L&T Finance Limited delivered a strong financial performance in the second quarter of FY2026–27, reporting higher profitability, robust retail lending growth and an improvement in asset quality. The non-banking financial company benefited from increased loan disbursements, stronger net interest income and lower credit costs. Its results highlight the company’s continued shift towards a retail-focused lending business, although rural lending conditions and borrower repayment risks remain important considerations.

For the quarter ended September 30, 2026, L&T Finance reported consolidated net profit of ₹975 crore, compared with ₹735 crore in Q2 FY26. This represented year-on-year growth of approximately 32.7%. The improvement reflects growth in the loan portfolio, higher interest income and better credit performance.

Total income increased 26% year on year to ₹5,484 crore. Interest income rose approximately 28% to ₹5,158 crore, while fee and commission income increased to ₹326 crore from ₹289 crore a year earlier. These figures indicate that lending activity remained the principal driver of revenue, with fees providing an additional contribution.

Profit before tax increased to ₹1,319 crore from ₹989 crore in the corresponding quarter last year, representing growth of approximately 33.4%. Profitability improved alongside business expansion, supported by a combination of higher lending income and better asset quality.

The company’s consolidated loan book reached approximately ₹1.366 lakh crore at the end of September 2026, up 28% year on year. The retail loan book expanded approximately 29% to ₹1.35 lakh crore. Retail lending now represents the overwhelming majority of the overall portfolio, reflecting the company’s strategy of building a diversified consumer and small-business lending franchise.

Retail disbursements increased 27% year on year to ₹24,027 crore. Strong disbursements indicate healthy demand across several lending categories, although the sustainability of this growth will depend on borrower affordability, underwriting quality and the wider economic environment.

Net interest margin plus fees, or NIM plus fees, improved to 10.48%, compared with 10.22% in Q2 FY26. This measure captures the contribution from lending spreads and fee income relative to the company’s earning assets. The improvement suggests that L&T Finance continued to optimise loan yields, fee generation and funding costs while expanding its portfolio.

Return on assets increased to 2.60%, compared with 2.41% a year earlier. This improvement indicates that the company generated more profit relative to its asset base. Sustaining this level will depend on the balance between loan growth, operating expenses, funding costs and credit losses.

Asset quality also improved. Gross Stage 3 assets declined to 2.75% from 3.29% in the year-ago quarter, while net Stage 3 assets improved to 0.85% from 1.00%. These indicators suggest a lower proportion of stressed loans after accounting for the relevant provisioning measures. Continued improvement in collections and disciplined underwriting will be necessary to maintain this trend.

Credit costs moderated to 2.46%, compared with 2.54% in the preceding quarter. Lower credit costs can support earnings growth because a smaller proportion of lending income is absorbed by expected and realised credit losses. Investors should nevertheless track the measure over several quarters, as a growing loan book can introduce new credit risks that emerge only after a time lag.

Personal loans were a major growth contributor. Disbursements increased 45% year on year to ₹4,233 crore. Growth in this segment can support higher interest income and customer engagement, but personal lending also requires careful monitoring of borrower leverage, repayment capacity and delinquencies.

Two-wheeler financing remained another important area. Disbursements rose 26% year on year to ₹3,170 crore. Demand for two-wheelers, particularly in urban and semi-urban markets, can support the segment, while vehicle prices, financing competition and household cash flows influence the pace of expansion.

Gold loans recorded particularly strong growth. Disbursements surged 229% year on year to ₹3,237 crore, supported by the expansion of the company’s distribution network. Gold-backed lending provides collateral, but it still carries risks related to gold-price movements, valuation, auction processes and the operational handling of pledged assets.

Management indicated that the gold-loan branch network stood at approximately 500 locations, with plans to expand to around 800 by the end of FY27. This expansion could increase customer reach and support further disbursement growth. The resulting financial benefit will depend on branch productivity, operating expenses and the ability to maintain prudent loan-to-value ratios.

