Ladies and gentlemen, good day and welcome to the LIC Housing Finance Q2 FY27 investor conference call being hosted by Axis Capital Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star and 0 on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Praveen Agarwal. Thank you, and over to you, Mr. Agarwal.
Thank you, Abhirat. Good day, everyone, and welcome to this earnings call of LIC Housing Finance. Today with us from the management team, we have Mr. Sandeep Kumar, MD and CEO, and Mr. Lokesh Mundhra, CFO. I would request Mr. Sandeep to share his initial comments, post which we will open the floor for Q&A. Over to you, sir.
Yeah, good morning. Good morning, everybody. Abhirat, welcome to post-earnings conference call for the LIC Housing Finance Limited. As you are aware, the company has announced its Q2 FY27 financial results on 30th of October 2026. Before we begin discussing the quarterly performance, let me briefly introduce myself. I joined the company as CEO in May 2026 and taken over charge as MD and CEO on 29th of August 2026. Before joining LICHFL, I was associated with LICHFL Financial Services Limited, a subsidiary of LIC Housing Finance, as its MD and CEO. Having been associated with LICHFL Group for last two years, I have an opportunity to lead this business operation and strategic initiatives. Before I start with the highlights of Q2 results, I would like to outline a few economic developments over the last quarter.
In October 2026, during the monetary policy review, the RBI increased the repo rate by 25 basis points to 5.5% and shifted its policy stance from neutral to calibrated tightening, reflecting rising inflationary pressure. Persistent geopolitical tension, elevated crude oil prices, upside risk inflation, uncertainty around the globe, interest rate trajectory have strengthened market expectations that RBI may maintain a higher monetary policy stance with the interest rates likely to remain elevated for longer. As a result, the company also increased its benchmark lending rate, LHPLR, on the existing portfolio as well as on the new business by 25 basis points with effect from 31st of October 2026. Housing demand in the September quarter remained broadly resilient. The underlying demand for the home ownership continues to be supported by urbanization. Looking ahead, the festive season and the sustained domestic economic activity around should further support housing credit demand.
With that in an overview, I would like to share the key financial highlights of the quarter. The total revenue from the operations were INR 7,175 crore against INR 7,074 crore for the corresponding quarter of the previous year. Outstanding loan portfolio stood at around INR 3,26,173 crore as on 30th September, 2026, as against INR 3,11,816 crore as on 30th September, 2025, reflecting a growth of 5%. Out of which retail portfolio stood at about INR 3,16,433 crore as against INR 3,03,084 crore, up by 4%, whereas the project loan portfolio stood at INR 9,740 crore against INR 8,732 crore, up by around 12%. Total disbursement for the quarter were INR 18,127 crore against INR 16,313 crore for the corresponding period in Q2 FY26, up by 11%. Out of that, disbursement in the retail portfolio were INR 17,563 crore as against INR 15,935 crore, up by 10% year-to-year.
Sequentially, quarter-to-quarter, the total disbursement were up by 21% as against the Q1 disbursement of INR 15,014 crore. Disbursement in project loans were INR 564 crore as against INR 378 crore for the same period during the previous year, up by 49%. The net interest income stood at around INR 2,088 crore as against INR 2,038 crore for the same period in the previous year. Net interest margin for Q2 FY27 stood at 2.58% as against 2.62% for Q2 FY26 and 2.58% for Q1 FY27. Profit before tax for the quarter was at INR 1,918.55 crore as against INR 1,704.71 crore in Q2 FY26, at a growth of around 13%. Profit after tax for the quarter stood at INR 1,508.78 crore as against INR 1,353.87 crore for the same period, showing a growth of around 11%.
In terms of asset quality, Stage three exposure at default as on 30th September, 2026 stood at 2.05% as against 2.51% as on 30th September , 2025. The total provisions stood at INR 4,292 crore, reflecting a provision coverage ratio of 49% on Stage three as on September 30, 2026. Around INR 553 crore of recovery has been done in this quarter. Apart from this, there were recovery from written-off accounts to the tune of INR 84 crore. On the borrowing side, our cumulative cost of funds stood at 7.29% as on 30th September, 2026, compared to 7.42% as on September 30, 2025, and 7.28% as on 31st March, 2026, reflecting an improvement of 13 basis points on a year-to-year basis. Whereas the incremental cost of funds for Q2 FY27 stood at 6.91% as against 7.06% in Q1 FY27.
