L&T Finance Q2 FY27 Earnings Call: Record PAT of Rs. 975 Crore, Gold Loan Book Jumps 242% (LTF)

L&T Finance Ltd held its Q2 FY27 earnings call on October 15, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Record Quarter Across PAT, Disbursements and Portfolio Quality

• Record PAT of Rs.975 crores — up 32% YoY in Q2 FY 2026-2027, which management called the highest ever profit after tax, alongside record disbursements and superior portfolio quality.
• Consolidated book at Rs.1,36,635 crores — +28% YoY; retail book Rs.1,34,600 crores (+29% YoY) on retail disbursements of Rs.24,027 crores (+27% YoY).
• ROA at 2.60% — +19 bps YoY (vs 2.48% in Q1 FY27); ROE at 13.56% (+223 bps YoY vs Q2 FY26 post-provisions).
• NIM+P at 10.48% — vs 10.22% in Q2 FY 2025-2026, within the guided 10-10.5% corridor.
• Credit cost moderated to 2.46% — down 8 bps QoQ in Q2 FY27.
• Cost of borrowings at a record low 6.95% — a 25 bps reduction in Q2 FY 2026-2027, aided by repricing of short-term bank lines, FCNRB deposits and PTC transactions (~5%), and lower average liquidity (Rs.9,500-10,000 cr).
• Fee and other income slowed — a 20-22 bps decline from the typical 180-185 bps range, attributed by management to ~Rs.4,000 crores of excess liquidity held in Q1 FY 2026-2027 due to a worsening external environment.

Long-Term Targets vs Current Run-Rate

• Book growth CAGR of 20%+ targeted under Lakshya 2031 — management cited "targeting 20% CAGR up to FY 2030-2031" for the book, vs 28% achieved in Q2 FY27; the yield+fee mix at 16.3% in Q2 FY 2026-2027 relies on high-yield growth (micro LAP, PL, gold, SME, economical housing).
• ROA of 3-3.2% by FY31 — management reiterated the Lakshya 2031 target ("ROA of 3-3.2% by FY31") vs 2.6% currently, citing cost-to-income improvement to 39% (Q2 FY 2026-2027), AI-led efficiencies and new fee-based PPI products as offsets.
• ROE of 16-18% by FY30/FY31 — vs 13.56% currently; credit cost target of <2% under Lakshya 2031 vs 2.46% in Q2 FY27.
• Credit cost guided to 2.0-2.2% by Q4 FY27 — management reiterated confidence, citing minimal drought impact (Rs.1,033 cr, or 3.3% of the book) and tractor portfolio performance ahead of FY 2025-2026 by 90 bps.
• ROA guided to 2.8-3.0% by Q4 FY27 — an interim step toward the FY31 target.
• IRDAI consultation paper on insurance commission rationalisation — especially credit life, which covers 65-85 million lives annually via banks/NBFCs; industry body FIDC is engaging the regulator. Management expects a "softer landing" and minimal disruption to Lakshya 2031 goals, citing scope for consultation and a requested glide path.

Broad-Based YoY Growth; Rural Deliberately Tempered

• Personal loans: record quarterly disbursement of Rs.4,233 crores — +45% YoY in Q2 FY 2026-2027; book Rs.18,664 crores (+72% YoY); partnerships (e.g., Airtel) constitute 40% of originations.
• Urban finance disbursements of Rs.10,328 crores (+27% YoY) — book Rs.67,668 crores (+32% YoY); two-wheeler book Rs.16,158 crores (+24% YoY) on disbursements of Rs.3,170 crores (+26% YoY), with 92% in the prime segment.
• Rural business disbursements of Rs.6,356 crores (+1% YoY) — book Rs.33,465 crores (+22% YoY); management is increasing risk-calibrated rural disbursement momentum in Q3 FY 2026-2027, using CGFMU and parametric insurance to de-risk the portfolio.
• Housing disbursements of Rs.2,926 crores (+8% YoY) — book Rs.32,846 crores (+20% YoY); 'Aaram Loans' launched (ticket size 20-50 lakhs) for affordable housing.
• SME disbursements of Rs.1,820 crores (+24% YoY) — book Rs.9,495 crores (+27% YoY); 80% of the portfolio covered under CGT MSE insurance; SME growth guided at 20-25%.
• Pharma book of Rs.17,397 crores (+9% YoY) — on disbursements of Rs.1,643 crores (-1% YoY) in Q2 FY 2026-2027.
• Rural risk actively managed — conscious attenuation of rural disbursements in Q2 FY27 due to monsoon uncertainty (2026 SW monsoon at 87% of LPA); drought in Karnataka, Maharashtra, AP and Telangana strengthened underwriting guardrails, though rural collection efficiency held at 99.7-99.8%.

