DuPont Decomposition
Why does LT earn its ROE?
Breaking down Return on Equity into profitability, efficiency, and leverage.
ROE = Net Margin × Asset Turnover × Equity Multiplier
13.0% = 5.9% × 0.67 × 3.29
Latest: FY2025
Profitability
Net Margin
5.9%
8.2% →5.9%
How much profit per ₹ of revenue
Efficiency
Asset Turnover
0.67x
0.21x →0.67x
Revenue per ₹ of assets
Leverage
Equity Multiplier
3.29x
2.41x →3.29x
Assets funded by equity vs debt
Trend Analysis
ROE improved by 8.8 pp over 3 years. Driven by net margin declining (8.2% → 5.9%), asset turnover improving (0.21x → 0.67x), leverage rising (2.41x → 3.29x).
Historical Decomposition
Last 3 years
| Year | Revenue | PAT | Net Margin | Asset TO | Leverage | ROE |
|---|---|---|---|---|---|---|
| FY2023 | ₹0Cr | ₹0Cr | 8.2% | 0.21 | 2.41 | 4.2% |
| FY2024 | ₹0Cr | ₹0Cr | 6.7% | 0.23 | 2.72 | 4.1% |
| FY2025 | ₹0Cr | ₹0Cr | 5.9% | 0.67 | 3.29 | 13.0% |
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.