L&T Finance Limited delivered exceptional financial performance in Q3FY26, achieving its highest ever quarterly core PAT of ₹760 Cr, representing a 21% year-on-year growth. After accounting for a one-time exceptional impact of ₹29 Cr related to the New Labour Code, the company reported PAT of ₹739 Cr, marking an 18% YoY increase. This strong profitability was supported by record retail disbursements of ₹22,701 Cr, up 49% YoY, demonstrating the company's robust business momentum across all segments.

Financial Performance Highlights

The company's financial metrics showed consistent improvement across key parameters during Q3FY26:

The company achieved its lowest ever Weighted Average Cost of Borrowing (WACB) at 7.25%, contributing to a 19 bps sequential improvement in Net Interest Margins plus Fees to 10.41% from 10.22% in Q2FY26. Total income grew 18% YoY and 8.4% QoQ, while operating costs increased only 7% YoY, leading to PPOP growth of 25%.

Credit Quality and Risk Management

L&T Finance demonstrated significant improvement in asset quality metrics during the quarter. Credit costs moderated from 2.98% in Q2FY26 to 2.83% in Q3FY26, representing a 15 bps QoQ reduction and 8 bps YoY improvement. Excluding a one-time charge of ₹23 Cr on co-borrower provisions, the core credit cost from operations came in at 2.74%, showing a 24 bps reduction on QoQ basis.

The microfinance portfolio showed sustained recovery with collection efficiency improvements:

The company maintained no utilization of macro-prudential provisions during the quarter, indicating the return of the Rural Business Finance vertical to near-normal credit cost trajectory.

Business Segment Performance

All business segments delivered strong growth during Q3FY26, supported by favorable macroeconomic conditions and GST 2.0 reforms:

Rural Business Finance

• Disbursements: ₹6,740 Cr (up 47% YoY, 7% QoQ)
• Book Size: ₹28,976 Cr (up 10% YoY, 6% QoQ)

Farmer Finance

• Disbursements: ₹2,783 Cr (up 12% YoY, 68% QoQ)
• Book Size: ₹16,671 Cr (up 11% YoY, 5% QoQ)

Urban Finance Segments

Technology and Digital Initiatives

The company continued advancing its digital transformation through multiple AI-driven projects. Project Cyclops, the advanced underwriting engine, showed excellent results with Net Non-Starter rates improving significantly:

• Two-Wheeler Portfolio: NNS reduced from 2.36% in Dec'24 to 0.41% in Dec'25
• Farm Business: NNS reduced from ~1.50% in Dec'24 to ~0.4% in Dec'25

Project Nostradamus, an AI-driven automated real-time portfolio management engine, went live in beta mode for Two-Wheeler Finance. The company also launched Project Helios and Project Orion, with Helios processing 5,000+ cases and achieving 30% reduction in turnaround time in the SME business.

Strategic Expansion and Outlook

L&T Finance expanded its Gold Loan business significantly, adding 64 new branches during the quarter and planning to establish 330+ gold loan branches by end of FY26. The company onboarded 7.0 lakh new customers, up from 5.9 lakh in the previous quarter, demonstrating strong customer acquisition momentum.

Managing Director Sudipta Roy expressed confidence in sustaining the business momentum through Q4FY26 and into FY27, supported by the normalization of the Rural Business Finance business and continued benefits from technology initiatives. The company remains committed to achieving its Lakshya 2026 target of 2.8%-3.0% RoA by Q4FY27, with plans to announce Lakshya 31 goals in the April quarter results.

L&T has unveiled an ambitious data centre expansion plan, targeting a significant scale-up from its current 32MW capacity to 200MW by 2030, backed by a capital investment of ₹10,000 crore. The engineering conglomerate is positioning itself to compete directly with industry giants Tata, Adani, and Reliance in the rapidly expanding AI data centre market.

Strategic Advantages Through Integration

Prashant Jain, head of corporate centre at L&T, emphasized the company's integrated approach as a key competitive advantage. The company plans to leverage its full technology stack, including existing enterprise relationships built by subsidiaries LTIMindtree and L&T Technology Services (LTTS), to attract clients to its Vyoma data centre business.

Infrastructure Development and Investments

L&T has commenced construction of a new 40MW data centre facility in Navi Mumbai, Maharashtra, as announced by President and Chief Financial Officer R. Shankar Raman during the groundstone laying ceremony. This facility represents part of the company's broader ₹10,000 crore investment plan spanning the next six years.

The company recently rebranded its cloud and data centre business from L&T-Cloudfiniti to Vyoma on November 26. Seema Ambastha, chief executive of the entity, had previously indicated a potential net outlay of $2.50-3.00 billion for building 300MW data centre capacity over five years.

Cost Control Strategy

L&T's approach focuses on controlling operational costs through vertical integration. The company's 21% stake in homegrown IT infrastructure firm E2E Networks, acquired a year ago, will serve as a primary contributor for data centre hardware, providing better cost control for server acquisition.

The company is evaluating whether to develop its own renewable energy plants or partner with third-party power production companies, targeting 75% renewable energy usage at its data centres.

Competitive Landscape Analysis

L&T's ₹10,000 crore investment appears conservative compared to competitors' announcements. Tata Consultancy Services announced a 1GW data centre with a $6.50 billion outlay on October 9, subsequently raising $1.00 billion from TPG on November 20. Adani partnered with Google on October 14 for a $15.00 billion AI data centre with $5.00 billion co-investment, while Reliance's joint venture with Brookfield Asset Management and Digital Realty announced an $11.00 billion, 1GW data centre on November 26.

Market Positioning and Execution Strategy

Analysts view L&T's integrated approach favorably, noting the company's existing technology services expertise through its subsidiaries. Naresh Singh, senior director analyst at Gartner, highlighted that data centres require vast investments in land, power, and resources, areas where established conglomerates have operational comfort.

Jayanth Kolla, partner at Convergence Catalyst, emphasized that execution will be crucial for L&T's success in transitioning from conventional operations to digital-native business requirements. The company's strategy of controlling the entire data centre value chain through strategic acquisitions and partnerships positions it to compete effectively in the growing AI infrastructure market.