Bajaj Housing Finance Limited — Q1 FY26 earnings call

Call held 23 Jul 2025

Management summary

Bajaj Housing Finance Limited reported a strong Q1 FY26 with AUM growth of 24% and PAT growth of 21%, maintaining healthy asset quality. However, the company revised its FY26 AUM growth guidance downwards to 21-23% and anticipates NIM moderation of 15-20 bps due to intense competitive pricing, higher attrition, and a moderated real estate market. Management expects growth to normalize by Q3 FY26 as competitive pressures stabilize.

Highlights

  • AUM grew by 24% YoY, driven by home loans (21%), LAP (30%), LRD (29%), and developer financing (32%).

  • PAT grew by 21% YoY to Rs. 583 crores, with ROA at 2.3% and annualized ROE at 11.6%.

  • Asset quality remained healthy with GNPA at 30 bps and NNPA at 13 bps, and annualized credit cost at 16 bps.

  • Cost of funds reduced by 21 bps sequentially to 7.7% in Q1 FY26, aided by lower incremental borrowing rates and repo rate transmission.

  • Disbursements increased by 22% YoY to Rs. 14,651 crores in Q1 FY26.

Concerns

  • AUM growth assessment for FY26 revised downwards to 21%-23% from the previous 24%-26% due to moderation in real estate and intense competitive pricing.

  • NIM/NTI is expected to moderate by 15-20 bps in FY26 due to lower investment income and reduced assignment income.

  • Higher attrition rates observed due to intense competitive pricing, particularly in the home loan segment.

  • Real estate market showing moderation, contributing to slower growth in home loan disbursals at an industry level.

Key financials

  1. AUM Growth 24%
  2. PAT Growth 21%
  3. ROA 2.3%
  4. GNPA 0.3%
  5. NNPA 0.13%
  6. OPEX to NTI 21.2%
  7. Cost of Funds 7.7% -0.21%QoQ
  8. Gross Spread 1.8%
  9. Net Interest Margin 4%
  10. Disbursements ₹14,651 Cr +22%YoY
  11. Net Worth ₹20,508 Cr
  12. CRAR 26.9%
  13. PBC Ratio 61.7%
  14. Annualized ROE 11.6%
  15. Annualized Credit Cost 0.16%

What they filed

Q1 FY27: revenue up 17.1%, net profit up 22.6% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue2,410 2,449 2,504 2,616 2,755 +14%2,884 +18%2,903 +16%3,063 +17%
Net profit546 548 587 583 643 +18%665 +21%669 +14%715 +23%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

SegmentPortfolio MixGrowth
Home Loans (HL)55.8%21%
Loan Against Property (LAP)10.5%30%
Lease Rental Discounting (LRD)20.4%29%
Developer Financing (DF)11.9%32%

Capital allocation

high confidence
  • Liquidity Liquidity disclosed The company carries treasury investments of Rs. 3,000 crores as of quarter-end, primarily for LCR requirements, which are liquidated based on cash needs. Management noted an equity overhang from capital raises in FY25.
    Because of total investments carried in the end of the quarter is Rs. 3,000 crores which is a mix of a T-bill, G-Sec, money market, mutual funds. And that is not a book which we carry for a long term. We keep on liquidating, because that is a book we run for LCR requirement. We do not run a treasury investment book, so as to say, for gain or a loss. We carry the investments only for the purpose of maintaining LCR ratios, and they keep on getting liquidated or booked basis the cash requirement of the company. There is no permanent investment book in the company. (Page 16)

Guidance & targets

AUM Growth

  • AUM Growth AUM Growth · FY26 · High confidence 21%-23%

    Previously 24%-26% → 21%-23%

    Due to heightened competitive activity, pricing on the acquisition, higher portfolio attrition and benign real estate market, AUM growth assessment for FY'26 is expected to be in the range of 21%-23%. (Page 5)

    — Atul Jain

Operating Efficiency

  • OPEX to NTI Operating Efficiency · FY26 · High confidence 20%-21%
    In terms of operating efficiency, as the company has been investing in the newly launched SBU and non-metro market coupled with NIM moderation due to lower rate scenario, OPEX to NTI is expected to be flat in the corridor of 20%-21% in FY '26 in line with what we delivered last year. (Page 6)

    — Atul Jain

Profitability

  • NII Profitability · FY26 · High confidence stable and in line with FY25
    Coming to profitability, NII is expected to remain stable and in line with FY '25, while NIM or NTI may moderate by 15-20 bps. (Page 6)

    — Atul Jain

  • NIM/NTI Moderation Profitability · FY26 · High confidence 15-20 bps

    Previously 10-15 bps → 15-20 bps

    Coming to profitability, NII is expected to remain stable and in line with FY '25, while NIM or NTI may moderate by 15-20 bps. (Page 6) ... when we are saying 15 to 20 bps, like I called out in the earlier question, it is largely due to what we are saying elevated from a 10 to 15 bps to 15 to 20 bps is because of a reduction in other income due to lower investment income, lower investments in the current year with rate reduction, lower investment income, and also lower cash being carried, because we have toned down our assessment of assignment, what we are going to assign out in the portfolio. (Page 15)

