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LTF reported another strong quarter, with its highest-ever PAT of Rs9.7bn (+33% yoy) and AUM of Rs1.37trn (+28% yoy), led by robust disbursements in Gold Loans, Personal Loans, and SME. Credit costs declined 8bps qoq to 2.46%, aided by better collections and AI-led tools (Cyclops, Nostradamus). The management remains confident of >20% AUM growth, NIM+fees at 10– 10.5%, and credit costs of ~2–2.2% by FY27 exit. It expects ROA to reach ~2.8–3.0% by FY27 exit and 3.0–3.2% by FY31. While monitoring the West Asia conflict and drought in some pockets, it sees no stress build-up, given limited exposure to affected areas (Rs10.3bn, ~3.3% of rural group loans/MFI book). On the IRDAI draft, the management expects a softer landing via FIDC, with offsets through payments/PPI fees, AI-led opex savings, and Hercules-led cross-sell. Strong growth in Gold Loans, Micro LAP, and Personal Loans, along with Hercules-led cross-sell, should support growth and margins. The recordlow COF of 6.95% provides a cushion against further repo hikes. Factoring in the recent performance and outlook, we adjust our estimates marginally, while maintaining BUY and Sep-27E TP of Rs330, implying an FY28E PBV 2.4x.

Strong quarter; lower COF drives profitability

LTF reported a strong quarter, with PAT of Rs9.7bn (+6%/33% qoq/yoy), beating our estimates, mainly due to lower-than-expected COF. AUM grew 5%/28% qoq/yoy, led by healthy retail disbursements (~Rs240bn, +27% yoy). NIM+fees was stable at 10.48%, as ~34bps qoq NIM expansion to 8.88% was offset by lower fee and other income (1.60% vs 1.93%). The NIM gain came from a 25bps qoq fall in COF to a record-low 6.95%. Opex-to-AUM rose slightly to 4.08% on branch and tech investments, while credit cost declined 8bps qoq to 2.46%. Asset quality improved, with GS3/NS3 at 2.75%/0.85%, and ROA/ROE stood at 2.60%/13.56%.

Lakshya 2031 intact; 2H momentum to strengthen further

LTF expects business momentum to strengthen in 3Q on festive demand and a calibrated rural pickup, with RBF collection efficiency steady at 99.7–99.8%. It remains confident of its Lakshya 2031 targets, with credit costs expected to fall to ~2–2.2% by 4QFY27 (≤2% over the medium term), supported by Cyclops-led underwriting, a prime-focused book, and CGFMU/CGTMSE cover. Despite further repo hikes, NIM+fees should stay around the middle of the 10–10.5% range, aided by a record-low COF of 6.95%, lockedin funding (for the next 3-4 quarters), and HL repricing. LTF expects a softer landing on insurance fee income and is diversifying into payments/PPI and Hercules-led cross-sell. It plans ~800 gold loan branches by FY27 end and targets gold loan AUM of Rs400– 450bn by FY31 (~14-15% of AUM). In personal loans, it expects the monthly run-rate to rise to Rs17–18bn from Rs14–15bn as Cyclops integration nears completion. Improving credit costs and operating leverage should drive ROA to ~2.8–3.0% by FY27 exit

Marginally adjust estimates, reiterate BUY

Reflecting 2Q performance and developments, we marginally adjust our estimates and reiterate BUY with a Sep-27E TP of Rs330, implying 2.4x FY28E PBV. Key monitorables: IRDAI guidelines, rural asset quality, PL ramp-up, and COF trajectory amid repo hikes.

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