Bajaj Housing Finance Limited — Q4 FY25 earnings call

Call held 23 Apr 2025

Management summary

Bajaj Housing Finance reported a strong Q4 FY25, with AUM growing 26% to ₹1,14,684 crores and PAT increasing 54% to ₹587 crores. Asset quality remained healthy with NNPA improving to 0.11%, and OPEX efficiency significantly improved. While gross spread saw a marginal sequential decline, the company is strategically investing in new business segments and expects to mitigate NIM compression through asset mix changes.

Highlights

  • AUM grew 26% to ₹1,14,684 crores as of March 31, 2025.

  • Q4 FY25 PAT grew 54% to ₹587 crores from ₹381 crores.

  • Annualized ROA improved 40 bps YoY to 2.4% from 2.0% in Q4 FY24.

  • OPEX to NTI improved from 27.1% in Q4 FY24 to 21.7% in Q4 FY25.

  • NNPA improved sequentially from 0.13% to 0.11%.

Concerns

  • Gross spread marginally lower at 1.8% in Q4 FY25, down from 1.9% in Q3 FY25.

  • Annualized ROE declined slightly to 12.1% from 12.7% in Q4 FY24 due to capital raise.

Key financials

  1. AUM ₹1.15L Cr +26%YoY
  2. PAT ₹587 Cr +54%YoY
  3. Annualized ROA 2.4% +20%YoY
  4. Annualized ROE 12.1% -4.7%YoY
  5. GNPA 0.29%
  6. NNPA 0.11% -15.4%QoQ
  7. OPEX to NTI 21.7% -19.9%YoY
  8. Credit Cost 0.12% -33.3%YoY
  9. Cost of Funds 7.9%
  10. Portfolio Yield 9.7%
  11. Gross Spread 1.8%
  12. NIM 4%
  13. CAR 28.3%
  14. PBC Ratio 63.3%
  15. Net Worth ₹19,932 Cr
  16. Disbursements ₹14,254 Cr +25%YoY

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

SegmentShare of PortfolioAUM GrowthGNPA
Home Loans56.2%22%0.34%
Loan Against Property (LAP)10.7%28%0.65%
Loan Against Rent Discounting (LRD)19.1%24%0%
Developer Finance12.5%49%0.05%

Guidance & targets

Profitability

  • NIM Compression Profitability · FY26 · Medium confidence 10-15 bps
    On your first question, if we maintain as it is book mix, yes, you can see NIM compression of a 10 to 15 bps during the year because if we are saying 34-35 bps is what we expect, the differential in the cost going down and I said 45-50 bps on the yield impact which can be there if we take a 75 bps kind of a rate cut scenario.

    — Atul Jain

Cost of Funds

  • Cost of Funds Reduction Cost of Funds · FY26 · High confidence 34-35 bps
    So, Raghav, our estimate is assuming the two cuts which has happened, and one cut more happens. YoY I think we should see a drop; 34-35 bps roughly.

    — Atul Jain

Portfolio Mix

  • Developer Finance Portfolio Share Portfolio Mix · FY26 · Medium confidence 15%

    From 12.5% today

    whether a developer finance book going up from 12.5% to 15% what we had called out in last year also which results in to compensating the increase of our non-top six markets which we have invested deep or increase of contribution from the SBU in terms of a near prime and there.

    — Atul Jain

Regulatory Compliance

  • Public Shareholding Requirement Regulatory Compliance · 2.5 years away · High confidence 75%
    You asked on public shareholding. It's 2.5 years away, Dhaval, to meet a 25% requirement. Of course categorically, I can tell you there is no plan to raise new capital in FY26 because our leverage is 5.1 or 5.2 as of 31st March '25.

    — Atul Jain

Capital Raise

  • New Capital Raise Capital Raise · FY26 · High confidence No plan
    Of course categorically, I can tell you there is no plan to raise new capital in FY26 because our leverage is 5.1 or 5.2 as of 31st March '25.

    — Atul Jain

Portfolio Management

  • Assigned Portfolio Share Portfolio Management · Long term strategy · High confidence 12-15%
    For a mortgage company assignment at a particular portion of a 12 to 15% of our book normally we keep it and that's a long term strategy as well. You will continue to see the percentage of assigned out at that ratio.