    — Atul Jain

  • ROA Profitability · FY26 · High confidence 2%-2.2%
    Now, ROA is expected to remain range bound at 2%-2.2%, which is in line with our medium-term guidance (Page 6)

    — Atul Jain

  • ROE Profitability · FY26 · High confidence 11%-12%
    and with ROE moderation of 11%-12% which is resulting from equity overhang of a capital raise done in FY ‘25. (Page 6)

    — Atul Jain

Gross Spread

  • Gross Spread Gross Spread · FY26 · Medium confidence 1.8% plus minus 4-5 bps
    NII is expected to remain flat, compared to what last year was there. So, gross spread at 1.8%, plus minus 4-5 bps here and there is what we continue to maintain, because that we control through the change in the product mix or change in the segment, because that is where we want to be in the corridor. (Page 7)

    — Atul Jain

Rate Cut Impact

  • Stress Test Rate Cut Rate Cut Impact · during the year · High confidence one more rate cut over 25 bps
    Yes, we are factoring in one more rate cut for our stress test scenario over 25 bps, additionally coming in during the year. (Page 22)

    — Atul Jain

What to watch in Q2 FY26

AUM Growth Trajectory

by end of Q3 FY26
Current 24% YoY in Q1 FY26, FY26 guidance revised to 21-23%
Target Return to normalized growth path (medium-term guidance of 24-26%)

Why it matters

Verifying if competitive pressures and attrition stabilize, allowing the company to revert to its higher medium-term growth targets.

Our hope would be that by end of Quarter 3 or so, we should be able to go back to, that is why we have not changed our medium-term guidance, while we have changed the assessment for the current year. (Page 7)

Risks & concerns

  • Intense Competitive Pricing and Attrition

    high

    Heightened competitive activity and pricing pressure are leading to higher attrition and impacting AUM growth.

    Management acknowledged

  • Potential for Mispricing in Home Loans

    high

    Management believes current pricing in home loans is softer than appropriate due to overall credit demand softness, leading to potential mispricing.

    Management acknowledged

  • Moderation in Real Estate Market

    medium

    The real estate market has been showing moderation over the last 2-3 quarters, impacting home loan growth.

    Management acknowledged

  • NIM/NTI Moderation

    medium

    NIM/NTI is expected to moderate by 15-20 bps in FY26 due to lower investment income and reduced assignment income.

    Management acknowledged

Q&A highlights

8 direct
FY26 Guidance Revision Direct
Broadly correct, Dhaval. 21%-23% against a medium term of 24%-26% AUM growth trajectory is correct. Margins, we are likely to see a compression of 5-10 bps which is called out.

Analyst sought clarification on the downward revision of AUM growth and margin compression guidance for FY26, which management confirmed.

Asked by Dhaval Sanghvi

Return to Medium-Term Growth Direct
Our hope would be that by end of Quarter 3 or so, we should be able to go back to, that is why we have not changed our medium-term guidance, while we have changed the assessment for the current year.

Analyst questioned the timeline for returning to the higher medium-term growth trajectory, and management provided a specific quarter (Q3 FY26) for stabilization.

Asked by Dhaval Sanghvi

Home Loan Growth Slowdown Direct
So, Nischint, the growth rate in HL has come down due to 3 factors. One is the real estate market has been showing some moderation over the last 2-3 quarters... There is an AUM growth, but no disbursal growth at an industry level... Second part is the market being slower than what it used to be specifically Y-o-Y, that is what is resulting into the growth being low.

Analyst inquired about the reasons for the slowing home loan growth, and management attributed it to real estate market moderation, industry-wide disbursal stagnation, and competitive pricing leading to higher attrition.

Asked by Nischint Chawathe

Rate Transmission on Loans Direct
We have done 3 cuts. Third cut was done on 1 July... On the external repo linked benchmark portfolio, which is also significant in our case, there is a full 100 bps of transmission which has happened. From the 45, 20 is passed on 1 July.

Analyst asked for clarity on rate transmissions, and management detailed the number of cuts, bps passed on internal PLR (45 bps) and repo-linked portfolios (100 bps), and the timing of the latest transmission.

Asked by Nischint Chawathe

Lowest Rate Offered vs Competition Direct
So, there are various companies and various banks which are offering at a different price. So, that data is there in the public domain carried by most of the newspapers. The rates are varying from, starting from as low as 7.3%, 7.35% from largely public sector banks to 7.9%, 7.8% from few private sector banks.

Analyst questioned the competitive pricing landscape, and management provided specific rate ranges offered by public and private sector banks, highlighting the intense competition.

Asked by Abhijit Tibrewal

LAP Average Ticket Size Increase Direct
One reason for LAP ATS movement is also we used to earlier do in a way what we call Affordable LAP also to some extent as a part of our rural vertical, which we have stopped doing in last 6-7 months. Now that volume in terms of a quantum was not very high, but number of cases would have been bringing down the average ticket size at a company level.

