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    Bajaj Housing

    BAJAJHFL
    Financial Services·6 Nov 2025
    Management Summary

    Bajaj Housing Finance reported a strong Q2 FY26 with robust AUM and PAT growth, alongside improved asset quality and operating efficiency. Despite competitive pressures and moderating yields, the company saw significant disbursement growth. Management outlined strategies to navigate the evolving interest rate environment and expand into new segments, while also addressing regulatory compliance.

    Highlights

    5

    • AUM grew by 24% on Y-o-Y basis and stood at INR1,26,749 crores as of 30th September.

    • PAT increased by 18% to 643 crores with annualized ROA at 2.3%.

    • Asset quality remained healthy with improvement in GNPA at 0.26% and NNPA at 0.12%.

    • Operating efficiency improved with opex to NTI stood at 19.6% against 20.5% in Q2 of last year.

    • Disbursements for the quarter grew by 32% from INR12,000 crores in Q2 FY '25 to close to INR 16,000 crores, i.e. INR15,914 crores in Q2 FY '26.

    Concerns

    4

    • Net interest margin (NIM) moderated by 10 bps on a year-on-year basis to 4%.

    • Annualized ROE for the quarter came in at 12.2% against 13.3% in Q2 FY '25, attributed to capital raise, no overlay release, and lower income from derecognized loans.

    • Portfolio yield moderated by 22 bps on sequential basis and 60 bps on a YOY basis at 9.3% in Q2 FY '26.

    • Heightened competitive intensity and attrition pressure across the portfolio, especially in home loans and construction finance.

    What Changed2

    vs Q3 FY26

    Guidance items7 → 6 (-1)Risks discussed3 → 4 (+1)

    Key financials

    Single quarter

    13 metrics
    1. 01AUM₹1.27L Cr+24%YoY
    2. 02PAT₹643 Cr+18%YoY
    3. 03Annualized ROA2.3%
    4. 04GNPA26%
    5. 05NNPA12%

    Segment breakdown

    AUM Growth by Product
    19% Home Loans Growth29.0% LAP Growth35% LRD Growth25% DF Growth
    Portfolio Composition
    55.0% Home Loans Share10% LAP Share21% LRD Share12% DF Share
    Yields by Product (IRR)
    8.6% Home Loans Yield10.3% LAP Yield8.1% LRD Yield11.5% DF Yield9.3% Aggregate Portfolio Yield
    List

    Guidance & targets

    6
    CategoryTargetPriority
    Cost of Funds
    Decline in cost of funds
    another only 10 bps
    		Medium
    Operating Efficiency
    Opex to NTI ratio
    14% to 15%
    		High
    Asset Quality
    GNPA
    40 to 60 bps
    		High
    Asset Quality
    Credit Cost
    20-25 bps
    		High
    Capital Structure
    Gearing ratio
    7.5
    		Medium
    Regulatory Compliance
    Minimum Public Shareholding
    0.25
    		High

    Cost of Funds reduction from rate cut

    Q4 FY26
    Current7.4% (Q2 FY26)
    TargetFurther 10 bps decline

    Why it matters

    A further reduction in cost of funds will directly impact the company's Net Interest Margin and overall profitability.

    And here on, the benefit on cost of fund would be marginal versus that if the portfolio attrition pressure continues to remain that way, we may see the pressure on the yields continuing. So that's where we are continuing with the guidance. Predominant part of the COF benefit is already passed through. Now we may have around 10 basis points of further benefit which we may see through the balance part of the year considering the rate cut.

    How to verify

    key_financials.metrics[label='Cost of Funds']

    Risks & concerns

    4
    RiskSeverity

    Heightened competitive intensity

    Competitive intensity is a norm, especially from PSU banks, impacting margins and requiring continuous strategy modification. — Management acknowledged

    medium

    Decreasing interest rate scenario

    Leads to portfolio yield moderation and NIM compression, with expectations of further rate cuts. — Management acknowledged

    medium

    Attrition pressure across portfolio

    Elevated attrition rates, particularly in home loans and construction finance, are impacting yields and AUM growth. — Management acknowledged

    medium

    Regulatory requirement for minimum public shareholding

    The company needs to achieve 25% public shareholding by September 2029, which will require dilution by the parent. — Analyst acknowledged

    medium

    Q&A highlights

    8

    “as a prime player, as players who are focused on the prime mortgages, we need to modify our strategies accordingly to be able to compete through the market because if you look at our disbursement growth, it had been far ahead of the industry growth.”

    Addresses a key competitive pressure point for the company's core business, highlighting adaptation and strong disbursement growth.

    asked by Shubhranshu Mishra

    2 min read6 chapters

    Detailed Narrative

    01

    Q2 FY26 Performance Highlights

    Bajaj Housing Finance reported a strong Q2 FY26, with AUM growing by 24% year-on-year to INR1,26,749 crores. Profit After Tax (PAT) increased by 18% to INR643 crores, resulting in an annualized Return on Asset (ROA) of 2.3%. Operating efficiency also improved, with the Opex to NTI ratio standing at 19.6%, down from 20.5% in the prior year's Q2. The company's Capital Adequacy Ratio (CAR) remained healthy at 26.12%.

    02

    AUM Growth and Portfolio Diversification

    Overall AUM growth was 24% YoY, with disbursements growing by 32% to INR15,914 crores in Q2 FY26. Product-wise, home loans grew by 19%, LAP by 29%, LRD by 35%, and Developer Finance (DF) by 25%. The portfolio composition remains diversified with home loans at 55%, LAP at 10%, LRD over 21%, and DF below 12%. The aggregate portfolio yield was 9.26%.

    03

    Margin and Cost of Funds Dynamics

    The company's Net Interest Margin (NIM) moderated by 10 bps year-on-year to 4% in Q2 FY26, while the portfolio yield moderated by 60 bps YoY to 9.3%. Cost of funds improved by 50 bps YoY to 7.4%, with a sequential reduction of 34 bps. Management anticipates a further 10 bps decline in cost of funds by Q4 FY26, but expects continued margin compression due to heightened competitive intensity and attrition pressure, especially in home loans and construction finance.

    04

    Asset Quality and Credit Costs

    Asset quality remained healthy, with GNPA improving by 4 bps to 0.26% and NNPA improving by 1 bps to 0.12% in Q2 FY26. Annualized credit costs stood at 18 bps. The company's model targets a GNPA range of 40 to 60 bps and credit costs of 20-25 bps, indicating current performance is better than the long-term model expectations.

    05

    Strategic Response to Competition and New Segments

    To counter intense competition from PSU banks in the prime home loan segment, Bajaj Housing Finance is deepening its presence in micro markets and enhancing customer segmentation. The dedicated SBU for near-prime and affordable segments is performing ahead of expectations, acquiring approximately INR250 crores per month and is expected to scale rapidly. The company also strategically manages assignment income based on treasury strategy and PBC criteria, opting not to assign assets this year due to sufficient capital.

    06

    Capital Adequacy and Regulatory Outlook

    The company maintains a strong capital position with a CAR of 26.12%. The PBC criteria, a regulatory requirement, stood at 61.21% against a threshold of 60%. Regarding the minimum public shareholding requirement of 25%, the company has until September 2029 to comply and is not in a hurry to dilute, anticipating a need for an additional capital raise in the future.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.