Bajaj Housing Finance Limited Q1 FY27 Earnings Call Summary

Event Participants

Executives

3
Atul Jain, Gaurav Kalani, Parag (Senior Management)

Analysts

6
Abhijit Tibrewal (Motilal Oswal), Abhishek Murarka (HSBC Securities), Gaurav Khandelwal (JPMorgan), Kunal Shah (Citigroup), Nishant (Kotak Securities), Viral Shah (IIFL Capital Services)

Financials & KPIs

Geographic & Segment Commentary

• Home Loans (Prime): Growth improved to 20% YoY. BT out pressure moderated in Q1 vs Q4—management is cautiously watching whether this is a trend or one-quarter phenomenon, with a decision expected after Q2. Acquisition pricing in the prime market remains stable with no large-scale upward movement, limiting yield repricing opportunity.
• Sambhav Housing (Near-Prime & Affordable): Monthly disbursement run rate improved to ₹450-465 crore vs ₹410-425 crore in Q4 (traditionally stronger quarter), and is on track to cross ₹600+ crore monthly within 9-12 months. 65% of customers have bureau score >750; salaried mix stable at 68%; operational across 73 urban and 72 rural locations. Affordable segment forms 33-36% of Sambhav book with average ticket of ₹18 lakh. Overall Sambhav ticket size of ₹28 lakh expected to trend down to ₹26-27 lakh with Tier 2/3 expansion.
• LAP: AUM growth of 22% YoY; GNPA rose to 62 bps from 46 bps QoQ due to one weak account (₹18 crore movement), excluding which asset quality is fine. Management noted GNPA has historically remained in a 50-70 bps corridor, with Q4 FY26 being an exception. Focus remains on prime/higher-ticket LAP; no affordable LAP exposure.
• Lease Rental Discounting (LRD): Strongest growth product at 41% YoY; mix increased 70 bps QoQ to 23.1%. Attrition largely driven by customer asset sales rather than balance transfers.
• Developer Finance: AUM growth of 19% YoY; GNPA at 12 bps due to one account moving from Stage 2 to Stage 3, with resolution efforts underway. Account was already provisioned at 48-49% in Stage 2 vs ~33-34% entry-level requirement, hence no incremental provisioning.

Company-Specific & Strategic Commentary

• AI Initiatives Across Loan Lifecycle: Deployed AI across origination, underwriting, collateral assessment, customer service, and internal processes—including voice agent for lead generation, credit personal discussion, call intelligence, collateral assessment intelligence, geoanalytics, AI customer assist platform, training platform, and AI interview agent for frontline hiring. Objectives: improve conversion, evidence-based underwriting, reduce collateral risk, and enable round-the-clock self-service.
• Borrowing Diversification: Well-diversified mix with money market at 52%, bank borrowings at 38%, and NHB refinance at 10%. QoQ, NCD mix improved 2.6% and ICD by 10 bps, offsetting reductions in bank borrowings (-2.5%) and NHB refinance (-20 bps). Relationship with 18 banks; Q1 CoF benefited from hedging, maturity of higher-cost borrowings, and resets.
• Assignment/Securitization Strategy: ~12%-13% of AUM is typically assigned on a trendline basis. Q1 assignment out of ~₹2,300 crore released Stage 1 provisions, contributing to the one-off 5 bps credit cost.
• ECL Model Recalibration: Annual recalibration (approved by statutory auditors) in January lowered Stage 1 provisioning rates across most portfolios given immaculate credit performance over last two years—explaining flat absolute Stage 1 provisions despite ₹7,500 crore growth.
• Encashment Basis: Company has recognized disbursements/interest on encashment basis for six years, predating NHB's check-handover guidance; no change in accounting approach.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

NIM Guidance & Pricing Power

• Question: What drives the 20-25 bps NIM moderation, and can PLR be increased given rising bank MCLR and NHB PLR? (Abhijit Tibrewal, Motilal Oswal)
• Answer: In a stable rate regime, the attriting book is at higher historical IRR than the incoming book; with stable asset mix and stable acquisition pricing in prime market, yield compression is automatic. No large-scale acquisition pricing upward movement exists—large HFCs remain price takers. Mix shift to Sambhav (80/20 exit vs 84/16 now) provides limited yield uptick. (Atul Jain)

Credit Cost One-Offs

• Question: Is the 5 bps credit cost driven by one-offs? (Abhijit Tibrewal)
• Answer: Yes—two one-timers: ₹2,300 crore assignment released Stage 1 provisions (₹13-14 crore), and Q4 FY26's accelerated Stage 2 provisioning was not repeated this quarter. Full-year guidance of 10-15 bps reflects BHFL's normal range. (Atul Jain)

Margin Mathematics

• Question: Yields flat and CoF down 7 bps—why is NIM down 14 bps while spread is flat? (Gaurav Khandelwal, JPMorgan)
• Answer: Spread is computed on quarter-end portfolio yield vs cost of funds (flat at 1.7%, 3-4 bps movement); NIM reflects income flow-through of high-yield book attrition replaced by lower-yield originations. Q2 CoF expected sideways with downward bias. (Gaurav Kalani)

