Laxmi India Finance Q3 FY26: AUM Surges Amid NPA Spike & Growth Outlook

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AuthorSatyam Jha|Published at:
Laxmi India Finance Q3 FY26: AUM Surges Amid NPA Spike & Growth Outlook
Overview

Laxmi India Finance reported AUM growth to ₹1,451 crore in Q3 FY26, driven by secured MSME and vehicle loans. However, Gross Non-Performing Assets (GNPA) rose to 2.4% due to a significant default in a Direct Assignment transaction. Management is provisioning for the loss and targeting strong future AUM growth while addressing high operating costs. The company plans expansion into Maharashtra.

Laxmi India Finance Navigates NPA Hit Amidst Strong AUM Growth Push

Laxmi India Finance reported AUM of ₹1,451 crore as of Q3 FY26, while Gross Non-Performing Assets (GNPA) rose to 2.4%.

Reader Takeaway: AUM growth set to soar; NPA spike and high costs remain key concerns.

What just happened (today’s filing)

Laxmi India Finance Limited convened its Q3 FY26 earnings call on February 17, 2026, detailing robust growth plans alongside a temporary setback.

The company’s Assets Under Management (AUM) have expanded significantly, reaching ₹1,451 crore. This growth is anchored by a product mix heavily skewed towards secured MSME loans, constituting 83-84% of the book.

These MSME loans feature an average ticket size of ₹7-8 lakh with a conservative collateral Loan-to-Value (LTV) ratio of 45-50%. Vehicle financing forms the second-largest product category.

However, the period saw Gross Non-Performing Assets (GNPA) rise to 2.4%. Management attributed this spike to a specific default in a Direct Assignment (DA) transaction with a partner NBFC, Up Money. The company has already provisioned ₹9 crore for this default over nine months and expects to provide the remaining ₹8 crore in Q1 FY27.

Why this matters

Despite the one-off NPA event, Laxmi India Finance maintains an ambitious growth trajectory. The company is targeting a 30-35% Compound Annual Growth Rate (CAGR) for its AUM, aiming to reach ₹5,000 crore within five years.

This expansion is supported by strategic plans for profitability, targeting a Return on Assets (ROA) between 3.5% and 3.75%. A potential credit rating upgrade is anticipated, which management believes could reduce the cost of funds by 100-150 basis points over the next one to two years.

The elevated operating costs, around 9% of AUM, remain a point of discussion. Management attributes this to the 100% direct-sourcing model and recent branch expansion, asserting that technology-driven efficiency gains are imminent.

The backstory (grounded)

Laxmi India Finance has scaled its AUM substantially from ₹200 crore in FY18 to its current ₹1,451 crore, demonstrating a consistent growth phase.

The company operates over 170 branches, primarily in Rajasthan, Gujarat, Madhya Pradesh, Chhattisgarh, and Uttar Pradesh, employing a direct sourcing model that emphasizes relationship-based lending for MSME clients.

What changes now

  • Shareholders can anticipate a strong focus on achieving targeted AUM growth of 30-35% CAGR.
  • The company's ability to manage and recover assets from the DA transaction default will be critical for asset quality.
  • Investors will monitor the planned entry into Maharashtra by April-May 2026.
  • Efforts to reduce high operating costs through technological adoption will be a key watchpoint.
  • The potential credit rating upgrade could favourably impact the company's cost of funds.

Risks to watch

  • Direct Assignment (DA) Transaction Default: A default by a partner NBFC led to a significant hit on recent profitability, requiring further provisioning.
  • High Operating Intensity: Operating costs remain a concern, hovering around 9% of AUM, which is high relative to industry peers.
  • Cash Collection Exposure: A substantial 40% of collections are still managed in cash, presenting operational and transparency challenges, though technology adoption is underway.

Peer comparison

Laxmi India Finance operates in a segment with established players like Cholamandalam Investment and Shriram Finance, which are leaders in vehicle and MSME financing.

While peers may benefit from greater scale and lower operating costs due to established digital infrastructure, Laxmi India Finance's 100% direct sourcing model aims for deeper client engagement in its chosen geographies.

Context metrics (time-bound)

  • AUM grew from ₹200 crore (FY18) to ₹1,451 crore (Q3 FY26).
  • GNPA stood at 2.4% for Q3 FY26.
  • Operating costs were approximately 9% of AUM for Q3 FY26.

What to track next

  • Resolution and recovery status of the Direct Assignment transaction default.
  • Progress on planned entry into the Maharashtra market.
  • Achieving the targeted ROA of 3.5% to 3.75%.
  • Demonstration of efficiency gains from technology adoption to reduce operating costs.
  • Outcome of anticipated credit rating upgrade and its effect on the cost of funds.
  • Monitoring the evolution of GNPA and asset quality metrics.
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