Event Participants
Executives
4 Lokesh Mundhra, Praveen Agarwal, Sandeep Kumar, Tribhuwan Adhikari
Analysts
9 Abhijit Tibrewal, Abhishek, Arun Antony, Avinash Singh, Gaurav Khandelwal, Kunal Shah, Rishi Mody, Sonal Minhas, Zhixuan Gao
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Total revenue from operations | ₹706.2 crore | Down 1.5% YoY from ₹716.9 crore; decline partly reflects reclassification of ₹31.87 crore written-off recoveries out of other income into impairment head |
| Outstanding loan portfolio (AUM) | ₹322,098 crore | +4% YoY from ₹309,587 crore (₹12,511 crore absolute addition); constrained by ₹1,500 crore net balance transfer out |
| Individual home loan book | ₹271,979 crore | +4% YoY from ₹262,411 crore; 84% of total portfolio |
| Total disbursements | ₹15,014 crore | +14.5% YoY from ₹13,116 crore; in line with 15% Q1 guidance |
| — Individual home loan disbursements | ₹12,119 crore | +8% YoY from ₹11,247 crore |
| — Non-housing individual (LAP/LRD) disbursements | ₹1,975 crore | +20% YoY from ₹1,647 crore; key margin lever with 9.43% incremental yield |
| — Project/developer finance disbursements | ₹872 crore | +459% YoY from ₹156 crore; low base after muted FY26 (₹1,950 crore full-year) |
| Net interest income | ₹2,075.52 crore | +0.5% YoY from ₹2,064.71 crore |
| Net interest margin | 2.58% | -10 bps YoY from 2.68%; 2 bps below lower end of 2.6-2.7% FY27 guidance due to competitive bank pricing and repricing of book |
| Stage 3 (GNPA) | 2.14% | -48 bps YoY from 2.62%; includes sale of ₹180 crore NPA to NARCL for ₹140 crore cash |
| Total provisions / coverage | ₹4,398 crore (~48% PCR) | Provision coverage approximately 48% |
| Credit cost | -5 bps | Negative due to ₹540 crore NPA recoveries (vs ₹307 crore YoY) and ₹164 crore net write-back (₹132 crore ECL + ₹32 crore written-off recoveries) |
| Profit before tax | ₹1,888.43 crore | +11.1% YoY from ₹1,699.16 crore |
| Profit after tax | ₹1,488.32 crore | +9.4% YoY from ₹1,359.92 crore; ROA improved ~9 bps YoY |
| Cost of funds (cumulative) | 7.28% | -22 bps YoY from 7.50%; +1 bp QoQ vs 7.27% on 31 March 2026 |
| Incremental cost of funds | 7.06% | vs 6.97% Q1 FY26 and 6.86% Q4 FY26; maturities (~₹17,000 crore at 7.38%) expected to refinance lower |
| Net balance transfer out | ₹1,500 crore | BT out ₹3,000 crore vs BT in ₹1,500 crore; flexible rewriting rates introduced for prime customers |
| Incremental disbursement yield | 8.25% | ~87 bps below cumulative book yield of 9.12%; structural margin gap being addressed via NHI mix shift |
Geographic & Segment Commentary
Individual Home Loans (IHL): Book of ₹271,979 crore (+4% YoY), 84% of portfolio; disbursements ₹12,119 crore (+8% YoY). Stage 3 ticked up 3 bps QoQ to 1.09% (EAD ₹2,967 crore). Competitive pressure from repo-linked bank pricing drives BT-outs; retention strategy targets prime and large-ticket customers with flexible rewriting rates.
Non-Housing Individual (LAP & LRD / NHI): Disbursements ₹1,975 crore, +20% YoY, with FY27 target of ₹15,000 crore. Incremental yield 9.43% vs cumulative >10%, approximately 150 bps higher than IHL - the primary portfolio yield elevator. Stage 3 at 3.06% (EAD ₹1,113 crore).
Project/Developer Finance (NHC + Project): Disbursements ₹872 crore (+459% YoY); FY27 target ₹4,000 crore with aspiration of ₹7,000-8,000 crore. Management rejects sub-8% rates from marquee builders and targets ~10.5% lending rates; credit policy revision to allow lower-rated (below BBB) builders pending EC/board approval. Stage 3 elevated at 20.53% (EAD ₹2,819 crore) - legacy stress concentrated here.
