IGI Logo

Disbursals to pick up; growth to remain muted

Our coverage HFCs could see a mixed quarter; AuM growth would pick up to 1.9% QoQ to Rs3.76trn (0.7% QoQ in Q1) with an uptick in disbursals of 27.6% sequentially as Q2 generally sees a pick-up after a fall in Q1. Housing segment for banks (incl. HDFC) may grow by ~2.4% QoQ/10.0% YoY. Disbursal run-rate of LICHF/CANF is a monitorable, given weak credit flow in last few quarters

NIM for coverage HFCs could fall by 11bps QoQ to 2.93%. NII may fall QoQ and grow by 4.0% YoY to Rs26.6bn due to faster loan repricing. Other income could increase by 8.4% QoQ to Rs2.2bn owing to seasonality which would be offset by 15.0% rise in opex to Rs6.08bn led by increase in both, staff costs and other opex. Hence, PPoP could fall QoQ by 4.6%. We see provisions to fall by 5bps QoQ to 21bps as Q2 sees better recoveries. PAT might decline QoQ to Rs16.5bn

* Slowing housing credit for banks could slightly uptick: Bank credit to HFCs has been slowing down due to weaker demand; it decelerated from ~13.0% YoY in Jul’24 to 9.0% in May’25. Banks’ housing credit growth was soft at 1.4% QTD in Aug’25. However, with increased liquidity in the system, housing segment for banks has seen a slight pick-up which may lead to 1.0% MoM growth in Aug’25 that could translate to 2.4% QoQ growth in Sep’25. Hence competitive intensity for HFCs could increase. For coverage HFCs, disbursals could increase by 27.6% sequentially to Rs207.7bn and we expect AuM to grow by 1.9% QoQ and 7.6% YoY to Rs3.76trn.

* Margin to decline QoQ: NIM may fall by 11bps QoQ to 2.93% due to repo rate cut over Feb’25 to Jun’25. NIM could decline in FY26 considering 1) increased competitive intensity from banks and 2) rate cut impact would be higher for HFCs compared to banks since housing loans are floating in nature.

* Other income and opex to be higher QoQ: Other income could inch up by 8.4% QoQ to Rs2.26bn owing to seasonality which would be offset by rise in opex by 15.0% QoQ to Rs6.08bn mainly led by LICHF.

* PAT to might decline: Provision cost for coverage HFCs may fall by 5bps QoQ to 21bps (vs +13bps in Q1FY26) owing to better recoveries. PAT may remain decline QoQ to Rs16.5bn (-2.5% YoY).

Please refer disclaimer at https://www.plindia.com/disclaimer/

SEBI Registration No. INH000000271