L&T Finance Limited (LTF), formerly known as L&T Finance Holdings Limited, has received its first international credit ratings from two major global rating agencies.

S&P Global Ratings Assignment

S&P Global Ratings has assigned LTF a 'BBB-' long-term and 'A-3' short-term issuer credit rating. The outlook on the long-term rating is positive.

Key points from S&P's assessment:

• The ratings reflect S&P's expectation of ongoing and extraordinary support from the L&T group.
• LTF benefits from being part of the broader Larsen & Toubro (L&T) group, with strong brand association.
• L&T is the largest shareholder of LTF, holding a 66.24% stake.
• The rating gets one notch of uplift for potential extraordinary support from L&T.
• S&P views LTF as a strategically important subsidiary of L&T, with an increased contribution to the parent's earnings over the years.
• LTF's strong capitalization helps mitigate its business risks.
• S&P expects LTF's risk profile to improve as the company shifts toward more diversified retail lending.

Fitch Ratings Assignment

Simultaneously, Fitch Ratings has assigned LTF a 'BBB-' Long-Term Foreign- and Local-Currency Issuer Default Rating (IDR). The outlook is stable. Fitch has also assigned a Shareholder Support Rating of 'bbb-'.

Key points from Fitch's assessment:

• The ratings reflect Fitch's expectation that L&T would provide extraordinary support to LTF if required.
• This view is underpinned by LTF's role as a source of the group's strategic growth and diversification.
• LTF's rising contribution to L&T's consolidated profitability demonstrates its value to the group.
• LTF's net profit reached 11.60% of L&T's consolidated net profit.
• Fitch believes the brand sharing between parent and subsidiary would heighten reputational risk for L&T if LTF were to default.
• LTF has one of the country's largest non-bank financial institution (NBFI) franchises, with a diversified loan book of around $11.00 billion.
• The company benefits from experienced management, improving risk frameworks, asset quality and profitability as well as healthy funding access.

LTF's Business Profile

Both rating agencies highlighted several aspects of LTF's business:

• LTF is among the 10 largest finance companies in India.
• It is one of the leading national players in rural business, two-wheelers, and farm equipment finance.
• The company has a granular and diversified loan book, of which 97% is toward the retail segment.
• LTF's loan book stood at INR 977.60 billion.
• Key segments include:

These investment grade ratings from S&P and Fitch are expected to enhance LTF's ability to access international capital markets and diversify its funding sources.

L&T Finance Limited (LTF), a prominent player in India's non-banking financial sector, has received its inaugural investment grade credit ratings from two major international rating agencies. Both S&P Global Ratings and Fitch Ratings assigned LTF a 'BBB-' long-term issuer credit rating, marking a significant milestone for the company.

S&P Global Ratings Assessment

S&P Global Ratings assigned LTF a 'BBB-' long-term and 'A-3' short-term issuer credit rating with a positive outlook. The rating agency highlighted several key factors supporting their assessment:

• Strong association with parent company Larsen & Toubro (L&T), which holds a 66.24% stake in LTF
• Expectation of ongoing and extraordinary support from the L&T group
• LTF's strategic importance to L&T's focus on building a strong services portfolio
• Strong capitalization, with a risk-adjusted capital ratio forecast to remain at 14.50%-15.00% over the next two years
• Shift towards more diversified retail lending, improving the company's risk profile

Fitch Ratings Perspective

Fitch Ratings also assigned LTF a 'BBB-' Long-Term Foreign- and Local-Currency Issuer Default Rating (IDR) with a stable outlook. Fitch's assessment emphasized:

• Expectation of extraordinary support from parent company L&T if required
• LTF's role as a source of strategic growth and diversification for the L&T group
• Increasing contribution to L&T's consolidated profitability, reaching 11.60% in FY25
• LTF's position as one of India's largest non-bank financial institution franchises
• Improved risk frameworks, asset quality, and profitability

Business Profile and Performance

Both rating agencies noted LTF's strong market position and diversified loan book:

• Total loan book of INR 977.60 billion as of end-March 2025
• 97% of the loan book focused on retail segments
• Key lending areas include rural business finance, home loans, farmer finance, and two-wheeler finance
• Profitability, as measured by return on adjusted assets, at about 2.40% for FY25

Outlook and Potential Rating Changes

S&P Global Ratings maintained a positive outlook, reflecting the outlook on India's sovereign credit rating. An upgrade of LTF would be contingent on an upgrade of India's sovereign rating.

Fitch Ratings assigned a stable outlook, indicating that any upgrade would depend on a substantial strengthening in L&T's credit profile or an increase in LTF's strategic role within the L&T group.

These investment grade ratings are expected to enhance LTF's ability to access global capital markets and diversify its funding sources, potentially leading to lower borrowing costs and supporting the company's growth strategy in the competitive Indian financial services sector.