LT Finance reported a 33% rise in quarterly net profit to Rs 9.7 billion, supported by strong growth in gold and personal loan segments. Assets under management reached Rs 1.37 trillion, a 28% increase from last year. Investors are watching the company's ability to maintain margins and manage risks in its rural loan portfolio as it scales its AI-led lending platform.
LT Finance has reported a strong performance for the recent quarter, with net profit after tax reaching Rs 9.7 billion. This represents a 33% increase compared to the same period last year. The company’s total assets under management also expanded significantly, climbing 28% to touch Rs 1.37 trillion. This growth was largely driven by sustained demand in the gold loan, personal loan, and small-to-medium enterprise lending segments.
Financial analysts, including those at Emkay Global, have highlighted the company’s ability to improve operational efficiency. The company’s credit costs, which represent the amount set aside for potential bad loans, improved by 8 basis points quarter-on-quarter to 2.46%. This improvement is credited to better collection processes and the use of proprietary artificial intelligence tools for managing loan portfolios. Additionally, the company reported a record-low cost of funds at 6.95%, which acts as a cushion against interest rate volatility.
Looking ahead, the management has projected an optimistic growth path, targeting assets under management expansion of more than 20% through fiscal year 2027. The company aims to stabilize net interest margins and fees between 10% and 10.5%. By the end of fiscal 2027, management targets credit costs to settle in the 2% to 2.2% range, with a return on assets projected to reach between 2.8% and 3.0%.
While growth prospects appear steady, the company faces specific risks. The lender has an exposure of approximately Rs 10.3 billion in rural group loans located in regions currently facing stressed conditions. This accounts for about 3.3% of its total rural group loan book. Investors may want to monitor how this exposure is managed, especially given potential economic pressures in these areas. Additionally, the company is adjusting to regulatory shifts, including the upcoming IRDAI draft, which the management expects to navigate through industry collaboration and diversified revenue streams from its payment services division.
The company’s strategy remains heavily focused on technology, with the deployment of cross-selling platforms like Hercules intended to drive further efficiency. The primary monitorables for investors in the coming quarters will be the pace of asset growth, the ability to keep credit costs within the projected 2% to 2.2% range, and the resolution of rural credit risks.