LIC Housing Finance Limited — Q2 FY26 earnings call

Call held 30 Oct 2025

Management summary

LIC Housing Finance reported a mixed Q2 FY26, with a 6% YoY growth in its outstanding loan portfolio to ₹3,11,816 crores and a notable improvement in asset quality, with Stage-3 exposure falling to 2.51%. However, overall disbursements remained flat YoY, primarily due to a significant decline in project loan disbursements and high balance transfers out, which management acknowledged as a key concern. Net interest margin compressed slightly to 2.62%, though the cost of funds saw a sequential decline, and the company expects NIMs to stabilize or improve going forward.

Highlights

  • Outstanding loan portfolio grew 6% YoY to ₹3,11,816 crores.

  • Individual home loan disbursements increased 3% YoY to ₹13,490 crores and 24% QoQ to ₹16,313 crores.

  • Stage-3 exposure improved significantly to 2.51% as of September 30, 2025, down from 3.06% a year ago.

  • Provision coverage ratio increased to over 53% from 49% last year.

  • Cost of funds declined by 8 basis points sequentially to 7.42%, with incremental cost of funds down 24 bps QoQ to 6.73%.

Concerns

  • Total disbursements were flat YoY at ₹16,313 crores, with project loan disbursements significantly muted, down 73% YoY to ₹378 crores.

  • NIM compressed to 2.62% in Q2 FY26 from 2.71% in Q2 FY25 and 2.68% in Q1 FY26.

  • Overall loan book growth is considered 'flat' by management, despite a 6% YoY increase, and is a 'biggest point of worry'.

  • High balance transfers (BT out) in Q2, reaching ₹4,000 crores against a normal run rate of ₹2,000 crores, impacting loan book growth.

Key financials

  1. Total Revenue from Operations ₹7,163 Cr +3.4%YoY
  2. Outstanding Loan Portfolio ₹3.12L Cr +5.9%YoY
  3. Total Disbursements ₹16,313 Cr -0.99%YoY
  4. Net Interest Income (NII) ₹2,038 Cr +3.2%YoY
  5. Net Interest Margin (NIM) 2.6%
  6. Profit After Tax (PAT) ₹1,353.87 Cr +1.9%YoY
  7. Stage-3 Exposure 2.5%
  8. Provision Coverage Ratio (PCR) 53%
  9. Cumulative Cost of Funds 7.4%
  10. Incremental Cost of Funds 6.7%
  11. Employee Cost ₹143 Cr

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 Housing Loan Portfolio
    ₹2.64L Cr Value5% YoY Growth85% Share of Total Portfolio
  • Project Loan Portfolio
    3% Share of Total Portfolio
  • Stage-2 Individual Housing Loan
    1.1% Exposure
  • Stage-2 Project + Non-housing Corporate
    24.9% Exposure
  • Stage-2 Non-housing Individuals
    4% Exposure
  • Individual Housing Loan Yield
    9.2% Yield
  • Non-housing Individual Yield
    10.2% Yield
  • Non-housing Corporates (incl. project finance) Yield
    10.5% Yield
  • Average Yield
    9.4% Yield
  • Incremental IHL Yield
    9% Yield
  • Incremental Non-housing Individual Yield
    10.2% Yield
  • Incremental Non-housing Corporate (incl. project) Yield
    10.5% Yield

Guidance & targets

Credit Growth

  • Overall Loan Book and Disbursements Growth Credit Growth · FY26 · High confidence double-digit growth

    From 10% growth today

    So, we had in the beginning of the year given you a guidance of about 10% growth, both in disbursements as well as the book. We right now stand at 6%. So, we are hopeful that the green shoots we see in the increase in disbursements from Q1 and Q2 will continue further, accelerate further, and probably by the end of the year we will be closer to the guided figure of double-digit growth.

    — Tribhuwan Adhikari

  • Overall Loan Book and Disbursements Growth Credit Growth · by end of March (FY26) · High confidence double-digit growth
    And yes, this year also, I do not say that we are going to do something exponential in the remaining two quarters. We would be very happy to achieve a double-digit growth both in the disbursement and in the book by the end of March.

    — Tribhuwan Adhikari

Credit Cost

  • Credit Costs Credit Cost · FY26 · High confidence 50 basis points
    I think we would be able to achieve the guided range of 50 basis points, which we had alluded to in the beginning of the year.

    — Tribhuwan Adhikari

Margin

  • NIM Margin · FY26 · High confidence 2.6% to 2.8%
    So, going forward, I believe the NIMs, the range which we had given 2.6% to 2.8%, we shall be maintaining it.

    — Lokesh Mundhra

  • NIM Margin · Going forward · Medium confidence improve slightly
    Going forward, I expect the NIMs to improve slightly.

    — Lokesh Mundhra

Cost of Borrowing

  • Cumulative Cost of Borrowing Reduction Cost of Borrowing · by end of March · High confidence 10 to 12 bps
    So, we are expecting the 10 to 12 bps further cut in our cumulative cost of borrowing.

