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BHFL witnessed a good quarter, with strong AUM growth of 25% yoy at Rs1.58trn, PAT growth of 18% yoy at Rs7.57bn, and ROA/ROE at 2.2%/12.7%. Asset quality remained robust, with GS3/NS3 at 0.29%/0.12% and credit cost at 10bps. NIM was broadly stable qoq at 3.7%, as a ~17bps decline in CoF offset the ~10bps yield compression. Management retained its guidance of 21-23% AUM growth and 2.1-2.3% RoA. Following the recent repo hike, BHFL has raised its PLR by 15bps, though the key risk of higher BT-outs remains in prime housing if banks do not adequately pass on the rate hike. Faster growth in higher-yielding Sambhav should partly cushion the margin pressure, with its share targeted at ~20% of home-loan originations by year-end. The proposed insurance commission norms are another monitorable, with a potential 6-7% impact on PBT should the draft be implemented in its current form. Factoring in 2Q performance and Management commentary, we marginally adjust our estimates while leaving core earnings largely unchanged. We retain ADD and Sep-27E TP of Rs85, implying 2.4x FY28E PBV.

Strong growth with stable margins and asset quality

BHFL reported good 2QFY27 results, with disbursements up 25% yoy at Rs199.35bn and PAT growing 18% yoy at Rs7.57bn; these translated into annualized ROA/ROE of 2.2%/12.7%. AUM grew 25% yoy at Rs1,582bn, led by healthy growth across home loans/LAP/LRD at 22%/26%/39%. Reported NIM was stable at ~3.7%, aided by 17bps qoq decline in CoF to 7.0%, on account of fixed liability swap. Opex-to-NTI improved to 19.1% from 19.7% yoy, while annualized credit cost remains benign at 10bps. On asset quality, GNPA/NNPA was stable qoq at 0.29%/0.12%, while Stage-3 PCR improved to 59.80% from 58.53% in 1QFY27.

Growth guidance maintained; Sambhav to support margins

The management maintains its 21-23% AUM growth target, supported by Sambhav, where monthly disbursements have crossed the Rs5bn mark and are targeted at >Rs6bn, with its share in home-loan originations expected to rise from 16% to ~20% by yearend. The key monitorable is BT-outs in prime housing following the recent repo hike; while BHFL has raised PLR by 15bps, competitive pressure could weigh on growth if banks do not adequately raise acquisition pricing. Margins are expected to compress by ~25bps in FY27, as older higher-yielding loans run off, partly cushioned by a rising Sambhav mix and recovery in DF growth. With ~88% of both assets and liabilities floating, Management expects ~80% of repo-rate changes to flow through to CoF and broadly pass through to the portfolio, limiting incremental rate-driven margin pressure. DF growth should recover as strong sanctions translate into disbursements, after higher repayments weighed on 1H growth. Opex-to-NTI remains healthy at 19.1%, despite continued investments in Sambhav and affordable housing. With asset quality robust and credit cost at 10bps, Management maintains its ROA guidance of 2.1-2.3%

Estimates largely unchanged; maintain ADD Given the 2QFY27 performance and Management commentary, we largely retain our core estimates for FY28-29; maintain ADD and Sep-27E TP of Rs85, implying 2.4x FY28E PBV.

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