Company-Specific & Strategic Commentary
Product Diversification: Deliberate mix shift from IHL toward NHI (LAP/LRD) and developer finance to lift portfolio yields; NHI growing ~20% and developer finance targeted at ₹4,000 crore, both at meaningfully higher spreads than prime home loans.
Direct Assignment & Co-lending: Policy in final stages; expected to commence in Q2 FY27 to accelerate book growth inorganically without compromising margins.
Technology & Digital: Project RED (LOS/LMS overhaul) completed 2023-24; STP digital onboarding live since February 2026 with guardrails being relaxed after four months of experience; HomY app disbursed ₹960 crore in Q1; Data Lakehouse with AI integration (lead generation, early-warning systems for collections) - RFP complete, contract award imminent. Management benchmarks Bajaj Housing as industry leader and expects to catch up.
Asset Quality Resolution: ₹180 crore NPA sold to NARCL for ₹140 crore in Q1; legacy developer loans in advanced resolution stages (DRT/NCLT/OTS); ₹540 crore NPA recoveries in Q1 vs ₹307 crore last year; targeting ₹500-600 crore recovery from technical write-off pool (~₹3,000 crore of ₹7,000 crore pool) in FY27.
Affordable Housing Business: External team being assembled; rollout pending NRC and board concurrence expected this year; no disbursement targets set yet.
Leadership: Management categorically denied any plan to bring in an external CEO from outside the LIC ecosystem.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| NIM | ~2.6% for FY27 (lower end of 2.6-2.7% band) | Challenged by bank competition on home loan rates; defended via NHI/developer mix shift and stable funding costs |
| Disbursement growth | 10-12% for FY27; Q2 targeted at 15% | Q1 achieved 14.5%; management "hell-bent" on reviving growth after sub-10% years |
| AUM/book growth | 8-10% for FY27 | Q1 at 4% YoY; DA and co-lending to supplement from Q2 |
| GNPA | <2% by FY27-end | Current 2.14%; NARCL sale and advanced legacy resolutions expected to drive improvement |
| Credit cost | 10-15 bps for FY27 | Maintained despite -5 bps Q1 print; assumes planned recoveries materialize through the year |
| Developer finance disbursements | ₹4,000 crore target; ₹7,000-8,000 crore aspiration | Requires credit policy change (lower-rated builders) and disciplined ~10.5% pricing |
| LAP + LRD disbursements | ₹15,000 crore for FY27 | Higher-yielding NHI segment (incremental 9.43%) to compensate for IHL yield drag |
| Cost of funds | Stable; +3-4 bps maximum on cumulative basis | ~₹17,000 crore maturing at avg 7.38% expected to refinance near 7.06% incremental rate |
| Legacy recoveries | ₹500-600 crore in FY27; ₹2,000 crore+ over next 2-3 years | From ~₹3,000 crore technical write-off pool via DRT/NCLT/OTS resolutions |
Risks & Constraints
| Risk | Context |
|---|---|
| Structural NIM compression | Incremental disbursement yield of 8.25% is ~87 bps below cumulative book yield of 9.12%; as the book reprices, margins will compress unless NHI/developer mix shift and lower funding costs offset - uncertainty on whether ₹15,000 crore LAP/LRD target can fully bridge the gap |
| Competition from banks | Banks' repo-linked pricing forces HFCs to cut rates on new and existing loans; net BT out of ₹1,500 crore in Q1; management is offering flexible rewriting rates to retain prime customers, which itself pressures yields |
| Macro/geopolitical backdrop | US-Iran conflict escalation, crude price volatility, and inflation upside risks could keep RBI from cutting rates, delaying repricing relief and dampening housing credit demand |
| Developer finance asset quality | Segment stage 3 is 20.53% (EAD ₹2,819 crore); planned expansion into lower-rated (sub-BBB) builders carries incremental credit risk; management emphasizes careful selection and 10.5%+ pricing discipline |
| Auditor/management disagreement | ₹500 crore restructured account upgrade (which would trigger provision release) was not recognized in Q1 because statutory auditors view the cooling-off period as incomplete; resolution pushed to Q2/Q3, creating uncertainty on credit cost trajectory |
| IHL asset quality drift | Stage 3 in individual loans rose 3 bps QoQ to 1.09%; while small, it reverses a declining trend and bears monitoring given competitive BT-out dynamics |
Q&A Highlights
Growth Trajectory & Strategic Philosophy Shift
- Question: (Avinash Singh, Emkay) Growth and margins have underperformed peers for five years; what changes materially? Also, why was the developer finance opportunity post-HDFC merger missed? (Gaurav Khandelwal, JPMorgan) Has the philosophy shifted from protecting margins to chasing growth?
