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Healthy loan growth; sequential decline in credit costs Earnings in line; NIM + fees stable QoQ despite some pressure on core NIM

* L&T Finance’s (LTF) reported 1QFY27 PAT grew 29% YoY to INR9b (in line) and NII grew ~28% YoY to INR29.2b (in line).

* Opex grew ~21% YoY to ~INR12.7b (in line). The cost-income ratio declined 100bp QoQ to 38.7% (PQ: 39.7%). PPoP (5% beat) grew 27% YoY to INR20.1b.

* Credit costs stood at INR7.7b (in line). Reported credit costs declined ~10bp QoQ to 2.54% (PQ: 2.64%).

* Total loan book grew ~27% YoY and ~6.5% QoQ to ~INR1.3t. Wholesale loans declined to ~INR22b

Retail loans up 28% YoY; strong momentum across all product segments

* Retail assets contributed ~98% to the loan mix. Retail loans grew ~28% YoY, led by healthy growth in MFI, 2W, LAP, gold and personal loans. Personal loans saw robust growth of 15% QoQ and 80% YoY. Rural business loans (MFI) grew 5% QoQ. Gold loan book grew 35% QoQ and SME rose 4% QoQ.

* Disbursements grew 36% YoY to INR238b. Secured disbursements grew 41% YoY to INR30b, led by 2W finance. Gold finance disbursements came in at INR19.3b. Personal loans disbursements stood at INR43.8b with an increased focus on Big Tech partnerships. Rural business finance disbursements increased 24% YoY to INR69.6b.

Valuation and view

* LTF's 1QFY27 earnings were broadly in line, supported by strong disbursements, leading to healthy retail loan growth. Asset quality remained broadly stable, leading to a sequential moderation in credit costs. Despite an uncertain geopolitical environment and elevated bond yields during the quarter, CoF and NIMs + fees remained largely stable.

* In the retail segment, personal loans, LAP, Gold, SME, MFI and 2W exhibited healthy loan growth, with retail now contributing ~98% to the loan mix. We will review our estimates and TP after the earnings call on 13 th Jul’26.

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