Despite the elevated interest rate environment during the quarter, we have been able to maintain stability in our overall cost of funds and moderated our incremental borrowing cost sequentially. With this brief introduction, I would like to invite your questions. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Avinash Singh from Emkay Global. Please go ahead. Mr. Singh, your line has been unmuted. Please go ahead with your question.
Yeah, hi. Good morning. Thanks for the opportunity. First question is on growth. I mean, the growth continues to lag the industry growth. Now, the competitive dynamics of this housing finance is going to stay the way it is. In your core segment of retail or salaried customer, the public sector banks remains aggressive. And if at all you move down, I mean, the affordable segment also in terms of the players, focus players remain competitive. Now, in this context, how do you see your growth panning out over the coming quarters? And if this competitive pricing continues, will you be willing to again take a hit on margins to accelerate growth? I mean, to put it very simple, I mean, do you see double-digit growth coming back over coming quarters or not?
That's one. Second, on this credit cost, I mean, yes, it continues to remain negative. The PCRs have been coming off slightly, but the question is that, okay, how do you see the outlook for credit cost? I mean, and once you have the kind of recoveries from past back book going away, what kind of a steady state credit cost do you see? Thanks.
Yeah, you are absolutely correct. There is a lot of volatility around the quarter. World over, the interest rates are moving up, and I think that is the case in India itself. All companies, all mortgage company, housing loan finance company, including banks, they are facing headwinds. I am very certain that we have achieved growth so far for the last two quarters. We have logged in a growth of more than 11%, which includes growth from the retail as well as project. And we have given a guidance for the year for a double-digit growth around 12% to 14%. What I see that as the rate has been increased across the industry, so there is no competitive margin pressure on us for that matter.
But yes, what steps we have taken internally to increase the sales at our end is that we are increasing number of people on the seat in our company. We have around more than 8,000 DSAs, agents, those who are giving us business, those who are active. We are also strengthening our marketing subsidiary also to get more business in terms of sales, and that is happening. The figures are with us. They are also increasing, say, around by 25% to 30% on quarterly basis. Secondly, on the margin front, if I see, we have, I think two months back, if I see, in certain products, we have initiated increase in rates two months back. And in fact, that has not impacted us. That has in fact has given some margin boost, if you have seen our results. I am very confident.
Another thing is we are focusing on product mix, a better product mix. Whereas we are dominated 100% by the salaried class, our now focus is moving towards self-employed category that more margins. At the same time, we are focusing on project side also. We are also focusing on LAP business also. I think for the current year, we have set our target for achievement of 20% of sales through LAP. This is margin-accretive business to us, and we are moving in the same direction. I am confident the projections given by us for the current year, we will hold them, we will maybe surpassing them. As far as the credit cost past question is concerned, yes, we are able to show, I think, a minus three basis points in the credit cost for the quarter.
Despite our aggressive recovery, I think we have done more than 500, 560 crore of recovery. And I tell you, none of the case out of this 50-60 is a big one. We have all relied on the retail loan recovery. And I am very confident that whatever guidance that we have given, that is around seven- 10 basis points up from the present, that will, we will be able to maintain it. We will be able to achieve it by the year end.
Yeah, Avinash, this is Lokesh Mundhra, CFO. What M.D. sir has narrated, I want to add some more facts for this quarter only. You know, last quarter my growth was 14.5%, disbursement growth. But if you compare the sequential growth for this quarter, it is more than 20%. It is around 21%. So, company is doing good on the disbursement path, but AUM growth is definitely muted because of the size of our portfolio. It is more than INR 3.26 lakh crores. So definitely, same similar growth cannot be reflected in AUM. But definitely, it will take and company is on the right path. The second is credit cost. Definitely, the last quarter also we have done good job recovery front. Again, for this quarter Q2, my credit cost is negative. That is by three basis points only, negative.
And we are looking for a better recovery during next quarter, Q3 and Q4. As far as investors are concerned, definitely, as you compare my financials, my profitability, most important parameter is return on equity. My return on equity is 14%. I think that is one of the best in the industry. Yeah, Avinash.
Yeah, thank you, sir. Yes, you rightly alluded that the divergence between disbursement growth and AUM. So one element there is of prepayments. It is stable around 12%, but this 12% closer to 12% level is reasonably higher than what you used to have earlier, more closer to 10%, 9%-10%. Now, till the time this prepayment rates come down, the divergence between disbursement and AUM might continue. So in that context, what are the steps you are taking and how do you see this prepayment to come down, particularly if the aggression from the large public sector bank continues? What are the steps you are taking and how do you hope your disbursement growth and AUM growth to converge versus the divergence that you have currently?
