L&T Finance credit cost must fall faster to reach its 2.0% to 2.2% target by March 2027

Profit hit a record as the book grew 28% and costs fell

L&T Finance, a lender to rural households, small businesses and consumers, reported profit after tax of ₹975 crore for the September 2026 quarter, a record by the company's account and a third above a year earlier.

Two costs came down. Credit cost, the charge the lender takes against bad loans as a share of its book, fell. Borrowing cost fell below 7%, the first time in the company's history, the chief financial officer said. The exhibit shows filed net profit, which differs slightly from the company's reported profit after tax. Lower provisions do not by themselves show fewer loans going bad; management attributes the improvement to better underwriting, which Inve has not tested.

Credit cost must fall faster than it has

Management has guided to a credit cost of 2.0% to 2.2% by the end of the financial year, and the chief executive said again that the company is confident. The same corridor has been stated on each call held since January, so the question is the pace. From 2.46%, it takes a further fall of 26 to 46 basis points in two quarters, calculated from the reported figures; if spread evenly over the two quarters, that is a faster pace than the last two falls. Quarterly falls need not be even, and no quarterly path was given on the call.

Management says every business is improving. The chief executive put a September dip in two-wheeler collections down to an overly aggressive collections experiment and called it nothing structural, an explanation Inve cannot test.

Borrowing cost under 7%; CFO expects new debt to cost more

NIM plus fees, the net interest margin and fee income together as a share of assets, was 10.48% last quarter, flat on the quarter before. The chief financial officer said it would sit about the middle of its corridor of 10% to 10.5% over the next couple of quarters. The midpoint is lower, so he is either pointing lower or describing roughly the current level; the call does not settle which.

On 13 July 2026 the company guided a full-year borrowing cost of 7.35% to 7.40%. Asked on the call whether the year would end lower or flat, the chief financial officer declined to give a figure and pointed to rate rises that make new borrowing dearer; he also said that being that low leaves the company better placed than the earlier plan assumed.

New lending barely grew quarter to quarter, led by rural

Retail disbursements, the new loans advanced in the quarter, were ₹24,027 crore: well above a year ago but barely above last quarter. Rural business and farm-equipment finance together fell about 15% on the quarter, calculated from the company's segment figures. The chief executive called the rural result near flat (in the same answer he counted tractors among rural disbursements; the rural business and farm-equipment lines together fell on the quarter, though they were flat on a year earlier) and said lending was deliberately held back after a weak monsoon.

The loan book still grew 28% on the year, because new lending exceeds repayments. Gold lending rose sharply on the quarter, and two-wheeler and SME lending also rose; rural, personal-loan and mortgage disbursements fell. Management expects a pickup in the festive quarter, which is an expectation, not data.

A proposed insurance-commission cut with undisclosed cost

The chief executive also raised, unprompted, the insurance regulator's draft proposal to cut distribution commissions, with significant cuts for credit-linked and motor insurance, products a lender sells alongside its own loans. Management said it is premature to quantify the effect, that its industry body plans to ask the regulator for a gradual path, and that the business model will change over time. On 13 July 2026 the topic reached the call only through an analyst's question. The company said it will give an official view of the return-on-assets effect once rules are final, so the company has not yet disclosed the size of this risk, though it said it has an estimate based on the draft. Management said it expects minimal disruption to its long-range goals and reiterated its long-run return-on-assets target; on the call it gave no estimate of the commission effect to set against that.