    — Atul Jain

What to watch in Q1 FY26

NIM Trajectory

Next quarter (Q1 FY26)
Current Flat at 4% in Q4 FY25; potential 10-15 bps compression in FY26
Target Observe if NIM compression is within the guided range or mitigated by asset mix changes

Why it matters

NIM is a core profitability metric for HFCs, directly impacted by interest rate cycles and competitive intensity.

On your first question, if we maintain as it is book mix, yes, you can see NIM compression of a 10 to 15 bps during the year because if we are saying 34-35 bps is what we expect, the differential in the cost going down and I said 45-50 bps on the yield impact which can be there if we take a 75 bps kind of a rate cut scenario. However, as you have only called out, there is a target type mix which is a play around for us available whether a developer finance book going up from 12.5% to 15% what we had called out in last year also which results in to compensating the increase of our non-top six markets which we have invested deep or increase of contribution from the SBU in terms of a near prime and there. We will target to cover a reasonable portion of that hit what we expect from the NIM.

Risks & concerns

  • NIM Compression due to Interest Rate Cycle

    medium

    Potential 10-15 bps NIM compression in FY26 due to downward interest rate cycle, but expected to be mitigated by asset mix changes.

    Management acknowledged

  • Competitive Pressure on Home Loan Pricing

    medium

    Competitive industry requires rate cuts on acquisition, and potential for higher balance transfers if exit penalties are removed, though impact is deemed not material.

    Management acknowledged

  • Growth Moderation from Base Effect

    low

    Observed moderation in PAT and total income growth is a natural normalization as the company's base grows, not a specific challenge.

    Analyst acknowledged

Q&A highlights

8 direct
Home loan rate cuts and pass-through post repo rate cut Direct
On the repo book, it's a full 50 bps has been passed on, while on the non-repo book there is a differential; you can say in the range of 10 to 15 bps which has been passed on.

Clarifies the company's response to interest rate changes and its impact on pricing for different loan segments, crucial for NIM analysis.

Asked by Piran Engineer, CLSA

Strategy for increasing fixed rate NCD share amidst declining rates Direct
The fundraising decision is taken at the point of a time which is a multiple factor of, let us say, what is the variable money you are able to raise at that point of time versus a fixed money, taking a call on saying that, what is the maximum downward trajectory on the variable money you will encounter versus what is the upfront benefit you are getting.

Explains the company's calibrated treasury strategy for managing cost of funds and interest rate risk, including the use of OIS hedging.

Asked by Piran Engineer, CLSA

Moderation in PAT and total income growth rates Direct
For FY22 we were a three-year-old company. The base was very small. So, as the company will grow forward because if I look at from FY18 to total cumulatively it will look like the growth of a 90% or 80% because company started in '17-18.

Provides context for the observed growth moderation, attributing it to a natural normalization as the company's base grows, rather than specific challenges.

Asked by Shashi Kumar, Trade Brains

Credit cost normalization and impact of portfolio assignments Direct
When we do an assignment, there is a stage 1 provisioning goes down. So, that's why when we guide for the credit cost, we say on a steady state basis, 20 to 25 bps of the credit cost is what we envisage.

Clarifies the company's credit cost philosophy and how portfolio assignments influence reported credit costs by reducing Stage 1 provisioning.

Asked by Viral Shah, IIFL Capital

Sharp QoQ increase in OPEX and PBC ratio Direct
First part we had already called out that we are investing deep, and we are going to invest deeper both in the management team and the new businesses, both SBU which we have set up and the top-6 plus markets team, we are investing... PBC has moved up, Viral on account of two factors; while home loan growth has been lower than the overall growth, it's the assignment out during the quarter was largely non-home loan assets.

Explains the drivers behind changes in operational efficiency and capital adequacy metrics, linking them to strategic investments and portfolio management actions.

Asked by Viral Shah, IIFL Capital

Future trajectory of cost of funds for FY26 Direct
So, Raghav, our estimate is assuming the two cuts which has happened, and one cut more happens. YoY I think we should see a drop; 34-35 bps roughly.