Hyper-Growth Vertical with Aggressive Branch Build-Out

• Gold loan disbursements of Rs.3,237 crore in Q2 FY 2026-2027 — 229% YoY growth; closing book at Rs.5,043 crore (+242% YoY).
• ~800 gold loan branches guided by end-FY 2026-2027 — with a long-term plan to reach ~2,000 branches before pausing; branches achieve break-even in 8-9 months.
• Gold loan AUM target of 14-15% of total AUM (Rs.40,000-45,000 crore) — by end of Lakshya 31 (FY 2030-2031).
• Portfolio described as BAU — no losses over the past 15 months, fewer than 3 auctions in the trailing year, and recovery rates exceeding 140% of the amount due.
• 172 branches added in H1 FY27 — reaching 502 active branches, with 110 branches crossing Rs.15 crore in POS as of Sep 30, 2026; Sampoorna multi-product network scaled to 150 branches (33 integrated with gold loan) since launch in FY25.
• Marketing campaigns achieved 15 million views and 34 million reach — featuring brand ambassador Jasprit Bumra and sponsorships (Family Kirana Store Season 2, India vs Sri Lanka test series); management expects these to boost business volumes.

Cyclops, Hercules and the AI Stack as Growth Enablers

• Project Hercules (AI cross-sell engine) Phase 1 live in Q2 FY27 — full implementation by Q3 FY27 (Dec 2026); expected to drive low-acquisition-cost disbursements in FY28.
• Cyclops risk system integration — attributed as the cause of flattish sequential consumer loan disbursements in Q2 FY 2026-2027 (not demand or credit issues); implementation nearly complete, with sequential growth expected to resume in Q3/Q4 FY 2026-2027; new partner onboarding now takes 3-4 months due to mandatory Cyclops integration.
• Cyclops covers 85-90% of the two-wheeler bill — Cyclops portfolios show 50% lower bounce rates vs legacy; the tool recovered 70-75 bps of the initial 75-100 bps yield compression from prime migration in 2W, with the portfolio now 92% prime.
• Nostradamus tool identified Rs.50 cr in collections savings/early resolutions — in H1 FY 2026-2027 across two-wheeler and PL; no adverse early warning signals despite weak monsoons, with reservoir levels at 71% supporting a near-normal Rabi crop.
• AI Citizen program launched — 1,200+ employees trained on the Google Enterprise Agent platform; 5,730 business process agents created by employees in FY 2026-2027.
• Payments platform (Pine Labs partnership) applied for PPI license — AI-enabled prepaid products expected in FY28, subject to RBI approval.

Cost Tailwinds With Rising Incremental Borrowing Costs

• Weighted average cost of funds down 25 bps to 6.95% — in Q2 FY 2026-2027; management noted that achieving a sub-7% rate places the company better than initially expected for FY 2026-2027, though the final outcome depends on the remaining two quarters, potential repo rate hikes and growth rates.
• Incremental borrowing costs have risen by 30-50 bps — per CFO Sachin Joshi, though the lower base provides a buffer for the next 3-4 quarters; incremental cost of borrowings requires a 30-40 bps margin going forward.
• Management expects 2-3 repo rate hikes (Dec 2026, Feb 2027) — the variable-rate home loan book (~Rs.25,000 crores) will be repriced opportunistically as market rates rise.
• Asset quality stable — two-wheeler 90+ at 1.2% (Q2 FY 2026-2027); LAP delinquency index at 10% of industry delinquency, with the AI-based Helios tool being implemented for underwriting; risk-based pricing rollout guided for PL, farm and SME.
• Total non-PSL bank borrowings at 28% (FY 2026-2027) — management declined to detail the granular mix of lines of credit vs term loans, directing analysts to Slide 38 and one-on-one discussions.
• Bihar credit quality expected to remain relatively stable — across microfinance and two-wheeler despite Q2 FY 2026-2027 floods, citing good late monsoon rains and parametric insurance coverage that has already yielded a significant payout for the state.
• Personal loan run rate and mix caveats — current monthly PL run rate of Rs.1,500 crores with an interim target of Rs.1,700-1,800 crores for Q3/Q4 FY 2026-2027; insurance on gold loan disbursements has not yet been initiated (FY 2026-2027), and fee income remains dependent on business mix.