L&T Finance · Material risks, their source context, and severity in the latest available quarter.
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Risk intelligence
Escalating geopolitical tensions (Iran-West Asia conflict) created uncertainty requiring higher surplus liquidity (₹4,200 crores at peak) and contributed to NIM compression of 24bps. Rising debt equity ratio (3.73x to 3.97x) increased borrowing costs by 25bps. Cost of funds may rise 4-5bps in FY27.
While monsoon has improved (deficit reduced to 14% below LPA by July 10), El Niño concerns remain. Rural business finance and tractor businesses are directly exposed to rainfall patterns. Management acknowledged localized risk in certain geographies but noted reservoir levels are acceptable and industry has deleveraged significantly.
IRDAI regulatory changes on insurance commissions could impact fee income, as insurance commissions represent a healthy proportion of fees. Management acknowledged industry-wide concern and factored this into plans, with payments business as an alternative fee revenue source (2-2.5 year buildout).
Remaining wholesale book of ~₹2,000 crores (now largely standard assets post-ARC settlement) requires 2-3 years for resolution. G3 contains one asset (Super Tech) with 61% PCR. Management expects over-realizations but has committed not to take these to P&L, creating macro provision buffer instead. This defers potential upside.
