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Informist, Wednesday, Jul. 23, 2025

By Aaryan Khanna and Vaishali Tyagi

NEW DELHI/MUMBAI – The growth of Bajaj Housing Finance Ltd.'s balance sheet is expected to pick up by Oct-Dec, even as the lender's guidance for 2025-26 (Apr-Mar) suggests a slowdown in the current financial year, the company's management told analysts in a conference call after its June quarter earnings. The impact of the pricing disruption will play through in disbursement and assets under management growth over the next four to five months, the housing financier said.

The Reserve Bank of India's Monetary Policy Committee has so far cut the policy repo rate by 100 basis points between February and June. The housing financier had passed on around 45 bps of the cuts on its internal prime lending rate to borrowers, of which 20 bps were on Jul. 1. External benchmark linked loans have been completely repriced and reflected in the June quarter earnings, the management said.

"What happens is there is always a much higher attrition or a much higher movement or a disruption in the market when the rate cut happens and there is a pressure which gets built up, but over a period it disappears and then it gets normalised," Managing Director Atul Jain said. "...we should be back on the move by Q3 (Oct-Dec) or so, as per our estimate, in case there is no further large pricing disruptions in the market, which we do not estimate to be."

In its investor presentation, Bajaj Housing pegged its AUM growth in FY26 at 21-23%, against its medium-term outlook of 24-26%. As of Jun. 30, its loanbook grew 24% on year to INR 1.204 trillion. The company has been conservative in its projections and projected for the most negative outcome it sees at the current juncture, the management said.

Disbursements grew 22% on year to INR 146.51 bullion in the June quarter but only marginally from INR 142.54 billion in the trailing quarter. The management cited the slowdown in the real estate sector over the last three quarters as a reason for slowing demand but maintained it would continue to grow its balance sheet through retail loans even if home loan demand "moves sideways", Jain said.

"There is an AUM growth but no disbursal growth at an industry level," the management said. "So when the industry growth is not there in disbursals, for you to continue to grow disbursals at the pace what you were doing becomes difficult because you have to take the part from someone else."

Earlier Wednesday, Bajaj Housing Finance posted a net profit of INR 5.83 billion for the June quarter, up 21% on year, drawing support from robust growth in interest income even as provisions quadrupled. The non-banking company's profit was marginally lower from INR 5.87 billion in the March quarter. The earnings were released after market hours. Its shares ended 0.7% higher at INR 122.27 on the National Stock Exchange Wednesday.

The slowdown in the housing financier's business segments was compounded by a slowing loan growth in the overall economy, the management said. Banks' loans rose only 9.5% on year as of Jun. 27, slowing from a 17.4% annual pace a year ago. The competitive intensity sparked across the industry is cyclical after a rate cut and is being amplified by the lack of demand for credit, according to Bajaj Housing Finance.

"We believe that the current pricing is also not fully appropriate. That is a function of current softness of a demand for credit overall," Jain said. "Because if you look at the overall credit growth in the system that is lower, which is resulting in, in our assessment, much lower pricing for the home loan portfolio in the market."

However, the fall in the yields on the home loan portfolio will soon be balanced out by a reduction in the non-bank lender's cost of funds. Even in its fundraising, the lender had increased its share of resources from non-convertible debentures in FY25 rather than rely on bank funding. Chief Financial Officer Gaurav Kalani explained Bajaj Housing was getting better rates by tapping the market rather than banks as the marginal-cost-of-funds-based lending rate had not fallen in line with the rate cut. Even in the current quarter, the housing financier's NCD issuance was cheaper than bank funding by 20 bps, Kalani said. 

The management said the expected contraction in net interest margin by 15-20 bps from the current 4.00% and net total income going ahead will be driven more by a reduction in investment income from lower returns on the liquidity buffer, which stood at over INR 30 billion at June-end. Investment income was higher in FY25 as equity capital was parked in the bank's treasury chest, earning interest income. The impact of the capital raises will also drive down return on equity to 11-12% in FY26 from the medium-term guidance of 13-15%.

The company did not have a strategic aim to change its average ticket size, but the ticket size was rising in line with trends in the real estate industry, where higher ticket properties were seeing greater traction, the management said. Meanwhile, it expects employee-related spending to remain high in the coming quarters into FY27 as it branches out to new geographies in non-metro markets and builds up its sub-prime housing lending separate business unit. Employee benefit expenses were INR 1.36 billion in the June quarter, up 20% on year, though the base was little changed from the year prior, the management said.  End

Edited by Akul Nishant Akhoury

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