So, Avinash, prepayment is prepayment by way of basically by three things. That is, one is our EMI, whatever principal repayment we are getting every month through EMI. The second is my BT out, or you can say the lump sum payment or prepayments. It is a 37 years old company, so definitely my prepayment or EMI is, in terms of principal, it is definitely around INR 2.5 thousand every month. But as far as BT out is concerned, as our rates are very competitive, if you compare with even rates offered by banks, so my rate is, up to last month, it was 7.15% onwards. So rates were very competitive. So I think on BT out front, it is nothing abnormal. Almost every month, net BT out hardly INR 500 crores only.
Secondly, for retention of customers, we have formed that one retention vertical at corporate level only, retention cell. Whenever we receive a request from the customer for return of document, request for documents, definitely we try to convince the customer that our rates are very competitive and wherever required, we reprice the loan. So, we are hopeful that if the company is growing at double-digit growth, last quarter it was 14.5%, this quarter it is around 11%. Sequentially it is growing at 21% Q1Q, so definitely it will reflect better growth in my AUM by end of the year.
Got it. Thank you, sir. Thank you.
Thank you. The next question is from the line of Shubhranshu Mishra from PhillipCapital. Please go ahead.
Hi, just two data point questions. First, if you can split the disbursement and AUM into, especially the retail part of it, into LAP and home loans for disbursement and AUM. Second is, if you can give the Stage three of each of these segments, which is home loans, non-home loans, and project loans. Thanks.
Yes, Shubhranshu, I will take that my portfolio breakup in terms of my different segments. My portfolio under IHL as on 30th September, 2026, it was INR 267,344 crores. Then non-housing individual, like LAP and LRD for individual segment, it was INR 45,513 crores. Non-housing corporates, it was INR 3,576. Project is, again, it is INR 9,740 crores as of 30th September , 2026. My total portfolio is, as of 30th September , it is INR 326,173 crores, as already we have given in our investor presentation. As far as growth is concerned, we are showing almost 5% growth year-on-year in terms of my portfolio. I think, what was your second question? Can you repeat it again?
The same split for disbursements. Actually, this was all given earlier in the PPT. This time around, what we have done is that we have only shown the split for project finance and individual. We are not splitting the individual into other asset classes, hence the question. So, again, if you can split the disbursement into the same categories. And gross Stage three for the same categories. Thanks.
If you want to note it down, just I will give you the breakup of INR 18,127 crores, what we have disbursed in this quarter. So, breakup of that INR 18,000 crores, IHL individual housing loan is INR 12,197 crores. Non-housing individuals, means LAP and LRD loans given to individuals, it was INR 5,216 crores. And non-housing corporate is INR 150 crores, and project is INR 564 crores. That is the breakup for this quarter in terms of disbursement.
And gross Stage three for each of these categories.
Pardon?
Gross Stage three for each of these categories, please.
Oh, okay. Okay. Stage three, you want stage three? Breakup of stage three?
Correct.
Of NPA stage three?
Yes, sir.
Gross NPA stage three is in IHL category, it is 1.09%.
Right.
NHI, non-housing individual, 2.36.
Right.
Then, SC is, because of some legacy cases, is on a higher side. My total gross NPA is 2.05% Stage three.
This 2.05 is the project loans. What is the project loan gross NPA, sir?
Project loan is, it is 20% almost. My gross NPA at the end of this quarter is 2.05. If you compare-
You said 20%, sir, for project finance?
20%. 20%. And that non-housing corporate, that is 20%.
20%, so two zero?
Two zero, yes. Two zero.
Yeah, yeah. Okay, okay. Sir, if I can just squeeze in one last question, sir. This project finance, how many projects are there which are still in gross Stage three, and what would be the largest ticket size there? If you can split, like, what stages of resolutions are they stuck at?
Okay. Just wait for a minute only. Actually, you want figures, so let me just give the exact figures. Stage three, under this project and non-housing corporate is INR 2,720 crores. INR 2,700. Okay?
Yes, sir.
Thank you.
The number of projects here, sir. The total number of projects.
The number, exactly. I am sharing the amount only.
Oh.
Okay?
Okay. Right. Would you be able to share the number of projects?
Yeah, yeah. We can share with you, but right now I am not having the figure in terms of numbers. So amount I already shared with you. So if you want numbers, we will share you separately. Yeah.
Right, right, sir. I will come back and let you. Thank you so much.
Thank you. The next question, Madhu, Life Insurance Company, please go ahead.
Hello?
Yes, yes.
Hello?