Analyst noted an increase in LAP average ticket size and subdued volume growth, and management explained it was partly due to discontinuing smaller 'Affordable LAP' in rural verticals to focus on Home Loans.

Asked by Renish

Impact of Lower Assignment on Credit Cost Direct
Yes, yes. But that we believe that is a good problem to have, because it is a Stage-1 asset provisioning as long as it is not say, while the credit cost is a factor of a Stage-1 plus Stage-2, stage 3. Rightly called out, if you assign out, you will see a lower credit cost which is actually not a lower credit cost, but it is a good asset provisioning not being there. Non-assignment will mean there will be a higher Stage-1 provisioning, which consequently may look like a higher credit cost to the P&L.

Analyst questioned if lower portfolio assignment would impact credit costs, and management clarified that while it might appear as higher credit cost on P&L due to increased Stage-1 provisioning, it reflects better asset retention rather than actual deterioration.

Asked by Viral Shah

Reason for Reduced Bank Borrowings Direct
So, basically we look at incremental borrowing rates between NCD and bank lines at the time we are borrowing. So, since the price differential has been better on the NCD side, while we have been borrowing, after factoring in the reductions which may come because banks get repriced, basis MCLR movements which we have not seen much happening. So, we factor all that in, and looking at those movements versus what acquisition level we are getting pricing on NCD versus bank lines is what we take as a call at that point in time. As of now, we've been seeing that the differential has been beneficial more towards the NCD side. That's why we've been focusing more on NCD borrowings.

Analyst asked why the company reduced bank borrowings despite high rates, and management explained it was due to a better price differential on NCDs compared to bank lines, making NCDs more attractive.

Asked by Piran Engineer

3 min read 7 chapters

Detailed narrative

Q1 FY26 Performance Overview

Bajaj Housing Finance Limited reported a balanced Q1 FY26 with AUM growing by 24% YoY, reaching Rs. 5,736 crores. Profit After Tax (PAT) increased by 21% YoY to Rs. 583 crores, maintaining a Return on Assets (ROA) of 2.3%. Asset quality remained robust with Gross Non-Performing Assets (GNPA) at 30 bps and Net Non-Performing Assets (NNPA) at 13 bps. Operating expenses to Net Total Income (OPEX to NTI) remained flat at 21.2%.

AUM Growth and Portfolio Mix

Overall AUM growth was 24%, driven by home loans (21%), Loan Against Property (30%), Lease Rental Discounting (29%), and developer financing (32%). The portfolio mix remained diversified, with home loans constituting 55.8%, LAP 10.5%, LRD 20.4%, and developer financing 11.9%. Disbursements for the quarter grew by 22% YoY to Rs. 14,651 crores, indicating strong origination despite market challenges.

Cost of Funds and Margins

The cost of funds saw a sequential reduction of 21 bps, settling at 7.7% in Q1 FY26, primarily due to lower incremental borrowing rates and the benefit of repo rate transmission. Gross spread remained flat sequentially at 1.8%, while Net Interest Margin (NIM) stood at 4%. Management expects a further 20-25 bps reduction in cost of funds in Q2 FY26, which should help maintain Net Interest Income (NII) despite portfolio yield compression.

Asset Quality and Provisioning

Asset quality remained healthy with GNPA at 30 bps and NNPA at 13 bps as of June 30, 2025. Annualized credit cost was 16 bps in Q1 FY26. Stage 1 assets saw a slight reduction of 3 bps to 99.36%, with Stage 2 assets at 0.34% and GNPA at 0.30%. Provisioning coverage ratio remained healthy at 56.25%, with management noting additional provisioning beyond ECL model requirements for specific cases.

FY26 Guidance Revision and Outlook

The company revised its AUM growth assessment for FY26 to 21%-23%, down from the previous 24%-26% medium-term guidance. This revision is attributed to moderation in the real estate market, intense competitive pricing, and higher attrition. NIM/NTI is expected to moderate by 15-20 bps, and ROA is projected to be in the range of 2%-2.2%. Management anticipates a return to the normalized growth trajectory by Q3 FY26 as competitive activities stabilize.

Competitive Landscape and Growth Strategy

The market is characterized by heightened competitive activity and pricing pressure, particularly in home loans, with rates as low as 7.3%-7.35% from public sector banks. This has led to higher attrition and a moderation in industry-wide disbursal growth. The company is focusing on organic growth, expanding into near-prime and affordable segments, and leveraging digital initiatives, with e-agreement penetration at 93% and digital customer onboarding at 88%.

Borrowing Mix and Rate Transmission

The borrowing mix remains diversified, with money market instruments at 53%, bank borrowings at 37%, and NHB refinance at 10%. The company has passed on 45 bps of rate cuts on internal PLR for prime salaried book and a full 100 bps on external repo-linked benchmark portfolios. The strategy involves optimizing cost of funds by leveraging better price differentials on NCDs compared to bank lines, leading to increased NCD borrowings.

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