DuPont Decomposition
Why does LICI earn its ROE?
Breaking down Return on Equity into profitability, efficiency, and leverage.
ROE = Net Margin × Asset Turnover × Equity Multiplier
37.9% = 5.4% × 0.16 × 44.40
Latest: FY2025
Profitability
Net Margin
5.4%
0.6% →5.4%
How much profit per ₹ of revenue
Efficiency
Asset Turnover
0.16x
0.17x →0.16x
Revenue per ₹ of assets
Leverage
Equity Multiplier
44.40x
371.25x →44.40x
Assets funded by equity vs debt
Trend Analysis
ROE improved by 1.9 pp over 4 years. Driven by net margin improving (0.6% → 5.4%), leverage falling (371.25x → 44.40x). High financial leverage (equity multiplier > 4x) amplifies returns but also risk.
Historical Decomposition
Last 4 years
| Year | Revenue | PAT | Net Margin | Asset TO | Leverage | ROE |
|---|---|---|---|---|---|---|
| FY2022 | ₹0.1Cr | ₹0Cr | 0.6% | 0.17 | 371.25 | 36.0% |
| FY2023 | ₹0.1Cr | ₹0Cr | 4.6% | 0.17 | 98.78 | 77.7% |
| FY2024 | ₹0.1Cr | ₹0Cr | 4.8% | 0.16 | 64.13 | 49.4% |
| FY2025 | ₹0.1Cr | ₹0Cr | 5.4% | 0.16 | 44.40 | 37.9% |
How to read DuPont
- • Rising ROE from margin = pricing power, operational improvement (good)
- • Rising ROE from turnover = better asset utilization (good)
- • Rising ROE from leverage = more debt, amplified risk (caution)
- • Falling ROE across all three = structural deterioration (red flag)
DuPont decomposition from audited annual financials. Factual analysis, not investment advice.