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L&T Finance has unveiled its 'Lakshya 2031' roadmap, aiming to nearly triple its assets under management to ₹3 lakh crore by fiscal year 2031. This plan relies on accelerated book growth and operational efficiencies, driven by artificial intelligence. While recent quarterly results show strong retail loan growth and improved profits, achieving these ambitious targets requires drastically reducing credit costs and navigating a complex market.
Growth Targets Under 'Lakshya 2031'
L&T Finance's 'Lakshya 2031' initiative sets four key financial objectives: annual book growth exceeding 20%, credit costs below 2%, a Return on Assets (ROA) between 3.0% and 3.2%, and a Return on Equity (ROE) of 16-18%. The company's retail loan book has already grown by 26% year-on-year, reaching ₹1,19,508 crore as of March 31, 2026. This retail focus is expected to boost profitability, with projections for loan book Compound Annual Growth Rate (CAGR) at approximately 21% and profit after tax growth around 28% over FY2026-FY2028. Analysts largely responded positively, with multiple brokerages maintaining 'Buy' ratings and projecting up to 20% upside, citing steady loan growth and improving return ratios. The consensus analyst rating is a 'Moderate Buy', with an average 12-month price target around ₹300.
AI Enhances Efficiency and Underwriting
Central to L&T Finance's targets is the integration of artificial intelligence. The AI underwriting engine, Cyclops, has shown promising results, achieving a 30-day past-due rate of just 2.71% on a ₹3,000 crore book acquired between April and July 2025. This significantly outperforms the industry average of 7.1%. This success is important as the company aims to lower credit costs from the current 2.64% toward the target of sub-2% by FY28-29. Furthermore, AI-driven collections bots are projected to save ₹30 to ₹40 crore annually by reducing per-call expenses from ₹300 for human agents to ₹10-12 for bots. The company is also developing a new payments platform to diversify fee income and capture customer data, expected to be operational by Q2 FY27.
Challenges in Cutting Credit Costs
Achieving the target of credit costs below 2% presents a significant challenge. While current credit costs have moderated to 2.64% in Q4 FY26, down from 2.83% in Q3 FY26, this remains above the target. Some reports indicate credit costs increased to 1.7% in H1 FY2026 from 1.3% in FY2024, with a stated utilization of macro prudential provisions. Moreover, the increasing share of semi-secured and unsecured assets in the portfolio, now at 43% as of September 2025, raises concerns about asset quality. The company aims to bring credit costs into the 2-2.2% range by Q4 FY27, with the sub-2% goal targeted for FY28-29, indicating a multi-year effort.
Valuation and Market Outlook
L&T Finance currently trades with a P/E ratio between 23.08 and 25.01. One analysis suggests this valuation is 41% above its 10-year median, deeming the stock 'Modestly Overvalued' relative to its GF Value. This valuation is higher than peers like Shriram Finance (22.50x) and Muthoot Finance (16.06x), but lower than Bajaj Finance (29.97x) and Cholamandalam Investment (27.32x). The broader Indian NBFC sector is expected to maintain strong growth, with Assets Under Management (AUM) projected to cross ₹50 lakh crore by March 2027, driven by retail and MSME lending. However, sector profitability could face pressure from geopolitical risks, such as the conflict in the Middle East, though L&T Finance's management has not yet observed palpable impacts.
Analyst View and Future Growth
Analysts generally maintain a positive view on L&T Finance, with a consensus rating of 'Moderate Buy' and price targets suggesting potential upside. Projections indicate L&T Finance is expected to enter a phase of consistent, quality-led growth from FY2027, supported by a favorable product mix and moderating funding costs. Successful execution of its AI strategy and prudent management of credit quality will be key to meeting the aggressive targets set for 'Lakshya 2031'.