Go on.
Hi, I am Madhu. Hi, good morning, sir. Thank you for the opportunity. My query is regarding the NCLT order in case of personal insolvency proceedings of Dr. Subhash Chandra and LIC's exposure to it. My query is, the first part is that what is the residual amount? Firstly, has the entire INR 1,330 odd crores been provided in the books? If not, what is the residual amount that remains to be provided and the extent of impact on the P&L? My second query is regarding the secured assets. What are the company's avenues for recovery of the outstanding amount and the steps that the company has taken or intends to take for monetization of these assets? What is the current assessed value of these assets relative to the outstanding exposure,
and are there any material legal or other impediments to realize the security, to monetize the security? Thank you.
Yeah, madam, good morning. As far as your question regarding this Zee matter is concerned, Subhash Chandra matter is concerned, I think we have already gone public. We have already shared the requisite information that the two loans which we have granted way back, they are in NCLT stage since 2022, 2023. Thereafter, the recovery process is on. Now we have filed a criminal suit against Mr. Subhash Chandra. A complaint has been filed in CBI against Mr. Subhash Chandra, who is a guarantor under those two loans. As far as the conditions of the loan, they are NPA, and we are under process of recovering through NCLT, through SARFAESI, whatever means available to us, we will pursue those cases. The standard assets are with us only. In fact, if you see,
we have an auction lined up for, I think, second or third against one of the properties. I won't be able to share much detail because already this is under sub judice with the CBI. Whenever there will be something new or some news will be there, we will share it in the press.
Sir, just
Yeah, please, please go on.
So, there is only going to be recovery on it going forward, no negative impact on the P&L as far as provision is concerned. So has it been 100% provided?
But look, I don't think it is 100% provided, but we have sufficient security coverage. So we have two big properties located prominently in the South Bombay only, and the value of those two properties are sufficient to cover my outstanding loan. That I can say.
Okay, thank you.
Thank you.
Thank you. The next question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead.
Yeah, thank you for taking my question. Just one question. Sir, I think during your opening remarks, you had shared that you have increased your PLR by 25 basis points effective October 21st on both the back book and the newer loans, the new loans that you are giving out. So I was just trying to understand, a couple of quarters back, we had shared that whenever loans, wherever the interest rate environment goes up, for at least some time till the time we start seeing an increase in our interest rates, we might maybe want to hold off those PLR increases on incremental loans so that we can maybe gain some market share. Because banks, given that they give out repo rate loans, repo rate-linked loans, they will be obligated to increase.
In that period, maybe you would have gained some market share. Any thought process around maybe gaining some market share? You have earlier alluded to the fact that you are still shooting for a double-digit disbursement growth. Just that thing, if I wanted some clarity on. The other thing is, sir, margins. I joined the call a little late. Have you put out some thoughts on how margins are going to shape up over the next few quarters, given that we are in a rising rate environment?
I tell you, in fact, your first question was regarding PLR. We have already effected our increase in PLR from 31st of October. We have increased 0.25 based on our book and as well as on the new disbursement. In fact, we are competing. 80% of our earlier business is in salary sector only, and we are competing with banks. Since banks have already increased that and passed on to the customer, I think it is not going to much impact on our sales, first thing. Second thing is, our portfolio side, at least one-third of our portfolio, I think the rates will increase from 1st of November. Whereas for two-third of our portfolio, it will be effective from 1st of January 2027. There is enough leeway into that.
As far as the competition part is concerned, I do not think that in that space, in the salaried space, it will remain to be competitive as far as the banks are concerned. We have taken a switch in our policy, our product mix. Now we are focusing on salaried employees. Again, salaried employees, we are going for self-employed category also. We are also trying to increase our business from LAP vertical, LRD vertical, and project finance. This is how we want to pursue the competition as well as we have a focus on our margins. The guidance which we have given, I think for the year, it is 2.5 - 2.6. I think we will be able to continue that. At present, last quarter, it is 2.58. As against quarter-to-quarter, if you see last year, it was 2.62, I think.
We will be able to maintain that margin.
Got it. Lastly, are there any big ticket resolutions on the project loan side which are there in the pipeline? Earlier in the calls, we used to hear that we are toying with the idea of some ARC sales as well. Some of them were in advanced stages. Some of them we said it will take time. Do you think in the second half, any big ticket project loan which is in advanced stages of resolution and you are expecting to get resolved?
