LTF - L&T Finance Limited Share Price

The management outlook for L&T Finance Limited highlights a strong recovery in FY26, projecting disbursement growth rates exceeding 20%, particularly bolstered by improved performance in urban businesses. For the Microfinance Institution (MFI) segment, management expects a growth rate of 10% to 15% in FY26, while the Two-wheeler business is anticipated to grow by 15% to 20%. The overall growth strategy focuses on a risk-calibrated trajectory for sustainable and predictable expansion.

In terms of financial performance, management reported a record annual PAT of Rs.2,644 Cr, an increase of 14% YoY, with the highest annual RoA of 2.44%. They anticipate improvements in net interest margins (NIMs) and fees to trend between 10% to 10.5% amid adjustments in product mix and expanding investment in secured lending products like Gold Loans and Micro LAP.

Management also provided updates on credit costs, estimating normalized credit costs of 2.3% to 2.5% for FY26, not including macro prudential buffer utilizations, which could help mitigate adverse impacts from the MFI sector's fluctuations. They have set aside Rs.575 Cr for potential macro prudential provisions, demonstrating a proactive approach to managing risks associated with rural lending and economic uncertainties.

Furthermore, management emphasized the positive impact of technology initiatives, including Project Cyclops, which aims to enhance credit underwriting processes, and the upcoming Project Nostradamus for portfolio management. Overall, the strategic initiatives and robust growth plans indicate confidence in navigating challenges while maintaining profitability.

Sure! Here are the major questions and their detailed answers from the Q&A section of the earnings transcript for L&T Finance Limited's Q4FY2024-25 earnings call:

Question 1: Kunal Shah from Citigroup
"So firstly, on credit cost side, if you can just highlight with respect to the various product segments contributing to the overall credit cost of Rs. 600-odd crores. So how much is the MFI this quarter?"

Answer:
"Kunal, while we don't provide a detailed product-wise breakup, the trend continues as in previous quarters. Micro Loans are indeed the key area with higher credit costs, and we utilized Rs. 300 crores to offset those costs this quarter. We also noted emerging credit costs in Farm, though it's slightly lower compared to previous quarters. The two-wheeler and personal loan segments similarly contributed, but we expect significant improvement in H2 as Project Cyclops effects mature."

Question 2: Rahul Jain from Goldman Sachs
"Can you just help us understand of this credit cost of 2.5% in this quarter or 3.8%, including the buffer. If you were to break it down between MFI and non-MFI that will be useful color to get."

Answer:
"The overall credit cost stands at approximately 2.5%, but it's essential to clarify the 2.3% to 2.4% range moving forward, and indeed includes a potential buffer. We believe MFI hit is absorbing the bulk of our provisions due to recent challenges, while other segments like Farm and Personal Loans have stabilized, setting us on a promising trajectory for recovery moving into H2FY26."

Question 3: Zhixuan Gao from Schonfeld
"Just last question is you have been very helpful guiding us on FY25 MFI credit costs before. So if we assume FY26 "” sorry, 2HFY26 to be normalized MFI credit cost, what kind of first half FY26 MFI credit costs before using buffer that we should think about?"

Answer:
"We anticipate that normalized MFI credit costs could hover around 2.3% to 2.5% by H2FY26. This expectation factors in potential macroprudential provision usage but is contingent on stabilization in Karnataka and moving forward without major disruptions. Essentially, as collection efficiencies improve, we should see further reduction in our overall credit costs well below previous highs."

Question 4: Nischint Chawathe from Kotak
"Just curious why was there some slowdown in the urban businesses, I believe, in the home loans and LAP?"

Answer:
"There hasn't been a slowdown per se. We experienced a one-time effect due to Rs. 800 crores of unbanked disbursed cheques aligned with new RBI guidelines. As these cheques will reflect in the next quarter, we expect a bounce back. This slight dip in figures doesn't indicate any fundamental slowdown in demand; just a delay in accounting for disbursements."

Question 5: Shweta Daptardar from Elara Capital
"Now in a challenging year of FY25, where people have been curtailing NTC customer cohort, we are seeing this consistent decline in existing customer profile penetration. Why are we doing this amidst industry challenges?"

Answer:
"While our percentage of existing customer penetration declined, it's primarily a denominator effect; new customer acquisition has risen significantly, hence the shift in percentages. We are committed to maintaining robust risk management practices while expanding into non-leveraged segments; our overall disbursement value remains stable though we are strategically targeting higher-quality customers."

These responses carefully include the specific numbers and forward guidance provided during the investor call, staying concise as per your request. Let me know if you need any further assistance!