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.