Sambhav Ticket Size & Affordable Mix

• Question: What should Sambhav ticket size look like as affordable scales? (Gaurav Khandelwal)
• Answer: Affordable is 33-36% of Sambhav book at ₹18 lakh average ticket (range ₹10-28 lakh); BHFL is in the upper affordable segment, not sub-₹10 lakh. Overall Sambhav ticket of ₹28 lakh should decline to ₹26-27 lakh as Tier 2/3 expansion contributes more. (Atul Jain)

LAP & DF Asset Quality

• Question: Any cohort-specific stress in the LAP book? Any parallels to the tech-employee stress seen by peers? (Viral Shah, IIFL)
• Answer: No geography or segment stress. LAP GNPA has been in a 50-70 bps corridor over seven-plus quarters (0.76% in Q3 FY25 → 0.46% in Q4 FY26 → 0.62% now) due to cyclicality in prime/higher-ticket LAP. One ₹18 crore account drove the QoQ move; DF has one Stage 2→3 account where resolution is being undertaken. (Atul Jain)

Provisioning Movements & ECL Recalibration

• Question: Why no increase in provisions on Stage 2→3 transitions? Why is Stage 1 provisioning flat despite ₹7,500 crore growth? (Kunal Shah, Citigroup)
• Answer: Pool-based dynamics—older NPAs rolling back release higher provisions than new entrants require; DF account was already provided at 48-49% in Stage 2 vs ~33-34% required at 90 DPD. Stage 1 provisions reflect January ECL model recalibration (statutorily validated) which lowered rates given stronger credit performance; provisioning is model-based, rating-based—not simple pool-to-pool math. (Gaurav Kalani & Atul Jain)

OpEx to NTI Outlook

• Question: Why is OpEx/NTI not improving toward medium-term guidance despite growth? (Kunal Shah)
• Answer: It will be sideways from last year: NIM compression suppresses income growth while investments continue in near-prime/affordable, offsetting efficiency gains. Even being more efficient, the margin compression makes the ratio look stable. (Atul Jain)

Cost of Funds Drivers

• Question: What drove the 7 bps QoQ CoF improvement? (Viral Shah)
• Answer: Three factors: hedge book benefits, natural maturity of older higher-cost borrowings, and resets of old borrowings at lower prices. Trend is expected to continue in Q2. (Atul Jain)

Margin Guidance Conservatism

• Question: With CoF trending down and DA income share rising, is the 20-25 bps margin guidance conservative? (Viral Shah)
• Answer: Not conservative or aggressive—it's a mathematical projection from monthly tracking of what yield is going out vs coming in. FY basis assignment at 12-13% of AUM remains consistent; quarter-to-quarter variation shouldn't alter the annual view. (Atul Jain)

Fee Income

• Question: What drove the large increase in fee income? (Nishant, Kotak Securities)
• Answer: Predominantly insurance income linked to higher disbursements; other fee lines (foreclosure, bounce, penal) are all business-linked variable incomes. (Gaurav Kalani)

Loan Growth Guidance & BT Out

• Question: Does guidance bake in lower BT out? (Nishant)
• Answer: Yes, a slightly lower BT out rate is baked in but not aggressively. Last year BT out jumped from July onward after the June 50 bps rate cut; Q1 FY27 moderation needs one more quarter to confirm a trend. A further decline in market pricing would surprise. (Atul Jain)

Industry Demand Dynamics

• Question: Where does industry demand stand? (Nishant)
• Answer: Demand is stabilized or slightly muted vs prior years. FY26 industry growth was 9.4%; FY27 likely in the same corridor (9%-10.5%), not the 11%-12% historically assumed. Price stabilization has shifted demand from preponement (FY24-25) to postponement. (Atul Jain)

BT Out Reduction – Prime vs Affordable

• Question: Is BT out reduction in prime or across the board? Who is ceding share? (Abhishek Murarka, HSBC)
• Answer: Reduction is in prime home loans—the historical book most susceptible to bank competition; reflects BHFL's own deepening/widening actions, not competitors ceding share. Sambhav book is too young (12 MOB average) for BT out economics. (Atul Jain)

Key Takeaway

Bajaj Housing Finance delivered a record Q1 FY27, with AUM at ₹1.496 lakh crore (+24% YoY, highest-ever ₹8,918 crore quarterly addition), disbursements of ₹19,509 crore (+33% YoY), and PAT of ₹715 crore (+23% YoY). Asset quality remained resilient—GNPA at 29 bps, NNPA at 12 bps—while the 5 bps credit cost was a one-off aided by ₹2,300 crore assignment and lower Stage 2 acceleration. NIM compressed 14 bps QoQ to 3.7%, with management guiding a total 20-25 bps FY27 moderation driven by yield attrition in a stable rate regime, partially offset by CoF tailwinds and a Sambhav mix shift (84/16 → 80/20). Strategic priorities include scaling Sambhav Housing toward ₹600+ crore monthly run rate (currently ₹450-465 crore), AI-led initiatives spanning the full loan lifecycle, and operating efficiency at 19.6% of net income. Management guides FY27 ROA at 2.1-2.3%, ROE at 12.5-13%, GNPA at 30-35 bps, and credit cost at 10-15 bps. Key watch points: whether Q1's BT out moderation becomes a trend, competitive pricing stability in prime mortgages, and geopolitical impacts on borrowing costs and real estate demand.