LIC Housing Finance Limited — Q1 FY26 earnings call

Call held 4 Aug 2025

Management summary

LIC Housing Finance reported a flattish Q1 FY26 with a 7% YoY revenue growth to INR7,233.13 crores and a 4.6% increase in PAT to INR1,359.92 crores. While the company saw an improvement in Stage 3 exposure YoY, it increased QoQ and credit costs were higher. NIM compressed due to competitive pressures and delayed rate cuts, but management expects improvement in subsequent quarters with strong disbursement momentum.

Highlights

  • Revenue from operations increased 7% YoY to INR7,233.13 crores in Q1 FY26.

  • Outstanding loan portfolio grew 7% YoY to INR3,09,587 crores as of June 30, 2025.

  • PAT increased 4.6% YoY to INR1,359.92 crores for the quarter.

  • Cost of funds reduced by 26 basis points YoY to 7.50% as of June 30, 2025.

  • Stage 3 exposure improved to 2.62% as of June 30, 2025, from 3.30% a year ago.

Concerns

  • Net Interest Margin (NIM) compressed to 2.68% in Q1 FY26 from 2.76% in Q1 FY25 and 2.86% in Q4 FY25.

  • Project loan disbursements declined significantly by 70.05% YoY to INR156 crores.

  • Q1 FY26 credit cost, if annualized, works out to 25 basis points, higher than last year's 9 basis points.

  • GNPA (Stage 3) increased QoQ to 2.62% from 2.47% in Q4 FY25.

Key financials

  1. Revenue from Operations ₹7,233.13 Cr +6.6%YoY
  2. Outstanding Loan Portfolio ₹3.10L Cr +7.2%YoY
  3. Net Interest Income ₹2,065.78 Cr +3.9%YoY
  4. Net Interest Margin 2.7% -2.9%YoY
  5. PAT ₹1,359.92 Cr +4.6%YoY
  6. Stage 3 Exposure 2.6% -20.6%YoY
  7. Cost of Funds 7.5% -3.4%YoY
  8. Credit Cost 25 bps +177.8%YoY

What they filed

Q1 FY27: revenue down 1.4%, net profit up 9.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue6,938 7,070 7,303 7,186 7,179 +3%7,206 +2%7,094 −3%7,083 −1%
Net profit1,328 1,435 1,374 1,364 1,349 +2%1,398 −3%1,493 +9%1,499 +10%
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

  • Individual Home Loan Portfolio
    ₹2.62L Cr Portfolio Value
  • Total Disbursements
    ₹13,116 Cr Disbursements Value
  • Individual Home Loan Disbursements
    ₹11,247 Cr Disbursements Value
  • Project Loan Disbursements
    ₹156 Cr Disbursements Value
  • Individual Home Loan Stage 3 EAD
    ₹3,211.32 Cr EAD Value1.2% EAD Percentage
  • Non-Housing Commercial (NHC) Stage 3 EAD
    ₹3,497.77 Cr EAD Value24.8% EAD Percentage
  • Non-Housing Individual (NHI) Stage 3 EAD
    ₹1,406.18 Cr EAD Value4.3% EAD Percentage

Guidance & targets

Credit Growth

  • Overall Loan Book Growth Credit Growth · FY26 · Medium confidence double-digit growth
    Well, Rajiv, if you -- in our con call for Q4, for the guidance for the year, we had given a double-digit growth as the guidance, right?

    — Tribhuwan Adhikari

Profitability

  • Net Interest Margin (NIM) Profitability · Future Quarters · High confidence 2.6% to 2.80%
    So in a nutshell, what guidance we have already given, that is between 2.6% to 2.80%, then definitely we'll maintain that.

    — Lokesh Mundhra

Disbursements

  • Monthly Disbursements Disbursements · August onwards · Medium confidence INR6,000 crores, INR6,500 crores
    So we should be August onwards, we should be hitting INR6,000 crores, INR6,500 crores every month.

