L&T Finance Q2 beat estimates, analysts upbeat on growth, credit efficiency

Brokerages remained upbeat on L&T Finance Ltd. (LTF) after the company reported strong Q2FY26 results, highlighting robust retail growth, improved asset quality, and cost efficiencies.

However, on the bourses at 11:45 AM, L&T Finance share price was trading 0.63 per cent lower at ₹267.15. By comparison, BSE Sensex was up 0.64 per cent at 84,002.56 levels.

Analysts pointed to a combination of technological interventions, a diversified retail portfolio, and prudent risk management as key drivers of the quarter’s performance.

Nuvama Institutional Equities (Nuvama) analysts’ noted that LTFH delivered a strong earnings beat on net interest income (NII) and operating expenses, driven by sharp dips in cost of funds.

“Gross credit cost decreased 8 per cent quarter-on-quarter (Q-o-Q), though net credit cost rose 14 per cent Q-o-Q as drawdowns from macroprudential provisions reduced to ₹150 crore from ₹300 crore,” the brokerage said. It also raised its target price to ₹315 from ₹240, citing the company’s strong growth outlook, improvement in risk-adjusted returns through its AI-based ‘Cyclops’ engine, and better collection efficiency (CE) in its microfinance operations. Nuvama expects return on assets (RoA) to improve to 2.8-3 per cent by FY27, with credit cost likely to fall to 2 per cent from the current 2.4 per cent. The brokerage maintained its ‘Buy,’ rating .

Emkay highlighted that LTF posted broadly steady Q2 results, with overall assets under management (AUM) growing 15 per cent Y-o-Y, led by robust disbursements across retail segments, including microfinance, personal loans, and gold loans. Margin (NIM+fee) was stable at 10.22 per cent, supported by a ~18-basis-point improvement in NIM due to moderating cost of funds. Credit cost improved to 2.41 per cent, aided by macro provision utilisation.

“Greenshoots are visible in MFI, with a focus on acquiring prime and near-prime customers and broader rollout of Cyclops expected to contain FY26 credit cost at 2.3-2.5 per cent,” the brokerage said, while retaining a ‘Reduce’ rating and revising the September 2026 target price upward to ₹240.

Motilal Oswal observed stable asset quality with declining credit costs. It noted that 2QFY26 profit after tax (PAT) rose 5 per cent Y-o-Y to ₹730 crore, in line with estimates, while net interest income grew 10 per cent Y-o-Y. Operating expenses rose 12 per cent Y-o-Y, and cost-to-income ratio improved by 40 basis points Q-o-Q. Credit costs before macro provision utilisation stood at ~3 per cent for the quarter.

The brokerage expects FY26/FY27 credit costs of 2.7 per cent/2.6 per cent, with a loan book CAGR of 22 per cent and PAT CAGR of 24 per cent over FY25-28. It reiterated a ‘Buy’ rating with a target price of ₹320, based on 2.4x Sep’27E book value.

Q2 show highlights

L&T Finance reported its highest-ever quarterly PAT of ₹735 crore, up 6 per cent Y-o-Y and 5 per cent Q-o-Q. The retail book crossed the ₹1 trillion milestone, reaching ₹1,04,607 crore, an 18 per cent growth Y-o-Y, while quarterly retail disbursements touched a record ₹18,883 crore, up 25 per cent Y-o-Y. Overall AUM stood at ₹1,07,096 crore, up 15 per cent Y-o-Y.

Asset quality remained robust, with gross stage 3 (GS3) at 3.29 per cent and net stage 3 (NS3) at 1.00 per cent. Credit cost for the quarter declined to 2.41 per cent from 2.59 per cent a year ago, while return on assets (RoA) was steady at 2.41 per cent. Return on equity (RoE) for the quarter stood at 11.33 per cent.

The quarter also saw strategic initiatives in technology and partnerships. LTF operationalised
the beta rollout of ‘Project Nostradamus’, an AI-driven portfolio management engine for its two-wheeler business, and scaled its AI-based digital credit engine ‘Cyclops’ in the SME segment. The company expanded digital partnerships, including the launch of a collaboration with Google Pay for personal loan origination.

Sudipta Roy, managing director & CEO, said, “Our focus on execution and growth has enabled a strong performance in a quarter traditionally considered weak in BFSI. Investments in technology, talent, branch expansion, and brand building are beginning to yield dividends. Our gold loan segment gained significant momentum, and we plan to add around 200 new branches by the end of FY26, taking our gold distribution strength to approximately 330 branches.”

With good monsoon conditions and improving consumer sentiment, LTF expects retail momentum to accelerate in H2FY26, fueled by festive demand and GST 2.0 reforms. The company aims to sustain its strong growth trajectory while gradually reducing credit costs to targeted levels.