    — Lokesh Mundhra

  • Cost of Borrowing Reduction Cost of Borrowing · by the end of the year · High confidence another 10-basis points
    So, expecting that another 10-basis points reduction in the cost of borrowing by the end of the year.

    — Tribhuwan Adhikari

Disbursements

  • Lead Channel Disbursements Disbursements · FY26 · High confidence ₹2,000 crores
    Target for this year is Rs. 2,000 crores through the lead channel.

    — Tribhuwan Adhikari

  • Construction Finance Channel Business Disbursements · FY26 · High confidence ₹5,000 crores
    But yes, we are targeting at least Rs. 5,000 crores of business from the construction finance channel this year which would come majorly in Q3 and Q4.

    — Lokesh Mundhra

Market Share

  • FSL Contribution to Total Business Market Share · FY26 · High confidence 15%
    Here we are looking at getting 15% of our total business to come from this FSL and going forward in the next year, we want them to contribute at least 25% of our business.

    — Tribhuwan Adhikari

  • FSL Contribution to Total Business Market Share · next year (FY27) · High confidence 25%

    — Tribhuwan Adhikari

Other

  • Balance Transfer (BT) Out Other · Q3 · High confidence ₹2,000 crores
    And Q3, I am expecting the BT to come down to normal at Rs. 2,000 per quarter. I expect that to be at that level.

    — Tribhuwan Adhikari

  • Balance Transfer (BT) Out Other · per quarter · High confidence ₹1,200-1,500 crores
    We expect this to come down to either the original levels of Rs. 2,000 crores or even further probably to Rs. 1,200-1,500 crores level.

    — Tribhuwan Adhikari

  • Employee Cost Other · current levels · High confidence ₹143-150 crores
    I think the employee cost would remain at the current levels, I think Rs. 143 crore, at the most probably Rs. 150 crore, not more.

    — Tribhuwan Adhikari

  • Employee Cost Other · Q3 · High confidence ₹150 crores
    I think Q3 is going to be in the Rs. 150 crores range.

    — Tribhuwan Adhikari

What to watch in Q3 FY26

Double-digit growth in disbursements and loan book

by end of March (FY26)
Current 6% YoY loan book growth, 24% QoQ disbursement growth (flat YoY total disbursements)
Target Double-digit growth

Why it matters

Management has explicitly targeted double-digit growth for the full fiscal year, and this is a key focus area for them.

We would be very happy to achieve a double-digit growth both in the disbursement and in the book by the end of March.

Risks & concerns

  • Subdued Loan Growth

    high

    Despite 6% YoY loan book growth, management views it as 'flat' and a 'biggest point of worry,' initiating a comprehensive relook at company structure and distribution.

    Both acknowledged

  • High Balance Transfer (BT) Out

    medium

    BT out doubled to ₹4,000 crores in Q2, impacting loan book growth, but recent rewriting rate reductions are expected to bring it down to ₹1,200-1,500 crores.

    Both acknowledged

  • Intense Competition from PSU Banks

    medium

    PSU banks are very aggressive, offering rates as low as 7.35%, putting pressure on lending rates and growth.

    Both acknowledged

  • Muted Project Loan Disbursements

    medium

    Project loan disbursements were down 73% YoY to ₹378 crores, contributing to overall subdued growth, though margins in this segment have improved.

    Management acknowledged

Q&A highlights

8 direct
Growth and Repayments/BT Out Direct
Yes, I do agree that the growth has been, I would say, flat. As you said, we are just showing growth of 5%, 6% Y-on-Yand Q-on-Q also there is not too much of a growth. Yes, you are right. The growth, to some extent, has been hit by BT during this second quarter.

Highlights management's acknowledgment of subdued growth and identifies BT out as a key factor impacting it, despite overall loan book growth.

Asked by Mahrukh Adajania

Credit Costs Trajectory Direct
As regards credit cost, yes, in the beginning of the year we had given a guidance of keeping credit costs within 15 basis points. Right now, in Q1 it was 6 basis points. In Q2 it was 5 basis points. So, together, 11 basis points. But if you see, though our asset quality has been improving, we have been making a slightly higher provision.

Clarifies the current credit cost trend and explains the reason for slightly higher provisions (management overlay) despite improving asset quality.

Asked by Mahrukh Adajania

NIM Sustainability and PLR Reset Impact Direct
I believe this 2.62% NIM which we are seeing at the end of Q2 is the bottom that we have seen. I do not see any reason why there should be any compression on NIMs any further.

Provides management's view on NIM bottoming out and explains the full impact of PLR reduction has been felt, suggesting future stability or improvement.

Asked by Renish

Structural Changes for Growth Direct
And towards that, the Board has guided us or the Board has asked us to go in for a comprehensive relook at the entire structuring of the company in terms of offices, the locations, also in terms of the distribution channels and what we need to do. And we are right now in the process of boarding a consultant for this process.

