Company Update : Bajaj Housing Finance by Motilal Oswal Financial Services Ltd
Heightened competition prompts a cut in growth guidance
FY26 AUM growth guidance now at ~21-23%; NIM stable QoQ
* Bajaj Housing (BHFL)’s 1QFY26 PAT grew 21% YoY to ~INR5.8b. NII grew 33% YoY to ~INR8.9b in 1QFY26. Other income declined 13% YoY to ~INR1.3b.
* BHFL’s opex rose ~26% YoY to INR2.1b. The opex was slightly higher, driven by continued investments in new business segments and expansion into nonmetro cities, which will continue over the next few quarters. PPoP grew ~25% YoY to INR8b for the quarter.
* Net credit costs stood at INR411m, which translated into annualized credit costs of ~16bp (PQ: ~12bp and PY: ~5bp). The company guided for FY26 credit costs of ~15-20bp (v/s ~20-25bp in the medium term).
Disbursements rise ~22% YoY; BT-outs inch up
* AUM grew 24% YoY to ~INR1.2t, while disbursements rose ~22% YoY to ~INR147b. Home Loans grew ~21% YoY, LAP rose 30% YoY, LRD grew 29% YoY, and Developer Financing grew 32% YoY in 1QFY26.
* Run-down during the quarter was elevated at ~31% (PQ: 29% and PY: 27.6%) due to higher portfolio attrition to the banks.
* Management guided for FY26 AUM growth of ~21-23%. This moderation was due to heightened competitive intensity on the acquisition of new loans, increased portfolio attrition, coupled with moderation in real estate demand.
* Management highlighted that the cut in the AUM growth guidance was primarily driven by high competition on prices and higher attrition in the portfolio. If there were no further significant policy rate cuts and no significant change in industry home loan pricing, then the portfolio attrition should normalize within 4-5 months.
Reported NIM steady QoQ; asset quality broadly stable
* BHFL’s reported NIM in 1QFY26 was stable QoQ at ~4.0%. Reported yields declined ~20bp QoQ to ~9.5%, and CoB also declined ~20bp to ~7.7%, leading to spreads remaining stable QoQ at ~1.8%.
* Management shared that NIM will decline by 15-20bp in FY26 due to a reduction in investment income (which in FY25 was higher due to two rounds of capital raises) and lower income on derecognized loans due to the lower quantum of assignments planned in FY26.
* Asset quality was largely stable, with GS3/NS3 at 0.3%/0.13%. PCR declined ~4pp QoQ to ~56% (PQ: ~60.3%).
* Management guided a GNPA of ~35-40bp, credit costs of 15-20bp, and PCR of 40-50%. There was an improvement in the guidance on asset quality and credit costs as the risk metrics continue to hold well across product portfolios.
* The RoA/RoE stood at ~2.3%/11.6% in 1QFY26 (4QFY25: RoA/RoE: 2.4%/12.1%), and CRAR was ~26.9% as of Jun’25. Leverage stood at 5.4x as of Jun’25.
Cut in FY26 guidance; Opex-to-NTI would remain stable despite efficiencies
BHFL shared the following assessment for opex and return metrics in FY26:
* Opex-to-NTI: The ratio will remain stable YoY between 20% and 21%. This was due to investments in SBU and the NIM moderation explained earlier.
* Return metrics: RoA stood at 2.0-2.2%, and RoE was 11-12%; leverage came in at 5.5-6.0x. The moderation in RoE was due to the equity overhang of the capital raise done in FY25.
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