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LICHF reported a subdued quarter, with muted AUM growth (~4% yoy) and continued margin compression, even as PAT grew 9.4% yoy to ~Rs14.88bn, aided by NPA recoveries. NIM compression of ~10bps yoy to 2.58% was mainly due to past PLR cuts and rising competitive pricing. The management’s strategies to improve margins include diversification into non-individual home loans (LAP and LRD segments), which offer ~150bps higher yields than HL, and inorganic growth through direct assignment and co-lending. Overall asset quality is stable, while credit cost remained negative in 1Q (-14bps), driven by recoveries from written-off accounts, an ARC portfolio sale, and an accounting reclassification of recoveries under the impairment head. The management remained confident of modest 8-10% AUM growth for FY27, while expecting full-year disbursements to grow 10-12% (~15% in 2Q) and credit costs of 10– 15bps. Factoring in the 1Q performance and the structurally weak growth, margin outlook, and credit cost guidance, we adjust our FY27-29 estimates while leaving our FY28-29 earnings estimate largely unchanged. We reiterate ADD and Jun-27E TP of Rs580, implying an FY28E PBV of 0.6x.

Recoveries support earnings; growth and margins under pressure

LICHF reported 1QFY27 disbursements of Rs150.14bn, up 14.5% yoy, while PAT grew 9.4% yoy to Rs14.88bn. AUM stood at Rs3.22trn, registering 4.0% yoy growth. Reported NIM compressed 10bps yoy to 2.58%, while COF stood at 7.28% and the annualized yield came in at 9.12% (with incremental disbursement yield lower at 8.25%). ROA improved 9bps yoy to 1.85%, while ROE stood at 14%. Operating expenses were slightly elevated due to a Rs220mn one-off gratuity provision, and credit costs stood at -14bps. Asset quality improved, with GS3 at 2.14% (down 48bps yoy) and PCR at 48%.

Growth aspirations intact; strategic mix shift to support margins

The management remains confident of 8–10% AUM growth in FY27, with full-year disbursements of 10–12%, as efforts to regain business momentum gain traction. The management indicated that while intense pricing competition in the core HL segment may cap NIM around 2.6% (earlier guidance of 2.6-2.7%), overall COF is likely to be broadly stable. To offset margin pressure, the company is progressing well on its strategic initiatives, deliberately shifting its focus toward higher-yielding non-housing individual loans (like LAP and LRD) and rolling out DA and co-lending policies. Additionally, plans to establish a dedicated affordable housing vertical are underway as a future growth lever, though the initiative currently remains a work-in-progress, pending board and committee approvals. These efforts, backed by new digital tools and automated loan processing to boost employee productivity, are expected to improve operating efficiency, while credit cost is likely to remain well-contained at 10–15bps; overall, the company targets steady profitability and improving asset quality for the full year

Factoring in 1Q performance; maintain ADD and Jun27E TP of Rs580

Factoring in the softer 1QFY27 performance and management commentary, we adjust our estimates while leaving our FY28-29E earnings largely unchanged (Exhibit 2). We maintain ADD with an unchanged Jun-27E TP of Rs580, implying an FY28E PBV of 0.6x

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