If you see our recovery part in the Q2, I think there is no big sale through ARC or something like that. In spite of that, we have done more than INR 563 crore recovery through retail recovery only. I think we are expanding our recovery team. We are making it stronger and taking all those steps to see. Yes, you are correct. What we could not do in Q2, definitely we have two projects lining up with resolution through ARC in Q3 and Q4. I am hopeful that those big recovery will also be effected in Q3 and Q4.
Got it, sir. That is all from my side, and thank you so much, and I wish you and your team the very best.
Thank you, Abhijit.
Thank you. The next question is from the line of Harshad Dewani from Anzo Capital. Please go ahead.
Hi, sir. Thank you for the opportunity. Am I audible?
Yes.
I had a question on dividend policy. Our payout, the dividend payout has been around 10% for several years, and I understand RBI norms allow us to go to maybe up to 50% payout. Stepping it up would lift our ROE and also reward shareholders. What's the thought process behind the same, and is there a case to raise it?
Harshad, you know, yeah. This company is giving, if you compare with the previous year, this time we have given 500% dividend, that is INR 10 per share, having face value of INR 2. Definitely rewarding shareholders, one way is dividend payout, and other way may be bonus or right issue at a discounted price. Other options are not in place right now. We can say that just taking industry average in terms of return on equity, we are giving almost 14% ROE, on return on equity. That is quite good if you compare with the other peer companies.
Understood. My second question would be, what is the progress in terms of DA and pool lending initiatives in this quarter?
Yeah. Harshad, policy for this direct assignment, or you can say securitization, we already placed before the board. It was discussed at length. Board has suggested minor modifications. I think we'll get it approved in the next board meeting. And probably in the Q3 and the Q4, we'll definitely in the market for a pool purchase or direct assignments.
Okay, sir. Helpful. Thank you.
Thank you.
Thank you. The next question is from the line of Gaurav Khandelwal from JPMorgan. Please go ahead.
Hi, good morning. Thanks for taking my questions. First question is on the yields and margin side. Sir, if I can understand better, our incremental cost of fund is almost down 40 basis points. The exit cost of fund of 6.91, it is almost 40 basis points below 7.29. In that context, if the cost of funds are not increasing, because even if I look at your liability mix, almost 45%, 50% is NCD, how were we able to increase the PLR by 25 basis points? Can you explain that, please?
Yes, Gaurav. The figures are in the public domain only. My incremental borrowing cost is 6.91. It is, if you compare with the industry, definitely it is quite lower, or somehow we could manage our incremental borrowing cost. If you compare year-on-year, definitely there is a handsome reduction in my incremental borrowing cost. As far as my margins are concerned, definitely, if you compare sequentially, last quarter it was 2.58%, and again, we could manage at 2.58% only. If you compare year-on-year, the last time it was 2.6%, so there is a reduction of four basis points. But if you compare with the other peer competitors, their margins have come down by almost 10 to 20 basis points. That way, we are performing in a better way.
Right. No, sir, but my question is, my understanding was to increase PLR, we have to justify a cost of fund increase. Is that not the case?
Okay, cost of fund is definitely one parameter, but all other players, especially banks, those who are having almost 75% market share, they already increased the lending rate by 25 basis points because of this policy repo rate increase. Definitely cost is one parameter for increasing PLR, but other parameter is my margin only. That is why whenever we are getting better margins, and if market is absorbing that lending rate, definitely we are increasing our prime lending rate, and it will be reflecting in my margin in Q3 and Q4 onwards.
Got it, sir. After these changes, what would be the gap between my incremental lending rate and my back book lending rate?
Incremental lending rate?
Yeah. New rate.
Incremental lending rate we have already increased. Earlier we were starting at 7.15, now we are starting at 7.40 onwards. For every segment, whether it is IHL, non-housing individuals, or project, or NHC, all PLR rates were increased by 25 basis points.
Got it. At the same time, like you said, by 1st January, we will get almost 25 basis points increase on back book. We were at 8.96% right now, which basically means we will go to 9.2% by 1st Jan. Is that a fair assumption?
My reset clause as per my loan agreements, almost one-third book is repriced on quarterly basis, and two-third book is repriced immediately from 1st of the next month.
Right. Exactly, sir, in that case, we are at 8.96 loan yield today. Once everything is repriced in, let us say, two, three months, we get to 9.2%, but our incremental lending rate would be 7.4, which means the gap between new lending and back book is 180 basis points, which means that my spreads will continue to compress going forward. Is that a right assumption?
So, 7.40 is my starting rate. It is not my average yield on the portfolio. So, on incremental basis, my average yield on the entire disbursement, it is 8.29, and my cost is 6.91 for this quarter. So my spread is around 1.75.
