LIC Housing Finance Limited — Q3 FY26 earnings call

Call held 2 Feb 2026

Management summary

LIC Housing Finance reported a mixed Q3 FY26, with modest revenue and loan book growth, but improved asset quality and net interest margins. While facing intense competition and slower disbursement growth, the company is undertaking a strategic review with consultants to drive future growth, focusing on diversifying its loan mix and improving operational efficiency. Management expects a strong Q4, traditionally its best quarter, with further improvements in disbursements and asset quality.

Highlights

  • Revenue from operations grew 2% YoY to ₹7,187 crores (Q3 FY26) from ₹7,057 crores (Q3 FY25).

  • Outstanding loan portfolio grew 5% YoY to ₹3,14,268 crores (Dec 31, 2025) from ₹2,99,144 crores (Dec 31, 2024).

  • Net Interest Margin (NIM) improved sequentially to 2.69% in Q3 FY26 from 2.62% in Q2 FY26.

  • Cost of funds declined by 14 bps QoQ to 7.28% in Q3 FY26 from 7.42% in Q2 FY26.

  • Stage-3 exposure at default reduced to 2.45% (Dec 31, 2025) from 2.51% (Sep 30, 2025) QoQ and 2.75% (Dec 31, 2024) YoY.

Concerns

  • Profit After Tax (PAT) declined 3.35% YoY to ₹1,383.95 crores (Q3 FY26) from ₹1,431.96 crores (Q3 FY25), partly due to a 50% haircut on a ₹500 crore corporate loan resolution in Q3 FY25.

  • Overall disbursement growth remained modest at 4% YoY, with management acknowledging single-digit growth for the past 3 years.

  • Intense competition from banks and ongoing rate wars are impacting growth and requiring continuous rate reductions to remain competitive.

Key financials

  1. Revenue from Operations ₹7,187 Cr +1.8%YoY
  2. Outstanding Loan Portfolio ₹3.14L Cr +5.1%YoY
  3. Total Disbursements ₹16,096 Cr +6.1%YoY
  4. Net Interest Income (NII) ₹2,102 Cr +5.1%YoY
  5. Net Interest Margin (NIM) 2.7% -0.37%YoY
  6. Profit After Tax (PAT) ₹1,383.95 Cr -3.4%YoY
  7. Stage-3 Exposure 2.5% -10.9%YoY
  8. Cost of Funds 7.3% -1.9%QoQ

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
    85% Share of Total Portfolio4% Growth
  • Individual Home Loan Disbursements
    ₹13,094 Cr Value7% Growth
  • Non-Housing Individual Loan Disbursements
    ₹2,304 Cr Value10% Growth
  • Other Than Individual Home Loans (OHL)
    15% Share in Business Book

Guidance & targets

Profitability

  • Net Profit Profitability · FY26 · Medium confidence 7,200 crores
    we expect to end the year with at least a 7% increase in profits, about 7,200 crores is what I expect.

    — Tribhuwan Adhikari

Volume

  • Retail Disbursements Volume · Q4 FY26 · High confidence minimum Rs. 20,000 crores
    I expect disbursements minimum to touch Rs. 20,000 crores. Q4 should minimum be Rs. 20,000 crores in retail.

    — Tribhuwan Adhikari

  • Project Disbursements Volume · Q4 FY26 · High confidence Rs. 1,500-2,000 crores
    about Rs. 1,500 crores to Rs. 2,000 crores in project should get us to Rs. 20,000 crores, Rs. 22,000 crores in Q4.

    — Tribhuwan Adhikari

  • Total Disbursements Volume · Q4 FY26 · High confidence Rs. 20,000-22,000 crores
    So, Rs. 20,000 crores in retail and about Rs. 1,500 crores to Rs. 2,000 crores in project should get us to Rs. 20,000 crores, Rs. 22,000 crores in Q4.

    — Tribhuwan Adhikari

  • Gross Balance Transfer Out Volume · Q4 FY26 · Medium confidence Rs. 2,200-2,500 crores
    I believe it will be in the region of 22 to 25 and 25, I believe, would be on the higher side. I think we should be able to restrict it by up to 22, probably.

    — Tribhuwan Adhikari

Margin

  • NIM Margin · Q4 FY26 · High confidence 2.70-2.72%
    I expect it to be somewhere around about 2.70, 2.72, 2-3 basis points improvement is what I expect in Q4.

    — Tribhuwan Adhikari

Debt

  • Cost of Borrowing Reduction Debt · Q4 FY26 · High confidence 5-7 basis points
    Probably 5 to 7 basis points is what we can look forward in Q4, further reduction in our borrowing cost by five basis points.

    — Tribhuwan Adhikari

Market Share

  • OHL Share in Business Book Market Share · FY26 · Medium confidence 18%
    But from 15 to 17, if we can get to 18, I think that would be a great progress.

