Whalesbook
Key Financials and Performance
Bajaj Housing Finance Ltd. announced its fourth-quarter results for fiscal year 2026, reporting a significant milestone with Assets Under Management (AUM) crossing ₹140,000 crore. This represents a robust 23% year-on-year growth. The company's normalized profit after tax (PAT) increased by 20% compared to the same period last year. Operational efficiency saw improvement, with the operating expense to net total income ratio decreasing to 19.2% from 21.8% year-on-year.
Asset Quality and Business Mix
Asset quality remained exceptionally strong. Gross Non-Performing Assets (GNPA) stood at a low 27 basis points, with Net Non-Performing Assets (NNPA) at 11 basis points. The provision coverage ratio for Stage 2 assets was also strengthened to approximately 60%. Home loans constituted 54.1% of the total loan book. Loans Against Property (LRD) demonstrated impressive year-on-year growth of 44%, now making up 22.4% of the mix. Direct Funding (DF) grew at a more subdued 13%, attributed to higher cash flows from funded projects.
Outlook and Competitive Pressures
Crossing the ₹1.4 lakh crore AUM mark underscores Bajaj Housing Finance's strong growth trajectory in a competitive market, while maintaining stellar asset quality is a key positive. However, the company anticipates continued margin compression. Management guided for aggressive AUM growth of 21-23% in FY27 and aims to sustain Return on Assets (ROA) within the 2.0%-2.2% range, indicating potential moderation from current levels.
The company faces intense competition, with management noting "irrational competitive activity" in the prime housing market that could affect pricing power. Approximately 10% of the loan book is subject to attrition from balance transfers to competing banks and NBFCs. Yield attrition is also expected to compress margins throughout FY27 as older, higher-yielding loans are replaced by new, lower-yielding acquisitions.
Investors will be closely monitoring net interest margins (NIMs) and the company's success in mitigating yield compression. The performance and disbursement ramp-up of initiatives like 'Sambhav Housing', which targets ₹600 crore in monthly disbursements, will also be key.
Industry Context and Key Metrics
Bajaj Housing Finance operates within a sector alongside major players like HDFC Ltd. (now part of HDFC Bank) and LIC Housing Finance, as well as other NBFCs such as PNB Housing Finance. While Bajaj Housing Finance's growth rate is notable, these peers hold significant market share and possess extensive distribution networks. The sector is characterized by a strong drive for market share, leading to competitive pricing and margin pressures across the industry.
In Q4 FY26, home loan yields were between 8.5-8.6%, with incremental NCD rates around 7% post-hedging. Fee income, primarily from insurance, reached ₹297 crore.