Detailed Narrative
Q1 FY26 Financial Performance Overview
Bajaj Housing Finance reported a robust Q1 FY26 with Profit After Tax (PAT) growing 21% YoY to Rs. 583 crores, and Annualized ROA maintained at 2.3%. Asset quality remained healthy, with GNPA at 30 bps and NNPA at 13 bps as of June 30, 2025. The OPEX to NTI ratio remained flat at 21.2%, reflecting ongoing investments in new segments while maintaining operational efficiency.
AUM Growth and Competitive Landscape
The company's AUM grew 24% YoY, reaching Rs. 5,736 crores in Q1 FY26, driven by strong disbursements which increased 22% YoY to Rs. 14,651 crores. However, the AUM growth guidance for FY26 was revised downwards to 21-23% from the previous 24-26% due to heightened competitive activity, aggressive pricing on acquisitions, and higher portfolio attrition, especially in the home loan segment which saw 12% retail disbursal growth.
Net Interest Margin and Cost of Funds Dynamics
The cost of funds saw a sequential reduction of 21 bps, settling at 7.7% in Q1 FY26, down from 7.9% in Q4 FY25. This reduction helped offset a 20 bps sequential decline in portfolio yield, keeping the gross spread flat at 1.8% and Net Interest Margin (NIM) at 4%. Management expects a further 20-25 bps reduction in cost of funds in Q2 FY26, but anticipates NIM/NTI to moderate by 15-20 bps for FY26 due to lower investment and assignment income.
Asset Quality and Provisioning Strategy
Asset quality metrics remained strong with GNPA at 30 bps and NNPA at 13 bps as of June 30, 2025. The annualized credit cost for Q1 FY26 was 16 bps, which would have been 17 bps excluding an overlay release of Rs. 25 crores. The Provisioning Coverage Ratio (PCR) stood healthy at 56.25%, with management maintaining a conservative approach to provisioning beyond the 40% required by the ECL model.
Strategic Focus and Digital Adoption
The company continues its digital transformation, achieving 93% e-agreement penetration and 88% digital customer onboarding by June 2025. In terms of product mix, while home loans constitute 55.8% of AUM, the company is strategically focusing on building its Home Loan channel first, particularly in the Affordable and near-prime segments, before expanding smaller ticket LAP in new SBUs, aiming for organic growth.
Capital Adequacy and Shareholder Returns
Bajaj Housing Finance maintained a comfortable Capital Adequacy Ratio (CRAR) of 26.9% and a PBC ratio of 61.71%, exceeding the regulatory requirement of 60%. The Annualized Return on Equity (ROE) for the quarter was 11.6%, with management noting a moderation due to the equity overhang from capital raises undertaken in FY25. The net worth stood at Rs. 20,508 crores as of June 30, 2025.