- Answer: (Adhikari) Q1 disbursements +14.5% in line with 15% guidance; Q2 targeted at 15%; FY27 book growth guidance 10-12%, with net BT out of ₹1,500 crore. This year is a deliberate balance between growth and margins - not growth at any cost. On developer finance, management refuses sub-8% rates from marquee builders and targets ~10.5%; a credit policy to allow carefully selected lower-rated builders is going to EC/board. "Best of both worlds" - grow via disbursements/retention while protecting spreads.
Margin Drivers & Portfolio Yield Gap
- Question: (Zhixuan Gao, Schonfeld) Incremental disbursement yield of 8.25% vs cumulative book yield of 9.12% - shouldn't margins keep compressing? (Kunal Shah, Citi) What drove the 22 bps YoY margin decline despite stable cost of funds?
- Answer: (Adhikari/Mundhra) Yes, there is structural pressure from the ~100 bps gap, but mitigation comes from: NHI (LAP/LRD) growing 20% at incremental yield of 9.43% (cumulative >10%, ~150 bps above IHL), developer finance at ~10.5%, plus stable funding costs (7.28% cumulative, 7.06% incremental). The YoY margin dip also reflects the full 25 bps book-wide rate cut announced in April 2025 repricing (₹1 lakh crore immediately, ₹2 lakh crore effective July 1) and competitive rewriting rates offered to retain customers.
Credit Cost Decomposition & Accounting Change
- Question: (Gaurav Khandelwal, JPMorgan) What drives the non-interest income drop? (Abhishek, HSBC) Can you split the ₹164 crore provision write-back?
- Answer: (Adhikari/Mundhra) Approximately ₹31.87 crore of recoveries from written-off accounts were previously in other income but are now netted under impairment head per auditors - hence the apparent revenue/other-income drop. The net ₹164 crore write-back comprises ₹132 crore from ECL and ₹32 crore from written-off recoveries. Full-year credit cost guidance of 10-15 bps maintained despite -5 bps Q1.
Restructured Account Upgrade & NARCL Sale
- Question: (Kunal Shah, Citi) Does Q1 provisioning include the ₹500 crore restructured account upgrade? How much has been received from that account?
- Answer: (Adhikari) Not included. The account was restructured on May 1, 2025; management believes the one-year cooling-off period is complete, but statutory auditors disagree because the first payment arrived slightly later than the exact anniversary. Discussions ongoing; recognition expected in Q2 or Q3. All payments are being received as per the restructuring schedule - nothing overdue. Separately, a ₹180 crore NPA was sold to NARCL for ₹140 crore cash in Q1.
Developer Finance: Predictability & Pricing Discipline
- Question: (Abhishek, HSBC) Is the ₹4,000 crore developer finance target predictable? Ticket size limits?
- Answer: (Adhikari) The process is transactional - deals are evaluated as borrowers approach. ₹700-800 crore of prior-year sanctions will disburse this year, providing a base; no ticket size limits (₹25 crore small developers to ₹300-400 crore large ones). FY27 target ₹4,000 crore with aspiration of ₹7,000-8,000 crore. Management will not do business below ~8% even with top-rated builders like Lodha, Sobha, Puravankara - requiring ~10.5% to protect returns.
LAP/LRD: Yield and Target
- Question: (Abhishek, HSBC) What is the LAP+LRD target and incremental rate?
- Answer: (Adhikari/Mundhra) FY27 target ₹15,000 crore combined. Incremental yield 9.43% for Q1 vs cumulative >10%. This segment, with developer finance, is the primary lever to offset IHL yield drag.
Funding Costs & Borrowing Maturities
- Question: (Abhijit Tibrewal, Motilal Oswal) What is maturing this year and at what rates? Will cost of funds rise?
