 32,846 crores, an increase of 20% year-on-year. During this quarter, we launched Arambh loans, L&T Finance's offering for the economical housing segment in non-metro and peripheral urban geographies with ticket sizes ranging between 20 to 50 lakhs.
Sachin Joshi (L&T Finance Ltd): up 27% Y-o-Y. The growth in business volumes was aided through an increase in direct sourcing and an existing strong network of distribution channels. As Sudipta mentioned earlier, we have covered around 80% of the portfolio through an insurance cover with CGTMSE, which puts us in a good position to focus on risk-calibrated growth going forward. As Raju mentioned earlier, in case of Gold Loan business, the quarterly disbursements stood at ₹3,237 crores, up to 29% year-on-year. The closing book reached ₹5,043 crores at the end of the quarter, representing a significant growth of 242% year-on-year. Let me know hand over the call back to Sudipta to make his closing statement.
Sudipta Roy (L&T Finance Ltd): Thank you, Sachin. In summary, this has been a great quarter for L&T Finance with superior performance across key performance parameters marked by record disbursements, superior portfolio quality and highest ever profit after tax. These outcomes reflect the strength of our business franchise, the resilience of our operating model and our continuous focus on delivering sustainable risk-calibrated growth. A key enabler of this journey is our continued investment in technology and artificial intelligence. We believe that the investments we are making today will not only strengthen our credit and risk management capabilities but also create a more agile and future-ready organizations. I'm particularly proud of how our teams have delivered during the quarter despite the uncertainties in the macroeconomic environment. We recognize that operating environment may not be without challenges and there maybe air pockets within the way, particularly across certain customer segments and geographies. However, our confidence stems from the strength of our franchise, the discipline of our underwriting approach, and our granular distribution model, and the investments we are making in technology and people. We remain vigilant, respond respondent to emerging risks with agility, and continue to pursue opportunities for responsible growth. I'm confident that this capabilities will help us navigate near-term uncertainties while keeping us firmly on course towards our long-term strategic ambitions as detailed in our Lakshya 2031 goals. I thank you all for our patient hearing and the floor is now open to questions.
Moderator: Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We take the first question from the line of Shreya Shivani from Nomura. Please go ahead.
109 more turns of this transcript: log in to Stocksigma to read the full call.