L&T Finance Limited
* Public issue of secured redeemable NCDs ^Public Issue of Secured Redeemable Non-Convertible Debentures and/or Unsecured Subordinated Redeemable Non-Convertible Debentures @cumulative redeemable non-convertible Note: None of the Directors on Crisil Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. 1 crore = 10 million Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale Crisil Ratings has assigned its 'Crisil AAA/Stable' rating to the Rs 15,000 crore non-convertible debentures (NCDs) of L&T Finance Ltd (LTF; formerly known as L&T Finance Holdings Ltd [LTFH]) and reaffirmed its ‘Crisil AAA/Stable/Crisil A1+’ ratings on the outstanding debt instruments and bank facilities.
Crisil Ratings has also withdrawn its ratings on NCDs of Rs 3,379 crores, PPMLD of Rs 300 crores and retail bonds of Rs 424.8 crores as the same has been fully redeemed. This rating action is in line with the withdrawal policy of Crisil Ratings.
The ratings continue to reflect the strong and diversified presence of LTF within the lending space and its diversified resource profile. The ratings also centrally factor in the expectation of strong and continued support from the parent, Larsen and Toubro Ltd (L&T; 'Crisil AAA/Stable/Crisil A1+'). These strengths are partially offset by the company’s moderate, though stable, asset quality.
Total assets under management (AUM) stood at Rs 97,762 crore as on March 31, 2025, having grown from Rs 85,565 crore, a year ago; correspondingly, the proportion of retail loans in the overall advances increased to ~97% from 94%. In a bid to further grow and diversify its product portfolio, LTF acquired the gold loan business of Paul Merchants Finance Private Ltd. (PMFL), a wholly owned subsidiary of Paul Merchants Ltd in June 2025. The acquisition included PMFL’s 130 branches, approximately 700 employees, and business transfer of its gold loan book size of Rs. 1,350 Crore to LTF. On June 30, 2025, total AUM of LTF stood at Rs 1,02,314 crore of which 98% were retail loans
This is in line with the company’s existing business strategy to granularize its portfolio. Against this, asset quality – though moderate – has also been rangebound. On March 31, 2025, reported gross non-performing assets (GNPAs) were 3.29% of gross advances vis-à-vis 3.15%, a year ago. As of June 30, 2025 – this metric stood at 3.31%.
For fiscal 2025, the company reported a profit after tax (PAT) of Rs 2,643 crore (return on managed assets [RoMA] of 2.4%), against Rs 2,317 crore (2.2%) for the previous fiscal. For the first quarter of fiscal 2026 (Q1FY26), the company reported a PAT of Rs 701 crore with an annualised RoMA of 2.3%. |
Analytical Approach Crisil Ratings considers the standalone business and financial risk profile of LTF (formerly known as LTFH; earlier consolidated with then LTF and LTICL). Crisil Ratings has also factored in the strong support from the parent, L&T, given the strategic importance of the entity to the parent along with the shared brand name. L&T is the majority shareholder of LTF, with a shareholding of 66.2% as on June 30, 2025. |
Key Rating Drivers & Detailed Description Strengths: Strategic importance to, and expectation of strong support from, L&T LTF has demonstrated a healthy growth over the past few fiscals, while maintaining a stable profitability. As part of L&T’s focus on building a strong services portfolio including IT, technology and financial services, LTF has remained a key focus area of the parent. L&T provides strategic oversight to the entity and has personnel from its senior management on the board of LTF. For instance, Mr. S N Subrahmanyan (chairman & managing director, L&T) is a non-executive director and chairperson on the board of LTF whereas Mr. R Shankar Raman (president, whole-time director and chief financial officer, L&T) is another non-executive director. The parent also has representation in some of the key committees of the company, such as asset-liability and risk management committees. LTF also benefits from the synergies, extensive experience and expertise of L&T, especially in infrastructure and real estate lending. The parentage of L&T, along with the brand name, also supports the resource profile.
Furthermore, the parent has infused equity capital at periodic intervals in LTF (infused ~Rs 1,900 crore in fiscal 2021 and Rs 2,000 crore in fiscal 2018). In the past, L&T has also extended a line of credit to LTF, to be used during contingency. Capital support from the parent, along with internal cash accrual, is expected to keep capitalisation adequate with gearing not expected to exceed 7.5 times on a steady-state basis.
