Q3 to be more robust than Q2 in terms of disbursements, demand momentum, says L&T Finance CEO Sudipta Roy

I have heard that for the gold loan business you acquired, the RBI has given approval for 500 branches. Could you clarify that?

There is nothing like an approval for 500 branches. As per RBI regulations, an NBFC can set up up to 1,000 gold loan branches without any separate authorization. Approval is required only when you cross 1,000. So, for the 200 new branches we’re setting up, no approval was needed, and the work is already underway.

The 200 branches will largely be opened across the north, east, and west of the country. In the south, we’ll open primarily in Karnataka. Many of these will be multiproduct outlets, which we call Sampoorna branches, offering gold loans, SME loans, tractor and two-wheeler finance, and personal loans.

We’re essentially opening one branch every day over the next two quarters. The average gold loan ticket size is between Rs 1.25 lakh and Rs 1.5 lakh, depending on the geography.

Gold prices have been rising sharply. Some lenders say they are reassessing margins and loan-to-value ratios. How are you managing this?

Our gold loan portfolio is still small, around Rs 1,475 crore, so we are comfortable with our current LTV levels. Yes, prices have gone up, and so has loan eligibility, but since most of our originations are organic (not balance transfers), the risk is contained.

We are aware that if gold prices fall after a sharp rise, risks can emerge. But given the small book and our focus on footprint expansion, this isn’t a major concern right now. We are monitoring it closely while prioritizing distribution build-out.

Your credit costs is seen normalising in H2. What’s driving this optimism?

The collection efficiency in our microfinance business has improved sharply, it was 99.5 percent in September, the highest in six months. So, microfinance is mending well.

Moreover, our two-wheeler portfolio underwritten through the Project Cyclops platform has shown a significant improvement in risk calibration. Project Cyclops is now live for two-wheeler, tractor, and SME segments, and personal loans will go live this quarter.

All these structural improvements in credit processes, combined with a better macro environment, are leading to a steady decline in credit costs.

Project Cyclops seems to be a success. Can you share its rollout status?

Yes, Cyclops has been rolled out across most products. In Two-wheelers, it was rolled out in January 2025, Farm equipment in August 2025, SME finance in September 2025, and Personal loans it will be live in Q3FY26

Home loans and rural group loans will go live by FY27. For gold loans, Cyclops isn’t required because it’s a fully secured product with extremely low loss rates. Putting it through Cyclops would be counterproductive.

Your disbursements through tech partners have almost doubled in Q2. How do you see this scaling up?

Yes, in percentage terms, it’s doubled from Rs 651 crore to Rs 1138 crore. But in absolute terms, it’s still small. On a steady-state basis, we want 50 percent of our personal loan disbursements to come through big-tech partnerships like Google Pay.

Currently, we disburse around Rs 1,000 crore per month in personal loans, of which Rs 350 crore comes through big-tech platforms. We want to take this to Rs 500 crore a month eventually.

The share of repeat retail disbursements in farm equipment and personal loans has come down. What explains that?

In farm equipment finance, repeat disbursements actually rose from 23 percent to 27 percent sequentially. In personal loans, the share fell because disbursements through big-tech partnerships surged from Rs 100 crore to Rs 350 crore per month. So, while the repeat base came down, the disbursements expanded faster due to tech-led originations.

Tell us more about Project Nostradamus, how it supports your business?

Nostradamus is an automated portfolio management engine that helps detect risk hotspots at a granular level. It’s more a risk monitoring than a growth tool, it alerts us in advance about locations or segments showing early stress so we can tighten underwriting parameters.

We launched it in beta mode in August 2025 for two-wheelers and will extend it to all business lines by FY26-end. The idea, much like its namesake, is to “predict the future” but here it’s powered by data science, not astrology.

Your borrowing cost fell sharply in Q2. What contributed to that?

There are several factors contributing this such as RBI rate cuts totaling around 100 bps, and improved system liquidity, commercial paper rates at the short end became very attractive, we started drawing down on our ECB lines, raised earlier at competitive rates.

Our PSL borrowings increased from 25 percent to 28 percent of total liabilities, which are typically 100 bps cheaper than bank borrowings. All of these together reduced our overall cost of funds.

You’ve reduced your non-PSL bank borrowings by 3 percent. What’s the borrowing mix outlook for the rest of the year?

It depends on disbursement growth. We expect commercial paper borrowings to rise as liquidity improves. We may explore more ECBs, but only if they are rate-efficient. PSL borrowings can also go up slightly. Overall, we’re watching market trends and will calibrate accordingly.

Lastly, do you expect Q3 to be stronger than Q2 given the festive demand and GST cuts?

Absolutely. Q3 should be stronger across most segments especially tractors, two-wheelers, personal loans, and SME. Q2 itself was robust with about 25 percent growth in disbursements, and we expect that momentum to continue.

Microfinance is usually softer during the festive season but should pick up by mid-November as Kharif crops start arriving in markets. Overall, we expect Q3 to be more robust than Q2 in terms of disbursements and demand momentum.