LICHSGFIN - Lic Housing Finance Ltd. Share Price

Management provided an optimistic outlook for LIC Housing Finance Limited, indicating confidence in growth for the upcoming quarters. As stated by Managing Director Tribhuwan Adhikari, the company anticipates improved performance in Q3 and Q4, which are typically strong periods. Key financial highlights for Q2 FY2025-26 include a total revenue from operations of Rs.7,163 crores, up 3% from Rs.6,926 crores year-over-year, and an outstanding loan portfolio of Rs.3,11,816 crores, reflecting a 6% growth from Rs.2,94,588 crores.

The individual housing loan portfolio reached Rs.2,64,096 crores, a 5% increase, and the total disbursements amounted to Rs.16,313 crores. Notably, there was a 24% sequential increase in disbursements compared to Q1. Management aims for a 10% growth in disbursements and book size for the fiscal year, with hope to reach this target as current momentum continues.

A significant improvement in asset quality was highlighted, with Stage-3 exposure at default decreasing to 2.51% from 3.06% year-over-year. The provision coverage ratio improved to above 53%, bolstered by a provision of Rs.5,074 crores. Net interest income stood at Rs.2,038 crores, and net interest margins for Q2 were 2.62%.

Key forward-looking points included plans to address growth challenges through restructuring, enhancing distribution channels, and exploring inorganic growth opportunities such as co-lending. The incremental cost of funds decreased to 6.73%, further supporting management's expectations for positive financial performance. Management is confident that by maintaining competitive rewriting rates and improving credit quality, the company is well-positioned to overcome current challenges and achieve sustainable growth.

Q1: Mahrukh Adajania from Nomura: Can you explain the growth that seems flat quarter-on-quarter despite seasonality, and what plans do you have to accelerate growth, particularly in core retail?

A1: I acknowledge the growth has been flat at 5-6% year-on-year, impacted by a higher balance transfer (BT) of Rs. 4,014 crores in Q2, significantly exceeding the normal run rate. To counter this, we've reduced rewriting rates to about 8%, which should help reduce BT out and potentially boost our growth, especially as Q3 and Q4 are traditionally strong quarters. Our targeted growth remains 10% by fiscal year-end.

Q2: Mahrukh Adajania from Nomura: What should we expect for credit costs moving forward?

A2: We've maintained credit costs in the range of 20-22 basis points, and our future outlook anticipates improvements in asset quality, leading us to achieve the previously guided range. Our provision coverage ratio (PCR) has increased to 53% from 49%. We aim to reduce credit costs further due to expected corporate recoveries and the resolution of stressed loans.

Q3: Renish from ICICI Bank: What is your outlook for NIM given recent reductions in borrowing costs?

A3: Currently, our NIM stands at 2.62%, and we expect this to stabilize or slightly improve. Our borrowing costs, at 7.42%, are down from 7.50%. As we further lower costs through repricing, I anticipate that the April PLR cut's full effect has been realized, and we should maintain our NIM guidance of 2.6% to 2.8% moving forward.

Q4: Renish from ICICI Bank: Given your current growth rate and competition, are structural changes needed?

A4: Yes, we're actively reviewing our organizational structure and distribution channels. Our dependency on agents for 87% of business necessitates exploring new growth channels like lead generation and strengthening our subsidiary, which we aim to grow to 25% of our business in the coming year.

Q5: Kunal Shah from Citigroup: In light of competitive pressures, will you revise your PLR?

A5: While the market is aggressive, we aim to protect our NIMs over aggressive growth. We've recently reduced our rewriting rates to about 8%. Our PLR already reflects competitive rates, so unless there's a significant market shift, I don't see further reductions.

Q6: Kushagra Goel from CLSA: What is your view on the competitive landscape, especially from PSUs?

A6: PSU banks are aggressively pricing loans, with rates around 7.35%-7.5%. While we're competitive, we focus on maintaining our margins rather than drawing customers through price cuts. We will remain cautious yet dedicated towards profitable growth in the face of this competition.

Q7: Bhaskar Basu from Jefferies: What is the yield on your home loan portfolio?

A7: The yield on our individual housing loans stands at about 9.24%. While there may be repricing as borrowing costs decrease, we don't expect a large influx of customers seeking to rewrite as most borrowers tend to stay unless the difference is substantial.

These summaries encapsulate key inquiries and answers from the Q&A section of the earnings transcript while retaining the crucial numerical values and forward guidance.