Provides specific guidance on the expected reduction in cost of funds for the next fiscal year, a critical input for future profitability projections.

Asked by Raghav Garg, Ambit Capital

Plans to meet 75% public shareholding requirement Direct
Of course categorically, I can tell you there is no plan to raise new capital in FY26 because our leverage is 5.1 or 5.2 as of 31st March '25... there is no primary conversation which will happen for next at least 1.5-2 years.

Addresses a significant regulatory compliance matter, clarifying the timeline and ruling out immediate primary capital raise, suggesting a secondary offering as a likely path.

Asked by Dhaval, DSP Mutual Fund

Growth strategy for Near Prime and Affordable Housing SBU Direct
We are looking at organic growth here. The BT is in this business what we have started as an SBU will not be more than 10% to 12% of the mix... our focus will largely be on purchase assets here as we grow this business.

Clarifies the strategic focus on organic growth and purchase transactions for the new SBU, indicating a cautious approach to riskier balance transfers.

Asked by Pranuj, JP Morgan

2 min read 6 chapters

Detailed narrative

Strong Financial Performance in Q4 FY25

Bajaj Housing Finance reported robust performance in Q4 FY25, with Assets Under Management (AUM) reaching ₹1,14,684 crores, marking a 26% year-on-year growth. Profit After Tax (PAT) for the quarter surged by 54% to ₹587 crores, while the annualized Return on Assets (ROA) remained steady at 2.4%, a 40 basis points improvement compared to Q4 FY24. The company's net worth stood at ₹19,932 crores as of March 31, 2025, reflecting strong financial health.

Improved Operational Efficiency and Asset Quality

Operational efficiency saw significant improvement, with the OPEX to Net Total Income (NTI) ratio decreasing from 27.1% in Q4 FY24 to 21.7% in Q4 FY25. Asset quality remained healthy, with Gross Non-Performing Assets (GNPA) at 0.29% and Net Non-Performing Assets (NNPA) improving sequentially from 0.13% to 0.11%. Credit cost for Q4 FY25 was 0.12%, an improvement from 0.18% in Q4 FY24, reflecting strong provisioning coverage which increased from 55.4% in Q3 FY25 to 60.3% in Q4 FY25.

Strategic Investments & New Business Segments

The company is actively investing in new growth avenues, including strengthening its management team and expanding its Near Prime and Affordable Housing SBU. This new business unit is growing steadily and is expected to contribute to future growth, with a focus on organic purchase transactions rather than riskier balance transfers. The company also continues to leverage technology, achieving 93% penetration for e-agreements and 80% for online customer onboarding in March, enhancing efficiency and customer experience.

NIM Dynamics and Cost of Funds Management

The Net Interest Margin (NIM) remained flat sequentially at 4% in Q4 FY25, while the gross spread marginally decreased to 1.8% from 1.9% in Q3 FY25 due to a reduction in portfolio yield. The cost of funds remained flat sequentially at 7.9%. Management anticipates a YoY reduction of approximately 34-35 basis points in the cost of funds for FY26, assuming a cumulative 75 basis points repo rate cut, and expects to mitigate potential NIM compression through strategic asset mix changes, such as increasing Developer Finance share.

Product Portfolio and Disbursements

The portfolio mix remained well-diversified, with Home Loans constituting 56.2%, LAP 10.7%, LRD 19.1%, and Developer Finance 12.5%. AUM growth was strong across segments, with Developer Finance leading at 49%, followed by LAP at 28%, LRD at 24%, and Home Loans at 22%. Disbursements for the quarter totaled ₹14,254 crores, a 25% increase year-on-year compared to ₹11,393 crores in Q4 FY24, indicating robust business momentum.

Capital Adequacy and Regulatory Compliance

The Capital Adequacy Ratio (CAR) was slightly below 28.25%, and the PBC ratio stood at 63.28%, well above the regulatory requirement of 60%. Regarding the 75% public shareholding requirement, management indicated it is 2.5 years away and there are no plans to raise new capital in FY26, given current leverage at 5.1-5.2x. A secondary offering from Bajaj Finance shareholders is a potential path for compliance, with no primary capital conversation expected for 1.5-2 years.

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