- Answer: (Mundhra) Approximately ₹17,000 crore of borrowings mature in FY27 at an average cost of 7.38%; Q1 incremental cost is 7.06%. Cumulative cost of funds should remain broadly stable, moving up a maximum of 3-4 bps. Management is "hopeful" of refinancing maturities at lower rates.
Segment-wise Asset Quality
- Question: (Abhijit Tibrewal, Motilal Oswal) Segment-wise stage 3 numbers?
- Answer: (Mundhra) Individual loans: EAD ₹2,967 crore, 1.09% (up 3 bps QoQ from 1.03%); NHI: EAD ₹1,113 crore, 3.06%; NHC/project: EAD ₹2,819 crore, 20.53%; overall 2.14%.
Technology Investments & Measurable Impact
- Question: (Rishi Mody, Mody Advisory) What ROI on Project RED and STP? How to benchmark tech capability vs Can Fin/Bajaj? (Sonal Minhas, Prescient Capital) When will digital add meaningfully to growth/AUM?
- Answer: (Adhikari) Project RED was a complete LOS/LMS overhaul completed 2023-24; STP digital onboarding has been live since February 2026 with tight guardrails now being relaxed. HomY app disbursed ₹960 crore in Q1. Data Lakehouse with AI (lead generation, EWS for collections/NPA) - tendering complete, contract imminent. Bajaj is the industry benchmark; LIC HFL will catch up. Digital savings go to manpower redeployment, not retrenchment. On growth, 4% YoY book growth vs Bajaj's 20-25% reflects a ₹3 lakh crore base; management is "hell-bent" on 8-10% book growth and 15% disbursement growth this year.
Legacy Write-offs, External CEO Denial & Affordable Housing
- Question: (Rishi Mody, Mody Advisory) Update on external CEO search (referenced from Q3 FY26 call)? Affordable housing team status? Recovery outlook from ₹7,000 crore written-off pool?
- Answer: (Adhikari) Management categorically denied ever stating an external CEO plan. Affordable housing: external team being assembled, NRC/board sanction expected this year, no targets set. On the ₹7,000 crore written-off pool (~₹3,000 crore technical write-offs), recoveries of ₹500-600 crore expected this year and ₹2,000 crore+ over 2-3 years via DRT/NCLT/OTS; ₹37 crore recovered in Q1.
Guidance Reaffirmation & April Growth Moderation
- Question: (Arun Antony, JM Financial) Was guidance revised to 8-10% book growth from earlier 10-12%? Why did April's 21% disbursement growth moderate to 14% for the quarter? Is credit cost guidance still 10-15 bps post accounting change?
- Answer: (Adhikari) FY27 guidance confirmed: book growth 8-10%, disbursement growth 10-12%, credit cost 10-15 bps. One month is not indicative of the quarter - Q1 at 14.5% is effectively in line with the 15% guidance; Q2 guided at 15%. NIM guidance of ~2.6% maintained despite Q1 at 2.58%.
Key Takeaway
LIC Housing Finance delivered a steady but muted Q1 FY27, with AUM up 4% YoY to ₹322,098 crore and disbursements up 14.5% to ₹15,014 crore, matching its 15% guidance. PAT grew 9.4% to ₹1,488 crore, aided by negative credit cost of -5 bps, a ₹164 crore ECL write-back, and a ₹180 crore NPA sale to NARCL, while NIM compressed 10 bps YoY to 2.58% - marginally below the 2.6% lower-end guidance. GNPA improved 48 bps YoY to 2.14%. Strategy centers on portfolio diversification - LAP/LRD disbursements up 20% at 9.43% incremental yields, a ₹4,000-8,000 crore developer finance push at ~10.5%, direct assignment and co-lending commencing Q2, digital STP/HomY rollout, and flexible rewriting rates to curb ₹1,500 crore net balance transfers. FY27 guidance holds at 8-10% AUM growth, 10-12% disbursement growth, ~2.6% NIM, and <2% GNPA, with cost of funds stable near 7.28%. Watch items include the ₹500 crore restructured account upgrade pending auditor agreement and whether NHI/developer mix shift can offset a structural ~87 bps incremental-versus-book yield gap against intensifying bank competition.