    — Tribhuwan Adhikari

Project Finance

  • Affordable Housing Business Project Finance · Current Year · Medium confidence INR1,000 crores
    This year, not having a huge target as such. We would be happy with somewhere about INR1,000 crores and a lot more buildup in the infrastructure and the capability.

    — Tribhuwan Adhikari

What to watch in Q2 FY26

Q2 Performance and Revised Guidance

Next quarter (Q2 FY26 earnings call)
Current Q1 FY26 was 'flattish' with 7% YoY revenue growth. Full-year guidance is 'double-digit growth'.
Target Stronger Q2 performance and potentially revised, more specific full-year guidance.

Why it matters

Will indicate if the company can accelerate growth and meet its full-year targets after a slow Q1.

Q2 is going to be a defining quarter for all of us. That will set the course for the financial year. So looking forward to meeting you all at the Q2 conference call and sort of explaining our performance as well as our way forward.

Risks & concerns

  • Intense Competition and Rate War

    high

    Intense competition from PSU banks is leading to a rate war, putting pressure on lending rates and NIMs. Management prioritizes margins over aggressive growth.

    Both acknowledged

  • Pressure on Retail Collections

    medium

    Some pressure on collections in the retail segment was observed in June, partly due to Q1 seasonality and internal personnel movements. Recovery operations are being intensified.

    Both acknowledged

  • Past Project Finance Asset Quality Issues

    medium

    Historically, the project finance segment had high NPAs (54% at one point), leading to a cautious approach and focus on reputed builders for new sanctions.

    Management acknowledged

  • Customer Expectations for Lower Rates

    medium

    Customers expect immediate benefits from RBI rate cuts, which can lead to balance transfers if not addressed, posing a retention challenge for existing borrowers.

    Both acknowledged

  • Q1 Seasonality and Personnel Movement

    low

    Q1 is traditionally a slow quarter for LICHFL due to promotion and transfer season, impacting disbursements and collections, but this is expected to normalize.

    Management acknowledged

Q&A highlights

4 direct
Credit costs and guidance Partial
So definitely what our MD and CEO is saying, so we'll maintain our credit cost within the limits. There has been a slight increase in provisioning as well as a slight increase in NPAs.

Analyst challenged management on higher credit costs (annualized 25 bps) vs. guidance (9-15 bps), indicating potential pressure on profitability.

Asked by Mahrukh Adajania

Softness in June collections Direct
It was basically in the retail segment, Mahrukh. It was basically in the retail segment. So whatever NPA increase we have seen, the INR500 crores, as I said, it was mostly in the retail segment only, and that is where we are seeing some pressure on the collections.

Management confirmed collection pressure in the retail segment in June, attributing it to internal personnel movements, which is a key operational detail.

Asked by Mahrukh Adajania

Disbursal growth and competition Partial
To some extent, I do agree. I think we were slightly delayed in lowering the rates. The banks cut it immediately. Of course, they had to cut it immediately since it was linked to repo. We took our time, slightly probably a little bit more time than what should happen. So that was one of the reasons.

Analyst questioned the soft disbursal growth amidst intense competition, prompting management to acknowledge past delays in rate adjustments and competitive pressures.

Asked by Mahrukh Adajania

Yield compression and repricing of loan book Direct
So whereas there is a compression in the yield on advances, there is also a compression on the cost of borrowings. Net-net, I do not believe my NIMs, which are at 2.68% as at the end of Q1, I don't think there'll be too much of a deviation in the NIMs.

Analyst sought clarity on the impact of RBI rate cuts and loan book repricing on NIMs, a critical profitability metric.

Asked by Avinash Singh

Muted project finance growth Direct
Yes. Vansh, yes. It is not that we are withdrawing from the project finance market or the construction finance market. We are there. We are there. Yes, we are slow because we want to finance only reputed and builders with pedigree. Our past history, as you all know, in the project finance space has not been great.

Analyst questioned the significant decline in project loan disbursements, revealing management's cautious approach due to past asset quality issues in this segment.