The funding environment also supported the company’s financial performance. L&T Finance’s weighted average cost of borrowing declined to 6.95%, from 7.32% a year earlier, and management indicated that borrowing costs had fallen by 25 basis points sequentially. Lower funding costs can protect lending margins, particularly when competitive conditions limit the ability to increase interest rates charged to customers.

Management expects net interest margins plus fees to remain within the 10%–10.5% range. This is a stated management outlook rather than a guaranteed outcome. Future performance will depend on the mix of loan products, the cost and availability of funding, customer pricing and competitive conditions across the lending market.

The company expects annual loan-book growth to remain above 20%, supported by retail demand and expansion in urban and semi-urban markets. Management also expects assets under management momentum to remain around 20% in the third quarter. These expectations provide useful reference points for monitoring business performance, but actual growth may vary with market conditions and underwriting decisions.

Rural lending requires a more cautious approach. Management highlighted concerns about deficient rainfall and possible El Niño conditions, indicating that the company had already moderated rural distribution and intended to maintain caution during the third and fourth quarters. This approach may temper growth in some rural products but is intended to protect the quality of the loan portfolio.

Festive demand could provide additional support during the second half of FY27, particularly for personal loans and two-wheeler financing. However, stronger disbursements should be assessed alongside collection efficiency, delinquency trends and the quality of newly originated loans. Rapid growth is most valuable when it generates sustainable returns without creating disproportionate credit losses.

L&T Finance also benefits from its broader lending platform, which spans consumer finance, rural lending, farm equipment, small and medium enterprise financing and other retail products. This diversification can reduce dependence on a single borrower category, although different segments respond differently to economic conditions, seasonal demand and changes in household or business cash flows.

Several risks remain relevant. A deterioration in rural income could increase delinquencies in selected lending segments. Competitive pressures may affect loan pricing, while an increase in funding costs could narrow margins. Rapid expansion in personal and gold loans also requires continued attention to underwriting standards, collateral management and collection processes.

Overall, L&T Finance reported a strong Q2 FY27, with consolidated net profit rising 33% to ₹975 crore, the loan book expanding 28% to approximately ₹1.366 lakh crore and NIM plus fees improving to 10.48%. Better asset-quality indicators and lower borrowing costs provide additional support. Investors should monitor whether the company can sustain loan growth above 20%, keep margins within management’s stated range and preserve credit quality while exercising caution in rural lending.

Highlights in Short

• Consolidated net profit: ₹975 crore, up 33% year on year.
• Total income: ₹5,484 crore, up 26% year on year.
• Interest income: ₹5,158 crore, up 28% year on year.
• Fee and commission income: ₹326 crore, compared with ₹289 crore in Q2 FY26.
• Profit before tax: ₹1,319 crore, up approximately 33.4%.
• Consolidated loan book: ₹1.366 lakh crore, up 28% year on year.
• Retail loan book: ₹1.35 lakh crore, up 29% year on year.
• Retail disbursements: ₹24,027 crore, up 27% year on year.
• NIM plus fees: 10.48%, compared with 10.22% a year earlier.
• Return on assets: 2.60%, versus 2.41% in Q2 FY26.
• Gross Stage 3 assets: 2.75%, down from 3.29% a year earlier.
• Net Stage 3 assets: 0.85%, compared with 1.00% in Q2 FY26.
• Credit costs: 2.46%, compared with 2.54% in Q1 FY27.
• Personal loan disbursements: ₹4,233 crore, up 45% year on year.
• Two-wheeler loan disbursements: ₹3,170 crore, up 26% year on year.
• Gold loan disbursements: ₹3,237 crore, up 229% year on year.
• Gold loan expansion: Management plans to increase the branch network from approximately 500 to 800 by FY27-end.
• Borrowing cost: 6.95%, down from 7.32% a year earlier.
• Management outlook: Annual loan-book growth above 20%, with NIM plus fees expected in the 10%–10.5% range.
• Key risks: Rural credit conditions, rising delinquencies, funding costs and rapid expansion in unsecured lending.