Okay. So 8.29 is the average disbursement rates, right? On cost of funds, sir, can you give us some visibility on, let us say, over the next three, four quarters, how much would your cost of fund change by, given the 25 basis points rate hike that we have already seen?
Yeah. Harshad, looking to my borrowing structure, almost 32%-35% borrowing is from banks, those who are repriced or based on EBLR, especially repo link. So probably impact of repricing of my bank borrowings, it would be around 10 basis points by end of the year.
Okay. Got it. That is clear. Thanks. Just one more question, and you already alluded to it in part. So when I look at the disbursement data to self-employed, that number was about 12% in first quarter. Second quarter, we have gone up to 17%. Is that a conscious strategy that you are adapting to increase your shift towards more self-employed, number one? Number two, how much is the yield differential for a self-employed loan versus a salaried loan?
Gaurav, actually self-employed, even M.D. sir was also saying that, we have shifted our focus from IHL, that is a prime salaried class segment, to non-housing individuals. That is LAP and LRD to individuals. Actually, that segment is giving better yield, and the difference would be around 150 to 200 basis points if you compare with the e-loan IHL portfolio.
In fact, this is a conscious shift we have taken. We are taking to diversify our portfolio mix. At the same time, actually, since most of the competition is from the salaried class, and that is we are getting it from banks. So we are trying to keep ourselves aloof from that, trying to avoid that, and that is why we are focusing on the self-employed, where the yield comes to around 9.15% as against 7.40% we normally pass into the salaried class. So, I think there is a differential of around 1.8, 1.7, something like this.
Got it, sir. Maybe if I can squeeze in one more, the final question on competition. This is almost a month that we have seen, one month has passed after the rate hikes. Are you seeing on the prime mortgage any increase in competition levels by PSUs or private banks? Competition was already elevated to begin with, but do you think has that worsened in the last two weeks, three weeks post the rate hike, or not really?
I can only say that banks have increased the rates immediately, but we are increasing rates from 31st of October. So probably, we are to that extent not affected during the last quarter.
Got it. Okay. Thank you. Those were all my questions. Very helpful.
Maintain the growth trajectory.
Thank you.
Thank you. Before we take the next questions, we would like to remind participants that you may press star and one to ask a question. The next question is from the line of Sanket Chheda from DAM Capital. Please go ahead.
Yeah. Hi, sir. Just circling back on the margin thing. In the rising interest rate cycle, since we have a higher share of NCD on the cost of fund side and almost the entire book on floating on the asset side, isn't it fair to assume that our cost of fund inch up would be slower than the yield inch up from here on, and hence from here on, margin should likely be steady if not inch up? That's my first question. I'll ask the next one after you answer this.
Yeah, Sanket. So, definitely because of parentage advantage, LIC, we are getting raising funds at a lower rate. Definitely, if you compare the other AAA-rated companies, our borrowing cost is comparatively less. So, my total borrowing, my cumulative borrowing cost is 7.29%. Last year, as I said, we have borrowed almost 82% money from banks only. So that banks borrowing is giving comfort. My cumulative borrowing cost on banks borrowing is 6.93% as on date. So still it is below seven. If you compare with the market conditions, the policy rates, even 10-year G-Sec rate has gone up to 749. Today only it is around 7.36. So that way, our cost of borrowing is very good. Definitely, margins would be intact, or we'll be able to maintain our net margins, what we have committed in the previous quarter.
Now, again, we are committing the same conservative view that our margin would be between somewhere 2.5% to 2.6%. That is a conservative outlook.
Sure, sir. On growth, we alluded that the disbursement growth would be 12%-14%. But we are not given a number on the AUM growth that we would foresee. Now, for I think a couple of years due to rising interest rate cycle, the disbursements have been really a range-bound number. So, do we expect this 12%, 14%, 15% disbursement growth to continue for two, three years? Thereby, would you like to give us some sense that when do we see 10%-12% AUM growth possible? Maybe next year or say in FY 2029. Why do you see that as a leader? Do you aspire to say take this growth higher now in the past few years? The growth has remained there. So, would you be happy with this 5% growth or you intend to or aspire to say deliver a higher growth from here on?
