ICICI Securities has maintained a positive outlook on L&T Finance, highlighting a 28% annual growth in assets under management. The company aims for improved profitability despite hurdles like rural demand fluctuations and interest rate pressures. Investors should track how the lender manages credit costs and regulatory changes in the coming quarters.
ICICI Securities has issued an update on L&T Finance, maintaining a positive stance on the stock with a target price of ₹370. The brokerage’s report emphasizes the company's strong growth momentum, noting a 28% year-on-year increase in assets under management (AUM). This expansion comes alongside the company's efforts to integrate technology platforms like Project Cyclops and Nostradamus into its daily operations.
These proprietary tools are designed to automate underwriting and monitor portfolios, which the company expects will enhance operational efficiency. In the second quarter of the 2027 fiscal year, L&T Finance reported a return on assets of 2.6%, marking a 12 basis-point improvement compared to the previous quarter. The company has set an ambitious internal goal to raise this return on assets to a range of 2.8% to 3% by the final quarter of the current fiscal year.
While the growth trajectory appears steady, the lender faces specific market pressures. The current interest rate cycle remains high, which can increase borrowing costs and dampen loan demand. Furthermore, the company is dealing with the impact of rainfall deficits on rural demand, a segment critical to many non-banking financial companies (NBFCs). Additionally, recent regulatory changes concerning insurance commissions have added a layer of complexity to the firm's business model. To combat these challenges, management is focusing on optimizing its credit book, with expectations that credit costs will decrease from the current 2.5% to between 2% and 2.2%.
Investors may monitor the execution of these plans closely. Success will largely depend on the company's ability to maintain portfolio quality while navigating the volatility in rural markets. Future updates regarding the transition to higher return-on-asset levels and the actual impact of regulatory shifts on margins will be important indicators of the company's long-term performance.