Event Participants
Executives
5 Deepak Baid, Gopal Krishan Sain, Kuldeep Singh Sikarwar, Piyush Somani, Sanjay Roja
Analysts
6 Deepesh J. Sancheti, Dhaval Pandya, Harkirat Singh, Seema Bajaj, Shivam Rathore, Vineet Sharma
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| AUM | ₹1,721.7 crore | Growth of 28% YoY; own book at ₹1,626.9 crore (up 31% YoY) |
| Disbursements | ₹232 crore | Up 40% YoY from ₹166 crore in Q1 FY26 |
| Net Interest Income | ₹47.1 crore | Up 39% YoY driven by NIM expansion |
| Profit Before Tax | ₹21.9 crore | Up 72% YoY |
| Profit After Tax | ₹16.4 crore | Up 70% YoY |
| ROA | 3.45% | Improved from 2.75% in Q1 FY26; targeting 3.5-3.75% |
| ROE | 13.86% | Moderation attributed to strengthened equity base post-IPO |
| NIM | 11.36% | Expanded from 10.43% YoY; portfolio yield stable at 2.67% |
| Cost of Borrowing | 10.66% | Declined 67 bps YoY from 11.33% |
| GNPA | 2.08% | Improved sequentially from 2.13% in March 2026 |
| NNPA | 0.93% | Improved from 1.09% at end of March 2026 |
| Credit Cost | 0.95% (₹3.69 crore) | Up from 0.58% in Q1 FY26; increase attributed to vehicle financing portfolio |
| Net Worth | ₹482.8 crore | As on June 30, 2026 |
| CRAR | 25.32% | Tier 1 capital at 24.82% |
| Debt to Equity | 3.1x | Net debt to equity at 2.57x after considering liquidity of ₹255.9 crore |
Geographic & Segment Commentary
MSME (Core Segment): MSME AUM at approximately ₹1,395 crore representing the largest vertical of the business. Continues to be the strategic focus with emphasis on secured SME lending to first-time borrowers in tier 2/3 markets.
Vehicle Finance: AUM at approximately ₹131 crore; this segment experienced elevated credit cost during Q1. Management tightened acceptance criteria and increased field follow-up frequency but maintains this is a segment-specific issue rather than an underwriting problem.
Other Products: Construction and loan against property at ₹90 crore, wholesale lending at ₹58 crore, and personal loans at ₹49 crore. Recently launched a prime MSME product ranging from ₹25-50 lakh with improved credit guidelines.
Geographic Presence: Operating 194 branches across six states (Rajasthan, MP, Gujarat, Chhattisgarh, UP, Maharashtra), with 25 branches added over the last year. Rajasthan remains the mother state with ~90 branches, though management is conscious about state-wise diversification.
Company-Specific & Strategic Commentary
Liability Franchise Strengthening: Banks now account for ~70% of borrowing mix with 84% of incremental borrowing in Q1. Raised ~₹296 crore across nine facilities including new lender ICICI Bank at competitive rates; credit rating upgraded from A- to A.
Branch Expansion Strategy: Cluster-based approach focusing on building density in existing markets with selective entry into new geographies. Plans for 30-35 new branches in FY27; breakeven achieved in 7-9 months with ₹1.5-2 crore AUM per branch.
Technology & Digitization: Sourcing, underwriting, servicing and collection processes largely digitized through LOS/LMS platforms, CKYC integration, RCU-based field investigation, and digital collections. E-sign capability expected shortly to complete full digitization.
