Detailed Narrative
Q3 FY26 Financial Performance Overview
Bajaj Housing Finance delivered a strong Q3 FY26, with Assets Under Management (AUM) growing 23% year-on-year to ₹1.33 lakh crore. Profit After Tax (PAT) increased by 21% to ₹665 crores, translating to an annualized Return on Assets (ROA) of 2.3% and Return on Equity (ROE) of 12.3%. The company also demonstrated improved operating efficiency, with the OPEX to NTI ratio falling to 19% from 19.8% in the prior year's comparable quarter.
AUM Growth and Diversified Product Mix
The robust AUM growth was supported by strong disbursement momentum, which rose 32% year-on-year to ₹16,545 crores. The portfolio remains well-diversified across product segments: Home Loans grew 18% and constitute 54.5% of AUM, Loan Against Property (LAP) grew 32% (10.7% of AUM), Lease Rental Discounting (LRD) grew 39% (sub 22% of AUM), and Developer Financing grew 18% (11.6% of AUM). This balanced growth across segments highlights the company's broad market penetration.
Cost of Funds and Margin Dynamics
The company successfully reduced its cost of funds by 50 basis points year-on-year to 7.3% in Q3 FY26, also seeing a sequential moderation of 5 bps. This improvement was attributed to policy rate transmission and lower rates on incremental borrowings. However, gross spreads moderated by 12 bps sequentially to 1.8% from 1.9% in Q2 FY26, primarily due to a 17 bps reduction in portfolio yield, which was only partially offset by the benefit in cost of funds. Net Interest Margin (NIM) remained flat at 4% both sequentially and year-on-year.
Healthy Asset Quality and Credit Costs
Bajaj Housing Finance maintained a healthy asset quality profile during the quarter. Gross Non-Performing Assets (GNPA) stood at 27 bps, a slight increase of 1 bp quarter-on-quarter, while Net Non-Performing Assets (NNPA) improved by 1 bp sequentially to 11 bps. The annualized credit cost was 19 bps, which is comparable to an adjusted 20 bps in Q3 FY25. The Provisioning Coverage Ratio (PCR) remained robust at 58.76%, indicating adequate provisioning for potential losses.
Scaling the Sambhav Loans Strategic Business Unit
The Sambhav Loans SBU, launched 18 months ago to target Near Prime and Affordable segments, has achieved a monthly disbursal run rate of ₹325-350 crores, with an AUM of over ₹5,000 crores. The company aims to increase this run rate to over ₹600 crores monthly within the next 12-15 months through strategic investments. The current disbursal mix is 35-40% from the affordable segment (₹15-35 lakh ticket size) and 60-65% from the near prime segment (₹40-60 lakh ticket size), with yields ranging from 9% to 13%.
Impact of Regulatory Interpretation on Tier-1 Capital
The company experienced a sharp decline in its Tier-1 capital due to a conservative interpretation of new RBI guidelines. Following the removal of an illustration that allowed for provisioning only up to the next tranche for undisbursed loans, Bajaj Housing Finance has opted to provision for the entire undisbursed chunk of home loans and construction finance loans. This conservative approach, while impacting capital ratios, is adopted pending further regulatory clarity.
Competitive Landscape and Attrition Management
Management acknowledged that high competitive intensity, particularly in the prime and super prime segments, is a persistent feature of the market. This environment has contributed to higher attrition, with BT-out (balance transfers) accounting for approximately 20% of the portfolio and 40% of applications moving out within 90 days. The company anticipates that attrition pressure will likely subside as the interest rate cycle stabilizes, allowing for more predictable portfolio retention.