This demonstration of financial support is reflected in the parent’s intention to (i) maintain strategic linkages and management oversight so that, among others, LTF conducts its business in a manner such that it honors its stakeholder obligations in a timely manner (ii) maintain majority shareholding in LTF, and (iii) provide growth and risk capital, if and when required.
The financial services business is expected to remain one of the key focus areas for L&T, which should continue to support LTF.
Strong and diversified presence across the lending segment LTF is operating as a retail-focused NBFC and, has built a strong market position with AUM of Rs 1,02,314 crore (with retail book of Rs 99,816 crore) as on June 30, 2025. Growth in AUM remains healthy at ~15% year-on-year (y-o-y) in Q1FY26 as compared to ~14% in fiscal 2025 and ~6% in fiscal 2024, owing to an accelerated sell down of the legacy wholesale portfolio. The effect of the sell down of wholesale portfolio is partly offset by a strong organic growth in retail portfolio. For Q1FY26, retail loans grew at 19% (y-o-y), including the gold loan portfolio acquired inorganically, as against 31% for fiscal 2024 and 35% for fiscal 2023. The slow down in overall loan growth is largely contributed by lower growth in unsecured retail business segments in line with the industry scenario.
The company has been focused on increasing the degree of digital integration in all its functional areas including sourcing, underwriting, disbursement, servicing and collections. LTF extended its ‘Project Cyclops’, an underwriting engine, to tractor financing business after complete scale up in two wheeler financing. LTF is extensively using its large customer base of ~2.6 crore through multiple channels, to enhance customer engagement and drive successful conversions, thus creating cross-selling and upselling opportunities. The growth in the retail segments has also been supported by enhanced digital presence (e.g., PLANET App.) and usage of data analytics.
LTF’s retail portfolio is divided into four main categories; 1. Farmer finance (15% of AUM as on June 30, 2025) 2. Rural business loans & micro finance loans (26%) 3. Urban finance consisting of two-wheeler finance (12%), personal loans (9%), home loans (20%), loan against property (6%) and 4. Small and medium enterprise (SME) finance (7%). The retail portfolio is further diversified subsequent to the acquisition of gold loan business in Jun-25 (1% of AUM). LTF’s adherence to stringent association norms resulted in limited negative impact on its asset quality post the emergence of issues like over indebtedness in the micro finance segment. Nevertheless, the business momentum across other segments remains favorable on account of steady urban consumption and increasing rural consumption. The remaining wholesale lending book of the entity comprises infrastructure finance (~1%) and real estate finance (~1%) as of June 30, 2025.
Retail portfolio at ~Rs 99,816 crore (~98% of overall loan book) as on June 30, 2025, has exhibited steady growth momentum over the past few quarters. Quarterly disbursement towards this segment were Rs 17,522 crore (Q1FY26), higher by 18% y-o-y (Disbursements for fiscal 2025 were Rs 60,040 crore as compared to Rs 54,267 crore for the previous fiscal).
Going forward, the business growth is expected to pick up and be driven by consistent focus on the retail (including SME finance) segment.
Well-diversified resource profile Resource profile is spread across capital markets and bank funding. The company is prominent issuer in the capital markets and has long established banking relationships as well. Of the total borrowing of Rs 93,768 crore as on June 30, 2025, non-convertible debentures (including retail), commercial paper, external commercial borrowings (ECB) and bank borrowings (including PSL and FIs) contribute 31%, 8%, 8%, and 51%, respectively. The diversity in resource profile aids the company’s ability to raise funds at competitive pricing. For Q1FY26, average borrowing cost[1] was 7.0% (annualised; 7.1% for fiscal 2025), which was lowest among most of its’ peers. L&T’s parentage also supports the resource profile of LTF.