Asked by Vansh Solanki

Increase in GNPA/NNPA Direct
NPA ratio, yes, it has gone up slightly. If you look quarter-to-quarter, it was 2.47% as at the end of Q4. Right now, it is 2.62%. Year-on-year, of course, there is an improvement, partially because, yes, in Q1, I would say the NPAs, the Stage 3 has gone up by INR514 crores.

Analyst probed the QoQ increase in GNPA, which management attributed to retail segment delinquencies and internal personnel movements.

Asked by Vansh Solanki

Balance transfer pressure and sufficiency of PLR cuts Partial
As of now, right now, we are not contemplating another any further cuts. Let's wait and watch. There is not too much of an impact on our, let me say, BT. The BT -- yes, they have gone up slightly, but it is not the increase is not significant for us to get into panic mode and start cutting immediately.

Analyst questioned if the 25 bps rate cut was enough to counter balance transfer threats, highlighting competitive intensity and management's stance on further rate actions.

Asked by Kunal Shah

Existing customer interest rate benefits Partial
So ours is linked to the PLR, the prime lending rate is what we call. We have cut it by 25 basis points for all customers. I do not know if you've not got it. You kindly see your statement for the month of July. You may be the quarterly reset customer. For you, it is applicable from the 1st of July.

An individual investor's direct complaint about not receiving rate cut benefits highlighted a potential customer retention challenge and communication gap.

Asked by Koteshwar Rao

2 min read 6 chapters

Detailed narrative

Q1 FY26 Performance Overview

LIC Housing Finance reported a 'flattish' Q1 FY26, with total revenue from operations growing 7% YoY to INR7,233.13 crores and PAT increasing 4.6% YoY to INR1,359.92 crores. The outstanding loan portfolio expanded 7% YoY to INR3,09,587 crores as of June 30, 2025. Management noted that Q1 is typically a slow quarter for the company, impacted by internal personnel movements.

Net Interest Margin (NIM) and Cost of Funds

NIM for Q1 FY26 stood at 2.68%, a compression from 2.76% in Q1 FY25 and 2.86% in Q4 FY25. This was partly attributed to delayed rate cuts by the company compared to banks. However, the cost of funds improved, reducing by 26 basis points YoY to 7.50% as of June 30, 2025, with incremental cost of funds at 6.97% for Q1 FY26. Management expects NIMs to remain stable, offsetting yield compression with lower borrowing costs, targeting a range of 2.6% to 2.80%.

Asset Quality Trends

Stage 3 exposure (GNPA) improved YoY to 2.62% as of June 30, 2025, from 3.30% a year ago. However, it saw a QoQ increase from 2.47% in Q4 FY25, with an approximate INR500 crore increase in NPAs, primarily in the retail segment. Total provisions stood at INR5,051 crores, maintaining a provision coverage of 51%. Management attributed the Q1 softness to personnel movement and expects recovery, aiming to keep credit costs within 9-15 bps.

Disbursement Dynamics

Total disbursements for Q1 FY26 were INR13,116 crores, a slight increase from INR12,915 crores YoY. Individual Home Loan disbursements grew 2.88% to INR11,247 crores, but Project Loan disbursements significantly declined by 70.05% to INR156 crores. Management noted a gradual pick-up in disbursements, with July reaching INR5,500 crores, and expects monthly disbursements of INR6,000-6,500 crores from August onwards.

Competition and Rate Strategy

The company faces intense competition, particularly from PSU banks, leading to a 'rate war.' While RBI cut repo rates by 100 basis points, LIC HFL implemented a 25 basis point cut across its PLR, effective June/July for existing borrowers. They are offering existing customers the option to rewrite loans at 8.75% to retain them, emphasizing a strategy to prioritize margins over aggressive growth and not contemplating further cuts currently.

Project Finance Outlook

Despite the sharp decline in Q1 project loan disbursements, management reiterated its commitment to the segment. They are adopting a cautious approach, focusing on 'reputed and BBB-rated builders' due to past issues (54% NPA in this segment historically). They have sanctioned INR800 crores in Q1, with disbursements linked to construction stages, and aim for an affordable housing book of around INR1,000 crores for the year, expecting growth in subsequent quarters.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Financial Services earnings calls