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    LIC Housing Finance Limited

    LICHSGFIN
    Financial Services·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

    5

    • 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

    4

    • 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.

    What Changed1

    vs Q3 FY26

    Guidance items8 → 15 (+7)

    Key financials

    Single quarter

    11 metrics
    1. 01Total Revenue from Operations₹7,163 Cr+3.4%YoY
    2. 02Outstanding Loan Portfolio₹3.12L Cr+5.9%YoY
    3. 03Total Disbursements₹16,313 Cr-1.0%YoY
    4. 04Net Interest Income (NII)₹2,038 Cr+3.2%YoY
    5. 05Net Interest Margin (NIM)2.6%

    Segment breakdown

    Individual Housing Loan Portfolio
    ₹2.6L Cr Value5% YoY Growth85% Share of Total Portfolio
    Project Loan Portfolio
    3% Share of Total Portfolio
    Stage-2 Individual Housing Loan
    115.0% 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
    9.0% Yield
    Incremental Non-housing Individual Yield
    10.2% Yield
    Incremental Non-housing Corporate (incl. project) Yield
    10.5% Yield
    List

    Guidance & targets

    15
    CategoryTargetPriority
    Credit Growth
    Overall Loan Book and Disbursements Growth
    double-digit growth
    		High
    Credit Growth
    Overall Loan Book and Disbursements Growth
    double-digit growth
    		High
    Credit Cost
    Credit Costs
    50 basis points
    		High
    Margin
    NIM
    2.6% to 2.8%
    		High
    Margin
    NIM
    improve slightly
    		Medium
    Cost of Borrowing
    Cumulative Cost of Borrowing Reduction
    10 to 12 bps
    		High
    Cost of Borrowing
    Cost of Borrowing Reduction
    another 10-basis points
    		High
    Disbursements
    Lead Channel Disbursements
    ₹2,000 crores
    		High
    Disbursements
    Construction Finance Channel Business
    ₹5,000 crores
    		High
    Market Share
    FSL Contribution to Total Business
    15%
    		High
    Market Share
    FSL Contribution to Total Business
    25%
    		High
    Other
    Balance Transfer (BT) Out
    ₹2,000 crores
    		High
    Other
    Balance Transfer (BT) Out
    ₹1,200-1,500 crores
    		High
    Other
    Employee Cost
    ₹143-150 crores
    		High
    Other
    Employee Cost
    ₹150 crores
    		High

    What to watch in Q3 FY26

    5

    Double-digit growth in disbursements and loan book

    by end of March (FY26)
    Current6% YoY loan book growth, 24% QoQ disbursement growth (flat YoY total disbursements)
    TargetDouble-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

    4
    RiskSeverity

    Subdued Loan Growth

    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

    High Balance Transfer (BT) Out

    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

    medium

    Intense Competition from PSU Banks

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

    medium

    Muted Project Loan Disbursements

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

    medium

    Q&A highlights

    8

    “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

    2 min read7 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    06

    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.

    07

    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.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.