Weakness: Moderate, albeit stable, asset quality Asset quality indicators, though moderate, have remained range bound in the recent past. Gross stage-3 (GS-3) and Net stage-3 (NS-3) stood at 3.31% and 0.99%, respectively as on June 30, 2025 (3.15% and 0.79% as March 31, 2024), improved from 4.74% and 1.51% on March 31, 2023 – supported by stronger collection efficiency, controlled slippages, higher recoveries and write offs. Furthermore, stringent underwriting policy led to controlled slippages in Rural business finance’s (RBF) segment. As on June 30, 2025, provisioning coverage ratio for GS-3 was at 71% as compared to 75%, a year ago. In the retail portfolio, asset quality has shown sequential improvement with GS-3 and NS-3 of 2.93% and 0.83%, respectively as on June 30, 2025, having improved from 3.21% and 0.70% as on June 30, 2023.
Nevertheless, the company witnessed marginal uptick in GS-3 assets in fiscal 2025 when compared with GS-3 assets as on March 31, 2024, was on account of higher slippages witnessed in Personal Loan, SME and wholesale segment. To counter this, the company is increasing the share of more prime customer segment in it’s retail businesses and is simultaneously scaling up collections in the higher-risk business.
Furthermore, wholesale book continues to rundown, particularly after the accelerated sell-own in fiscal 2023, and forms ~2% of the AUM. The net security receipt book stands at Rs 5,862 crore (5% of total assets) as on March 31, 2025. The provisions created for wholesale portfolio as part of the accelerated sell-down strategy can potentially cover the incremental provisioning requirement. The stage 2 provisions (including macroprudential provisions) accounted for 29% (June 2025) of the Gross stage-2 retail assets.
Crisil Ratings takes note of the recent growth in retail portfolio with stable asset quality in the established products of LTF - rural group loans and micro finance, farm equipment financing, two wheeler financing and home loans. While the SME (6.8% of AUM as of June 2025) and personal loans (9.2% of AUM as of June 2025) have also contributed to the overall growth, these two segments are yet to go through economic cycles. Ability of the management to keep the asset quality metrics under check as recently scaled portfolios season and go through economic cycles, while the overall business continues to grow at a healthy pace, will remain a key monitorable. [1] Borrowing cost = Annualised interest cost during the period divided by the average of outstanding borrowings at the beginning and the end of the period |
Liquidity: Superior The asset-liability maturity profile as on June 30, 2025, reflects cumulative positive liquidity gaps in all buckets up to one year. LTF generally maintains liquidity to meet obligations coming up over the next 30 days. As on June 30, 2025, total debt repayments (including interest) scheduled over the following six months (July to December 2025) were Rs 18,627 crore. Against this, LTF had a liquidity balance of around Rs 23,695 crore (comprising cash, liquid investments and unutilised bank lines).
Environment, social, and governance profile The environment, social and governance (ESG) profiles of financial institutions typically factor in governance as a key differentiator between them. The sector has reasonable social impact because of its substantial employee and customer base and can play a key role in promoting financial inclusion. While the sector does not have a direct adverse environmental impact, lending decisions may have a bearing on the environment and other sustainability related factors.
The ESG profile of LTF supports its already strong credit risk profile. LTF has demonstrated an ongoing focus towards embedding different aspects of sustainability in its business strategy, business operations and business impact.
Key ESG highlights:
There is growing importance of ESG among investors and lenders. LTF’s commitment to ESG will play a key role in enhancing stakeholder confidence, given the high share of foreign investors as well as access to both domestic and foreign capital markets. |
Outlook: Stable LTF will remain highly strategically important to L&T and continue to benefit from the latter’s strong support over the medium term. Furthermore, LTF is expected to maintain its strong and diversified presence across the financial services space and a well-diversified resource profile. |
Rating Sensitivity Factors Downward Factors
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About the Company LTF is a NBFC-ICC and a subsidiary of L&T. It was incorporated in 2008 and is listed under the National Stock Exchange and Bombay Stock Exchange. On December 04, 2023, LTFH has announced the successful completion of the merger with its subsidiaries LTF, LTICL and LTMFTL. Subsequent to this, LTFH – changed its name to LTF – and has been operating as a single unified retail NBFC, housing all lending businesses under one operating NBFC. |
Key Financial Indicators: L&T Finance (as per Indian Accounting Standard)
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Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Not yet issued
Annexure - Details of Rating Withdrawn
^cumulative redeemable non-convertible |
Annexure – List of Entities Consolidated
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| Annexure - Details of Bank Lenders & Facilities | ||||||||
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**Interchangeable with short term bank facility
Criteria Details
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