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What the record says.
Bajaj Housing Finance reported a strong Q4 FY25 with PAT surging 54% YoY to INR 587 crore, driven by 26% AUM growth to INR 114,684 crore and improving operational efficiency (OpEx-to-NTI ratio improved from 27.1% to 21.7%). Asset quality remained pristine with GNPA at 0.29% and NNPA at 0.11%. The company is investing in its Near Prime & Affordable SBU and non-top-6 markets to drive future growth. Management expects a 34-35 bps decline in cost of funds in FY26 assuming 75 bps repo rate cuts, but NIM compression of 10-15 bps is likely, partly offset by a favorable asset mix shift (e.g., developer finance share increasing). Key risk: competitive intensity from banks, especially PSUs, could pressure yields more than anticipated.
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Guidance to track
- Assuming 75 bps cumulative repo rate cuts, management expects cost of funds to drop by 34-35 bps on a full-year basis in FY26.
- With steady book mix, net interest margin could compress by 10-15 bps during FY26, partly offset by asset mix changes.
- On a steady-state basis (excluding assignment effects), credit cost is expected to be 20-25 bps on assets under management.
- Management stated there is no plan to raise new equity capital in FY26, with leverage at 5.1x and headroom up to 7.5x.
Risks flagged
- PSU banks have become more aggressive post repo rate cuts, and private banks were aggressive in March, potentially pressuring yields and market share.
- Management acknowledged 10-15 bps NIM compression in FY26 due to repo rate cuts, with yield pass-through (45-50 bps) exceeding cost pass-through (34-35 bps).
- RBI's proposed removal of exit penalties on floating rate loans could increase balance transfers in the LAP segment, though management expects limited material impact.
- With long-tenor home loans (behavioral maturity 6-8 years) funded by shorter-term liabilities (average 3-5 years), ALM risk requires active management.
Key quotes
- We are only a credit risk company, which we have to take a credit risk because we are in a lending business. Apart from that, we don't want to take an interest rate risk.
- Our estimate is to assuming that two cuts which has happened and one cut more happens, YoY I think we should see a drop 34-35 basis points roughly.
- There is no change in the medium term guidance on the key financial indicators what we had guided from last quarter's investor presentation.
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