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Informist, Friday, May 16, 2025

By Sachi Pandey

MUMBAI – LIC Housing Finance Ltd. plans to more than double its project finance disbursals in the financial year 2025-26 (Apr–Mar) with a focus on lending to reputed developers offering better yields, the company's management said in a post-earnings analyst call Friday. "Project finance is one sector where yields are much better," the management said. "We are focused on project finance, I would say, but not in a very aggressive way. However, we want to grow this book and have taken our target of doing 10,000 crores (INR 100.00 billion) through project finance."

For FY25 the company's project finance book stood at INR 38.00 billion, up 48% from FY24, according to the company's investor presentation. Still, project finance accounts for just 3% of the overall loan book, the management added.

The housing financier is also aiming to keep its net interest margin between 2.60% and 2.80% in FY26, compared with 2.73% at the end of March. "Margins are going to be under pressure. It will require deft handling," the company said, adding that it is focused on balancing loan growth with margin protection. The company's net interest income for FY25 was INR 81.30 billion, down from INR 86.51 billion in FY24.

The company also plans to expand its presence in the affordable housing segment after entering the space last year. Disbursements in this category amounted to INR 4.32 billion in FY25, the management said. In FY26, the lender is targeting INR 20.00 billion of disbursements in this space. "We have been slow in the segment deliberately," the management said, citing the need for better internal capability and credit handling to avoid slippages in this high-yielding but riskier segment.

LIC Housing projects 10–12% disbursement growth in FY26. For the year ended Mar. 31, its total disbursements stood at INR 640.22 billion, up 9%. Disbursements in the individual home loan segment amounted to INR 516.14 billion, as against INR 491.03 billion in FY24.

"As we move into the next fiscal, we remain optimistic about our industry growth, especially in the affordable segment. This should give us a positive roadmap over the upcoming 12 months," Tribhuwan Adhikari, managing director & chief executive officer of LIC Housing Finance, said in a press release. 

The housing financier see yields on advances in the affordable housing segment at 11.0–12.0%, and those on loans against property at 10.5–11.0%. LIC Housing expects this portfolio to build up gradually over the next 2–3 years. 

The management expects recoveries to remain robust, with the company targeting over INR 15.00 billion in FY26, following INR 18.00 billion in FY25. Recoveries will be a mix of cash recoveries and technical write-offs governed by its 100% provisioning policy, the management said.

The company also expects asset quality to improve, with the gross non-performing assets ratio seen dropping below 2.2%. For the March quarter, the company's asset quality improved steadily with the gross non-performing assets ratio falling to 2.47% from 2.74% in the previous quarter and 3.31% a year earlier. The net non-performing assets ratio eased to 1.22%, down from 1.46% a quarter ago and 1.63% a year ago. The housing financier's provision coverage ratio stood at 51.25% for the reporting quarter.

Talking about transmission of the repo rate cuts, the company said it does not expect the new rates to be reflected immediately, given the quarterly reset cycle for most loans. "It usually takes about three months for borrowers to feel the effect of a rate cut," the management noted.

The management said the company's cost of funds has fallen to 7.30%, but it remains cautious on pricing. "We cannot afford to set our rates higher than competition--we can lose business," the management said, adding that it aims to grow selectively in higher-margin areas while leveraging its size and credit rating to optimise borrowing costs. For FY25 the incremental cost of funds was at 7.73%. For FY24, it was at 7.76%. For Jan-Mar, the incremental cost of funds of the company was at 7.66%.

The company announced its results after market hours Thursday. It posted a net profit of INR 13.68 billion, up 25% on year. On a sequential basis, the net profit fell 4%. At 1519 IST, shares of LIC Housing Finance were 0.5% lower at INR 621.65 on the National Stock Exchange.  End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Rajeev Pai

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