    — Tribhuwan Adhikari

What to watch in Q4 FY26

Total Disbursements

Next quarter (Q4 FY26 results)
Current ₹16,096 crores (Q3 FY26, 4% YoY growth)
Target ₹20,000-22,000 crores (Q4 FY26)

Why it matters

Key indicator of the success of rate reductions, strategic shifts, and consultant-led initiatives to boost growth.

I expect disbursements minimum to touch Rs. 20,000 crores. Q4 should minimum be Rs. 20,000 crores in retail. I am not adding project to it. So, Rs. 20,000 crores in retail and about Rs. 1,500 crores to Rs. 2,000 crores in project should get us to Rs. 20,000 crores, Rs. 22,000 crores in Q4.

Risks & concerns

  • Intense Competition and Rate War

    medium

    Intense competition from banks, leading to rate wars, is impacting lending rates and requiring the company to reduce its rates to remain competitive, potentially pressuring margins.

    Management acknowledged

  • Slower Growth in Core Segment

    medium

    The company has experienced single-digit disbursement growth for the past three years, particularly in its core individual home loan (salary) segment, due to high competition.

    Management acknowledged

  • Legacy Project Loan Resolution Delays

    medium

    A significant portion of Stage-3 NPAs are legacy project loans, where resolutions are often stalled by borrowers using legal avenues, leading to prolonged recovery timelines and past last-minute backtracks.

    Management acknowledged

  • Funding Cost Volatility

    low

    Recent 'blowing up' of borrowing rates post-budget could impact future funding costs, though management expressed confidence in Q4 NIM.

    Management acknowledged

Q&A highlights

5 direct
Growth Strategy and Market Share Partial
Well, first of all, as far as the industry or the overall market is concerned, well, a lot of competition in the market is what we are witnessing right now. Now, LIC Housing Finance, as you all know, as I said in my opening remarks also, we are 85% in the individual home loan business. My total disbursement is 85% comprises individual home loans. Amongst the individual home loans also, we are mostly into the salary segment, not too much into the self-employed segment. There is a tremendous competition, especially from banks.

Addresses core investor concern about growth stagnation and outlines strategic shift towards diversification and internal restructuring.

Asked by Nischint Chawathe, Kotak

Dividend Payout Ratio Direct
Now, coming to the dividend payout ratio, well, that is a call which the board will have to take, right? Right now, the profit figures are reasonably okay, not anything substantial, but we expect to end the year with at least a 7% increase in profits, about 7,200 crores is what I expect. Now, going forward, let us see how the board takes a call. We have been declaring about 500% dividend.

Clarifies capital allocation policy regarding shareholder returns and the factors influencing dividend decisions.

Asked by Nischint Chawathe, Kotak

Funding Cost Reduction Potential Direct
Probably 5 to 7 basis points is what we can look forward in Q4, further reduction in our borrowing cost by five basis points.

Provides specific guidance on a key profitability driver (NIM) and the company's strategy to manage funding costs.

Asked by Nischint Chawathe, Kotak

Fixed vs Floating Funding Mix and ALM Direct
No, Nishit, there is no strategic advantage in having 50% of your borrowing at fixed when 99% of your book is floating rate. Now, the problem is, where is the money in the market? I ideally would want the banks to give me 100% of my loans. But I do not think RBI would allow that because RBI wants the banks to be deleverage as far as the funding, certain sectors, all sectors is concerned. So, slowly, consciously, we are trying to bring it down. As far as the ALM is concerned, our ALMs are perfectly matched. There is no mismatch in our ALM.

Clarifies the company's funding strategy, ALM management, and the constraints faced due to market liquidity and regulatory environment.

Asked by Nishit Shah, ViSolitech Investment Advisor

Impact of Rate Cuts on Existing Borrowers and Rewriting Strategy Direct
We did not lower our prime lending rate, but what we did was we have a feature called rewriting, in which customers can come to us and ask us to appraise their lending rates and rewrite it at a lower rate. We have reduced our rewriting rates in the month of October. Of course, going down the line, it took some time. So, now I think the rewriting, which was about 3,300 crores in Q3, now it has come down to sustainable and manageable levels in the month of January, as I see it.

Details how the company is addressing competitive pressure and customer retention through specific product offerings like 'rewriting'.

Asked by Nishit Shah, ViSolitech Investment Advisor

Synergy with LIC Agents for Distribution Partial
And even now we are engaged with LIC on how do we synergize the marketing resources which we have between LIC HFL and LIC. There are some traditional mindsets working in the sense that the LIC branch managers feel that if my agent takes up LIC housing finance, he will stop doing insurance and so on and so forth. We try to talk to; we are consciously engaged with the senior management of LIC and trying to churn out a sort of synergized strategy. In fact, the management of LIC has on boarded a special consultant to work on all the synergies between all the various subsidiaries of LIC and LIC of India.