Yeah, Sanket. So, the first phase is disbursement growth only. On disbursement side, the company started growing at a decent rate. The last quarter it was around 15%, this quarter again it was around 12%. So, definitely when your disbursement growth would be better, it will be reflected in AUM growth only. My AUM size is very big, so growing similar growth, definitely we have taken a very ambitious target of double-digit growth around 8%-10%. So, we are moving in that direction only. But predominantly, this company is basically individual households that in the prime segment, that is salaried class. If you compare my market share, as per the data released by National Housing Bank, still we are holding market share of almost 27% in terms of disbursement, and almost 40% market share in terms of my portfolio size.
So, definitely we are moving in the right direction, and we are hopeful that company will reflect a decent growth on AUM by end of the year.
Sure, sir. Thanks. Those were my questions.
Thank you. The next question is from the line of Chetan Shah from Citigroup. Please go ahead.
Yeah. Thank you for the opportunity. Sir, firstly, on the cost of funds towards the banks, which you alluded that it might increase by 10 basis points by the end of the year. If I look at the PPT number, bank or NHB weighted average cost was 6.85% in Q1, which has increased to 6.92% already in Q2. The 10 basis points will be over and above this Q2 number. That is the first question. Secondly, on the CP cost, we have almost seen a decline of 51 basis points on a sequential basis from 7.2% to 6.9%. Anything to read here? That is the first question.
Yes, Mr. Shah. NHB, if you compare the figure of my outstanding borrowing from NHB, it was around INR 10,000 crore last year. It has gone up to almost INR 25,000 crore. My average borrowing cost from NHB is 6.91%. It is almost, if you compare with the market rates, 6.91% is a very good rate. This year, in affordable segment, almost we are getting refinance of almost 25% to 30% from NHB, and the remaining we are getting at 7.75%. My blended rate is around 6.91%. CP, again, my CP as on 30th September , it is around INR 12,000 crore, and average cost is 6.69%. During this quarter, in initial days of this quarter, we could borrow money from the market at a very decent rate. It was around 6% or around 6% or 6.10%.
That is why my borrowing cost through CP is 6.69% as on September 30.
Okay, sure. Thank you. Sir, on the recovery front, now coming to the recovery, we have seen kind of negative credit cost for the first two quarters. Anything specifically, and we already highlighted that two more corporate projects are also in pipeline. Should we assume a negative credit cost for the overall FY 2027 as well?
Shah, every quarter it should be negative. It is difficult to say, but we are expecting that my credit cost would be around eight-10 basis points by end of the year. My PCR is around 48%. For this quarter, it was negative by three basis points. By end of the year, we are expecting somewhere around eight-10 basis points. Yeah.
Okay, sure.
Okay. Is it-
Okay. Sir, lastly on the AUM growth, basically disbursements, as you already mentioned, they were quite strong at 20% sequential growth, but it is not translating into AUM growth despite the stable repayment rate at all. What kind of disbursement growth should come up or what kind of repayment growth should we be looking at to get to the desired 10%-12% AUM growth? Yeah.
First strategy is we have to focus on disbursement growth. Now company started showing a good growth of 10%-20%. We are targeting around double-digit growth, even around 15% growth we are targeting for this year. Definitely, it will reflect in my AUM growth. But looking to the size of company, size of portfolio, its impact is not reflecting equal impact in AUM growth. We are hopeful that by end of the year, company will show a decent growth in AUM also.
Apart from that, I would like to say that this year we are trying to implement our institutional rewriting framework. We expect that some of the customers will be trying to BT out. We have developed an institutional framework for rewriting, and I think that the results of that may be forthcoming in this quarter as well as the Q4.
Lastly, sir, one question if I could squeeze in. Yeah. Hello?
Yes, yes.
Yeah. One last question. On the affordable housing piece, I think we had mentioned a few quarters ago that we would be looking to ramp up on this segment. Any update, anything you want to update here in terms of, like you had been highlighted that we will be reaching a goalpost of INR 1,000 crore of AUM, and so any timelines or anything to update you on the affordable housing piece? Yeah.
Mr. Shah, that segment is definitely lucrative in terms of yield, but that segment is risky. We have affordable housing segment, but portfolio is, if you compare with my total AUM, it is negligible. As such, we have not created a separate team for affordable housing loan segment, but definitely we are moving in the same direction. Though it is lucrative in terms of yield, but on the other side, it is a very risky segment. Some of the companies are definitely, they are more in affordable segment. But my core strength is that is prime segment, because that segment is comparatively lesser risky and giving better returns and steady returns. Our focus is on what company is traditionally doing for last so many years. But this year, we have changed our strategy in terms of better yield.
This year we are focusing on non-housing segment, that is the LAP and LRD, especially to individual segment. Again, we started focusing on project finance. That project finance is again showing a good growth of 49% quarter-on-quarter. That is a good sign for the company's growth.