Reveals a strategic initiative to address growth challenges through a comprehensive review of company structure and distribution channels, indicating potential future changes.

Asked by Renish

PLR Reduction and Impact on BT Out Direct
I think that rewriting rates reduction has taken place. And Q3, I am expecting the BT to come down to normal at Rs. 2,000 per quarter. I expect that to be at that level.

Explains the recent reduction in rewriting rates (by 75 bps) and its expected positive impact on reducing BT out, with a specific target for Q3.

Asked by Kunal Shah

Nature of Stage-3 Improvement (Retail vs. Corporate) Direct
It was both corporate. Corporate, I think there was one big loan of about Rs. 140 crores which got resolved, but the entire thing did not come. I think we got about Rs. 60 crores of that. The rest is through because it is scheduled, I would say, repayment.

Clarifies that the improvement in asset quality (Stage-3) was a mix of corporate and retail, with a specific corporate loan resolution contributing.

Asked by Kunal Shah

Competitive Intensity from PSU Banks Direct
But yes, what we are seeing is PSU banks are very, very aggressive, right? Offering rates as low as 7.35%. Two banks I know are offering new loans at 7.35%, whereas most of the bigger banks, PSU banks, are at 7.5%, where we are exactly right now. So, I believe we are competitive as far as that is concerned insofar as that is concerned.

Acknowledges the intense competition from PSU banks, particularly on lending rates, and explains LIC HFL's competitive position.

Asked by Kushagra Goel

Employee Cost Reduction Direct
So, now that the wage revision has been done, the salary cost is now fixed. There is not going to be any other. There is no impending wage revision until the 1st of August 2027. No provisioning for wage revision is being made. So, that is the reason why the salary cost has come down.

Explains the significant QoQ drop in employee costs due to the completion of wage revisions and associated provisioning, providing clarity on future cost trajectory.

Asked by Bhaskar Basu

2 min read 7 chapters

Detailed narrative

Q2 FY26 Financial Performance Overview

LIC Housing Finance reported a 3.42% YoY increase in total revenue from operations to ₹7,163 crores for Q2 FY26. Profit After Tax (PAT) also grew by 1.87% YoY to ₹1,353.87 crores. The outstanding loan portfolio expanded by 5.85% YoY to ₹3,11,816 crores, primarily driven by individual housing loans.

Loan Book and Disbursements

The outstanding loan portfolio reached ₹3,11,816 crores, with individual housing loans constituting 85% at ₹2,64,096 crores, growing 5% YoY. Total disbursements for the quarter were ₹16,313 crores, a slight decline of 1% YoY, but showed a strong 24.37% QoQ growth from ₹13,116 crores in Q1. Individual home loan disbursements grew 3% YoY to ₹13,490 crores, while project loan disbursements were significantly muted at ₹378 crores, down 73% YoY.

Asset Quality and Provisions

Asset quality showed marked improvement, with Stage-3 exposure (GNPA) declining to 2.51% as of September 30, 2025, from 3.06% a year ago. Total provisions stood at ₹5,074 crores, leading to a provision coverage ratio of over 53%, up from 49% last year and 51% last quarter. The company made a technical write-off of ₹133 crores (fully provisioned) and recovered ₹83 crores from written-off loans.

Net Interest Margin and Cost of Funds

Net Interest Income (NII) for Q2 FY26 was ₹2,038 crores, a 3.24% YoY increase but a 1.35% QoQ decline. Net Interest Margin (NIM) for the quarter stood at 2.62%, down from 2.71% in Q2 FY25 and 2.68% in Q1 FY26. The cumulative cost of funds decreased by 8 basis points sequentially to 7.42%, and the incremental cost of funds saw a 24 bps QoQ reduction to 6.73%. Management believes the Q2 NIM of 2.62% is the bottom and expects stabilization or slight improvement.

Growth Strategy and Alternate Channels

Management acknowledged that growth has been 'flat' and is a 'biggest point of worry,' leading the Board to initiate a comprehensive relook at the company's structure, locations, and distribution channels, with a consultant being onboarded. The company is actively developing alternate channels, targeting ₹2,000 crores from the lead generation channel this fiscal year and aiming for 15% of total business from its FSL subsidiary this year, increasing to 25% next year.

Competitive Landscape and Lending Rates

The company faces intense competition from PSU banks, which are offering aggressive lending rates as low as 7.35%. LIC HFL has recently reduced its rewriting rates by 75 basis points, now offering rates around 8% (lending rate plus 50 bps), to mitigate high balance transfers (BT out), which reached ₹4,000 crores in Q2. Management expects BT out to normalize to ₹1,200-1,500 crores per quarter in Q3.

Employee Costs

Employee costs for Q2 FY26 significantly decreased to ₹143 crores from ₹160 crores in Q1 FY26. This reduction is attributed to the completion of wage revisions and associated provisioning in the previous year, with no further wage revision expected until August 2027, leading to a more stable employee cost structure.

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