Highlights a key strategic opportunity for leveraging the parent company's network and the challenges involved, with a future outlook for resolution.

Asked by Nishit Shah, ViSolitech Investment Advisor

Corporate Loan Resolutions Partial
These corporate resolutions, most of these are big loans, upwards of Rs. 200 crores, Rs. 250 crores, Rs. 400 crores, Rs. 500 crores. Yes, lots of progress made, lots of progress made. And these big corporates, big loans, big builders, they use every opportunity at their disposal, all courts, DRT, etc., to stall our expectations. But yes, there is a lot of forward movement in many of these corporate loans. A few of them could crack at any point of time.

Addresses a key asset quality concern, particularly for legacy NPAs, and the challenges in their resolution.

Asked by Kunal Shah, Citigroup

Underwriting Standards and Mindset Change for Growth Direct
In the last 6 months, honestly, if you ask me, we have made our underwriting standards slightly more conducive to the market environment. As I said, there is a huge competition going on in the market for companies like LICHF because our competitors are banks. So, apart from the rate war which is going on, yes, this SOP war is also going on in the market. So, banks are willing to take calls, aggressive calls to boost their credit growth, etc. And we have had to match up with them. So, overall, in the last six months, I would say our credit appraisal SOPs have got down, I will not use the word become lax or anything of that sort. But yes, we have adjusted them and tried to match what the banks are doing in the market.

Reveals insights into risk appetite adjustments and the internal cultural shifts required to achieve growth in new segments.

Asked by Gaurav, JP Morgan

3 min read 7 chapters

Detailed narrative

Q3 FY26 Performance Overview

LIC Housing Finance reported a 2% YoY increase in revenue from operations to ₹7,187 crores and a 5% growth in its outstanding loan portfolio to ₹3,14,268 crores as of December 31, 2025. Disbursements grew 4% YoY to ₹16,096 crores, with individual home loan disbursements up 7% and non-housing individual loans up 10%. Net Interest Income (NII) rose 5% YoY to ₹2,102 crores, and Net Interest Margin (NIM) improved sequentially to 2.69% from 2.62% in Q2 FY26.

Asset Quality Improvement

The company demonstrated an improvement in asset quality, with Stage-3 exposure at default reducing to 2.45% as of December 31, 2025, down from 2.51% in the previous quarter and 2.75% a year ago. Total provisions stood at ₹5,105 crores, translating to a provision coverage ratio of approximately 54% on Stage-3 assets. Management noted that the majority of Stage-3 assets are legacy project loans, with ongoing resolution efforts, though past experiences include last-minute backtracks.

Funding Cost Optimization

LIC HFL successfully reduced its overall cost of funds by 14 basis points sequentially to 7.28% in Q3 FY26, and by 45 basis points year-to-date from 7.73% as of March 31, 2025. This was achieved through a conscious shift in strategy towards more floating-rate, repo-linked bank borrowings, with the fixed-floating mix now at 50-50, compared to 55-45 previously. Management anticipates a further 5-7 basis points reduction in Q4 FY26.

Competitive Landscape and Rate Strategy

Facing intense competition from banks, LIC HFL reduced its new home loan rates to 7.15% onwards, making it one of the lowest in the industry. To retain existing customers, the company introduced a 'rewriting' option, allowing them to avail new loan rates plus 50 basis points, which helped reduce balance transfers out from ₹4,000 crores in Q2 to ₹3,300 crores in Q3. The company expects a dramatic decrease in net balance transfers out in Q4.

Strategic Review and Organizational Restructuring

Acknowledging persistent single-digit growth, management is undertaking a comprehensive internal review of its organizational structure, marketing, and operational verticals. Consultants, including 'Big Four' firms and IIMs, are being onboarded in February, with work starting in March. A concrete plan for restructuring is expected by April/May, aiming to drive better growth and market share, and to move beyond the current 'stalemate'.

Diversification into OHL and Mindset Shift

The company is actively diversifying its loan portfolio beyond individual home loans (IHL) into Other Than Individual Home Loans (OHL), such as LAP and LRD, which offer 150-200 basis points higher margins. OHL's share in the business book has increased from 11-12% to approximately 15%, with a target of 18% by year-end. Management emphasized the need for an internal 'mindset change' to embrace these new segments, moving away from a historical focus solely on the risk-averse, salaried IHL segment.

Q4 Outlook and Future Expectations

Management expressed strong optimism for Q4 FY26, traditionally the strongest quarter, expecting disbursements to pick up significantly to ₹20,000-22,000 crores (retail and project combined). They anticipate further improvements in asset quality, margins (NIM of 2.70-2.72%), and overall business performance. The company also noted that if the RBI does not cut rates in February, customers may proceed with housing decisions rather than waiting for further rate cuts.

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