"L&T Finance (LTF), during its Investor Digital Day 2024 (Link) (on 25 Nov’24), provided key insights into its project Cyclops – an AI-driven, multi-dimensional underwriting engine. The MD & CEO, as part of his opening address, highlighted LTF’s transition from being a wholesale lender to diversifying retail and digital initiatives, making it future ready with digital at the core. Thereafter, LTF’s Chief Digital Officer and Chief AI & Data Officer provided further insights into its futuristic digital architecture and how AI is driving growth. A brief overview of all its product verticals was provided by the respective business heads
LTF continues to granularly track and execute its 5-pillar execution strategy towards reaching a consolidated RoA range of 2.8–3%, thereby, creating a sustainable and predictable retail franchise. However, MFI asset quality headwinds at sector level due to the current issue of over leveraging and tightening of MFI guard rails and natural calamities in specific geographies (larger for LTF), pose a risk to our credit cost estimate for LTF or could be offset by utilisation of macro prudential provisions. Moreover, since the industry is passing through a turmoil, it is unlikely that LTF would be unimpacted, given that it commands >6% market share in JLG loans. We, therefore, revise our target multiple to 1.8x FY26E ABV (vs. 2.0x earlier) and our TP stands revised to INR 200 vs INR 225 earlier. Maintain BUY."
