Bajaj Housing Finance Limited — Q2 FY26 earnings call

Call held 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

  • 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

  • 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.

Key financials

  1. AUM ₹1.27L Cr +24%YoY
  2. PAT ₹643 Cr +18%YoY
  3. Annualized ROA 2.3%
  4. GNPA 0.26%
  5. NNPA 0.12%
  6. Opex to NTI 19.6%
  7. Annualized ROE 12.2%
  8. Disbursements ₹15,914 Cr +32%YoY
  9. Cost of Funds 7.4%
  10. NIM 4%
  11. Net Interest Income Growth 34%
  12. Credit Cost 18 bps
  13. CAR 26.1%

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

  • AUM Growth by Product
    19% Home Loans Growth29% LAP Growth35% LRD Growth25% DF Growth
  • Portfolio Composition
    55% 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

Guidance & targets

Cost of Funds

  • Decline in cost of funds Cost of Funds · Q4 FY26 · Medium confidence another only 10 bps
    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.

    — Gaurav Kalani

Operating Efficiency

  • Opex to NTI ratio Operating Efficiency · next three to four year · High confidence 14% to 15%
    I think next three to four year, you should clearly see the 14% to 15% kind of opex to NTI numbers.

    — Atul Jain

Asset Quality

  • GNPA Asset Quality · null · High confidence 40 to 60 bps
    So, when we guide for our medium term, GNPAs is as well, we always guide for Bobby, from last year, is 40 to 60 bps, because that's the model is constructed for.

    — Atul Jain

  • Credit Cost Asset Quality · null · High confidence 20-25 bps
    But the model what we construct is for that 40 to 60 bps of a GNPA and 20-25 bps of a credit cost.

    — Atul Jain

Capital Structure

  • Gearing ratio Capital Structure · within two years · Medium confidence 7.5
    I think two years is the time frame where we should be. It will depend upon the growth numbers, of course, but as we give a medium term growth guidance, I think two years, two and a half years is the time frame where we should look at achieving that sustainability vision. This is what we say target ratio of a leverage.

    — Atul Jain

Regulatory Compliance

  • Minimum Public Shareholding Regulatory Compliance · September '29 · High confidence 0.25
    We have time till September '29 now to get it.

    — Atul Jain

What to watch in Q3 FY26

Cost of Funds reduction from rate cut

Q4 FY26
Current 7.4% (Q2 FY26)
Target Further 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.

Risks & concerns

  • Heightened competitive intensity

    medium

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

    Management acknowledged

  • Decreasing interest rate scenario

    medium

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

    Management acknowledged

  • Attrition pressure across portfolio

    medium

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

    Management acknowledged

  • Regulatory requirement for minimum public shareholding

    medium

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

    Analyst acknowledged

Q&A highlights

7 direct
Strategy for competition from PSU banks in prime home loan segment. Direct
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

Yields on different product categories and portfolio mix. Direct
at a portfolio IRR at HL had been at 8.6%, LAP at 10.3%, LRD at close to 8.1%-8.2%, developer finance close to 11.5%. At an aggregate level, we come at 9.26% is the yield what we come at the portfolio.

Provides granular insight into the profitability and yield characteristics of the company's diverse loan segments.

Asked by Shubhranshu Mishra

Impact of expected rate cuts on margins and cost of funds. Partial
On a full year basis, we are expecting to be in this guidance range only because of the compression we are seeing driven by attrition pressure across the portfolio especially in the home loan side, also in the construction finance side.

Explains the drivers behind NIM moderation and the future outlook in a changing interest rate environment, emphasizing attrition pressure.

Asked by Viral Shah

Traction and strategy for near-prime and affordable segment. Direct
Currently we are now acquiring close to INR250 odd crores per month business in this line and expecting to rapidly scale further.

Details the company's expansion into new, potentially higher-yield segments and their significant growth expectations.

Asked by Viral Shah

Derecognition income and assignment strategy. Direct
assignment is the treasury strategy. We are excess of capital, we have excess of our capital and we took a conscious decision in the current year to not do assignment for treasury strategy because as a treasury as a means of fund, otherwise we had been normally falling 12%-13% of our assets assigned out to our strategy, even as a treasury strategy for our ALM match.

Clarifies the reasons for lower assignment income this quarter, indicating a strategic choice rather than a lack of opportunity.

Asked by Siraj Khan

BT in/out rates and competitive landscape. Direct
At an overall home loan acquisition for the company, our BT in is 15% approximately of our overall HL acquisition, which is perfectly in line with the industry... At a home loan level, it is a 21%-22% kind of an annualized attrition, what we are seeing.

Provides key metrics on customer acquisition and retention in the competitive home loan market, highlighting elevated attrition.

Asked by Rahil Shah

Competition in Lease Rental Discounting (LRD) and Developer Finance. Direct
Lease rental discounting, the level of competition would be higher than the home loan as well, because these are all, one, the customers are quite evolved... For developer finance, competition is more from some housing finance companies, NBFCs, and in recent past, what we have seen largely from even some private credit funds to the AIF structure.

Gives insight into competitive dynamics beyond the core home loan segment, noting higher competition in LRD and specific players in DF.

Asked by Bobby Jayaraman

Timeline for achieving minimum public shareholding (25%) as per regulatory guidelines. Direct
We have time till September '29 now to get it... We are not in a hurry to dilute because we have not got any urgency to raise primary capital.

Addresses a significant regulatory compliance requirement and the company's approach to it, confirming the timeline and lack of immediate urgency for dilution.

Asked by Siraj Khan

2 min read 6 chapters

Detailed narrative

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%.

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%.

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.

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.

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.

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.

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