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
32.5% = 5.9% × 0.16 × 33.68
Latest: FY2026
Profitability
Net Margin
5.9%
0.6% →5.9%
How much profit per ₹ of revenue
Efficiency
Asset Turnover
0.16x
0.17x →0.16x
Revenue per ₹ of assets
Leverage
Equity Multiplier
33.68x
375.19x →33.68x
Assets funded by equity vs debt
Trend Analysis
ROE declined by 3.9 pp over 5 years. Driven by net margin improving (0.6% → 5.9%), leverage falling (375.19x → 33.68x). 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 | ₹0.1Cr | ₹0Cr | 0.6% | 0.17 | 375.19 | 36.4% |
| FY2023 | ₹0.1Cr | ₹0Cr | 4.6% | 0.17 | 99.03 | 77.9% |
| FY2024 | ₹0.1Cr | ₹0Cr | 4.8% | 0.16 | 64.24 | 49.5% |
| FY2025 | ₹0.1Cr | ₹0Cr | 5.4% | 0.16 | 44.49 | 38.0% |
| FY2026 | ₹0.1Cr | ₹0Cr | 5.9% | 0.16 | 33.68 | 32.5% |
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.