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
14.7% = 5.7% × 0.63 × 4.14
Latest: FY2026
Profitability
Net Margin
5.7%
5.6% →5.7%
How much profit per ₹ of revenue
Efficiency
Asset Turnover
0.63x
0.49x →0.63x
Revenue per ₹ of assets
Leverage
Equity Multiplier
4.14x
3.88x →4.14x
Assets funded by equity vs debt
Trend Analysis
ROE improved by 4.2 pp over 5 years. Driven by asset turnover improving (0.49x → 0.63x), leverage rising (3.88x → 4.14x). High financial leverage (equity multiplier > 4x) amplifies returns but also risk.
Historical Decomposition
Last 5 years
| Year | Revenue | PAT | Net Margin | Asset TO | Leverage | ROE |
|---|---|---|---|---|---|---|
| FY2022 | ₹0Cr | ₹0Cr | 5.6% | 0.49 | 3.88 | 10.5% |
| FY2023 | ₹0Cr | ₹0Cr | 5.8% | 0.55 | 3.70 | 11.7% |
| FY2024 | ₹0Cr | ₹0Cr | 6.0% | 0.64 | 3.94 | 15.1% |
| FY2025 | ₹0Cr | ₹0Cr | 5.9% | 0.67 | 3.89 | 15.4% |
| FY2026 | ₹0Cr | ₹0Cr | 5.7% | 0.63 | 4.14 | 14.7% |
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.