Capital Planning: Targets ₹300-350 crore capital raise starting mid next financial year to support growth while maintaining leverage around 3.5-4x.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| AUM Growth | 30-35% annually (medium term) | Maintained despite Q1 disbursement growth of 40%; management maintaining existing guidance to assess performance over coming quarters |
| PAT Growth | 40-45% for FY27 | Q1 PAT growth of 70% significantly ahead of range; maintaining guidance pending further assessment |
| ROA | 3.5-3.75% | Targeting by end of FY27 |
| Cost of Borrowing | Additional 20-25 bps reduction | Assuming stable global rate conditions and RBI neutral stance |
| Cost to Income | Target of ~42-44% | Internally believed healthy ratio, challenging during growth phase |
| Capital Raise | ₹300-350 crore | Planned to start process mid next financial year |
Risks & Constraints
| Risk | Context |
|---|---|
| Vehicle Finance Portfolio Stress | Credit cost elevated due to stress in vehicle financing segment; 70% of expected credit loss provisions already taken. Management has tightened acceptance criteria and increased field follow-ups. |
| Global Uncertainty Impact | Crude price increases affecting borrower costs, though overall impact limited as customer base is in tier 2/3 cities without international transactions. Management expects collection efficiency to remain well maintained. |
| Branch Expansion Execution | New branches have 7-9 month breakeven period; managing productivity of maturing branches in newer markets like UP and Maharashtra is key to sustained profitability. |
| Competitive Intensity | Increasing competition in MSME lending requires maintaining underwriting discipline while managing yield expectations. |
Q&A Highlights
Branch Productivity and Network Expansion
- Question: How are new branches performing versus mature network, and what is the expected gestation period? (Deepesh J. Sancheti - Maanya Finance)
- Answer: Of the 25 branches opened last year, one is already at breakeven stage. Average breakeven takes 7-9 months with ₹1.5-2 crore AUM per branch. Branches categorized into three tiers based on population and market potential, with 3-6 relationship officers and branch manager per branch. (Kuldeep Singh Sikarwar)
Growth Strategy and Product Mix
- Question: Will MSME share increase going forward, and how will geographical distribution evolve? (Vineet Sharma - Param Capital)
- Answer: Planning 30-35 new branches across existing states in FY27; added 10 in Q1 itself. MSME remains the focused product with new prime MSME product (₹25-50 lakh) launched. Secured SME lending is the core strategy based on historical performance. New geographies including potential new states being explored. Rajasthan will remain the major state for 3-4 years, but conscious effort toward state-wise diversification. (Kuldeep Singh Sikarwar)
Credit Cost Increase
- Question: Credit costs have increased ~1% in this quarter - what are the reasons? Is it from new geographies or vintages? (Unidentified Participant)
- Answer: The increase is specifically from the wheels (vehicle finance) portfolio. Management has increased provisions to 70% of expected credit loss for one specific case, having already guided to this in previous quarters. Core MSME and secured SME portfolios show moderate credit cost. The provision is case-specific and will be reassessed at each reporting date based on collection outcomes. (Gopal Krishan Sain, Kuldeep Singh Sikarwar)
Capital Planning and Leverage Capacity
- Question: How much balance sheet capacity exists before incremental equity capital becomes necessary? (Shivam Rathore - MB Investment)
- Answer: Net leverage stands at 2.43x with healthy liquidity of ₹255 crore. Plan to raise capital of ₹300-350 crore starting mid next financial year. Can extend leverage to 3.5-4x before raising capital, which would help achieve good ROE. (Gopal Krishan Sain, Piyush Somani)
Cost of Borrowing and NIM Outlook
- Question: How much headroom for funding cost decline, and what is sustainable NIM range? (Seema Bajaj - RK Consultants)
- Answer: Rating upgrade from A- to A translated to lower borrowing costs. Incremental borrowing cost for last 12 months is ~10.48% versus blended 10.66%. Another 20-25 bps reduction possible this year assuming stable global conditions. Any benefit may be partially passed to borrowers depending on trade and asset quality conditions. (Piyush Somani)
Operating Leverage and Cost-to-Income
- Question: With opex growing 34% YoY versus 51% total income growth, how much operating leverage is ahead? (Seema Bajaj - RK Consultants)
- Answer: Cost-to-income currently below 50%, with target of 42-44% internally. Growing phase naturally has higher opex due to new branch openings, but subsequent benefits follow in subsequent months. (Piyush Somani)
March Disbursement Run Rate
- Question: Disbursements grew 40% YoY versus 28% AUM growth - how should we read this gap? (Seema Bajaj - RK Consultants)
- Answer: AUM growth depends on disbursements as well as repayments and loan closures. The current disbursement run rate provides confidence in growth trajectory. (Kuldeep Singh Sikarwar)
Key Takeaway
Laxmi India Finance delivered a strong Q1 FY27 with AUM growth of 28% YoY to ₹1,721.7 crore, PAT up 70% to ₹16.4 crore, and ROA improving to 3.45% from 2.75%. NIM expanded to 11.36% driven by declining cost of borrowing (10.66%, down 67 bps YoY) as the company deepens bank relationships (70% of mix, 84% of incremental borrowing). Asset quality improved sequentially with GNPA at 2.08% and NNPA at 0.93%, though credit cost rose to 0.95% due to specific stress in the vehicle finance portfolio. Management maintains FY27 guidance of 30-35% AUM growth and 40-45% PAT growth despite Q1 exceeding these ranges. Strategy centers on branch-led secured MSME lending with 194 branches across six states, expanding 30-35 branches in FY27 with 7-9 month breakeven period. Key watch points include vehicle finance stress resolution, competitive intensity in MSME lending, and planned ₹300-350 crore capital raise in FY28 to support continued growth at optimal leverage.