LIC Housing Fin.

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.

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.

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.

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.

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'.

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.

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.