Okay. Sure, sir. Thank you, and thank you so much for answering all my questions. All the best. Yeah.
Thank you. The next question is from the line of Vipul Kumar Shah from Sumangal Investments. Please go ahead.
Hi, sir. I am an individual investor, so my question relates to our renewed focus on project finance, where our past experience is not very good. We have very high NPAs, and the cases are still continuing. So, what we are going to do different this time so that we don't have the same type of result?
Yeah. Actually, you see, we have taken a different strategy this time. Earlier, we used to focus only on the big ticket size project financing, maybe INR 500 crore, INR 400 crore, INR 600 crore. This time, our strategy from the beginning of the year, we have taken a stance that apart from the big, we should also start looking at small ticket size project financing. And where I find the maximum growth in the housing is today is coming from the traction in the tier two, tier three, and tier four cities. So, we have set up mechanisms in our regional offices to see that we start getting proposal for the project finance with the range of INR 50 crore-INR 100 crore. And we are getting lot of inquiries from tier two, tier three cities. We have become very selective, very choosy.
It is not like that whatever is coming, we are accepting it. And we are mindful of the NPAs which have been generated during the last few years. We are trying to resolve that also at the same time. But our strategy is to move this project cycle in a big way, but by learning, I mean, from the past mistakes we have done, at the same time exploring new markets where we were earlier not present.
So, what is the yield we are offering to the small ticket size builders, and what is the security cover in terms of percentage?
Yeah, yeah. Mr. Shah. So, definitely what Amrit has said that we are very selective whenever we are financing any project. So, for bigger loans, we have taken a minimum benchmark of external credit rating, that is BBB, and security coverage is 1.75 times. So, you were initially saying that our experience was not so good in this segment, so you are very right. We already burned our fingers. But this time, we have tightened our underwriting parameters, and we are taking a very calculated call for financing project finance cases. And we are hopeful that in this segment, this segment is good, and it is yielding almost 10% plus. If you compare with the IHL segment, this project finance segment is giving you better returns, and it is more than 10%.
So, for a BBB developer, you are giving rates at loans at just 10%?
It is not so.
Yeah.
It depends on the many underwriting parameters. The AAA BBB is the minimum benchmark. That is the minimum benchmark. And it depends. If the suppose rating is AA+ or AA, so definitely my lending rate would be. Normally, we are following the market rates, what other financial institutions like banks are offering. So we are matching our rates with the other lending institutions. But on an average, the segment is giving you 10% plus yield on the entire project portfolio. Or more precisely, it is around 10.62% as on 30th September 2026.
Okay, sir. Thank you and all the best.
Very much.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. The next question is from the line of Ayush, an individual investor. Please go ahead.
Good morning. My question is a follow-up regarding the dividend policy. We are at around 14%, 15% ROE, upwards of 25% capital adequacy, and single-digit AUM growth rate. Over the next couple of years, at the current rate, our capital adequacy will cross around 27%. When RBI is allowing us to give up to 50% of annual profit as dividends, why don't we tweak our policy? Because despite having 15% ROE and LIC parentage, we're trading at 0.6 times book. That is the lowest amongst all HFCs. Everyone trades at least at double our valuation. Even if we give the maximum permissible dividend over the next two years, our capital adequacy ratio remains around the current levels, and even the gearing ratio only increases marginally. So, why don't the senior management and the board have a serious discussion about this?
Because trading at a 40% discount to book value is extremely punitive to all the shareholders.
Yes, Ayush. My capital adequacy ratio is far above the required of 15%, that is 25.48%. We can consider. This year again, we have declared a dividend of 500%. That is, in terms of amount, it's INR 10 per share. Definitely, whenever time comes, definitely we'll find out the other options to rewarding my shareholders. As of now, there is no matter to be discussed regarding other ways of payouts to shareholders. But definitely, in the board meeting, last time also it was discussed in the board meeting, so we'll take a call at the appropriate time.
It's been more than five years since we've been trading at these steep discounts. Despite the 500% that you're saying on a INR 2 face value, that barely moves the needle on a stock that has a INR 850 book value. I think looking at it in terms of a percentage of the face value is the wrong metric. Even if you get to 7%, 8% asset growth, and with the way your risk weight is on the asset, you will still not need more than 40%, 45% of the profits as retained earnings even to maintain these levels. You should commit to the shareholders that you will take steps to at least bring the book value up to par, because 0.6 is unheard of. PNB Housing is trading at one point four times.
You have a pseudo-sovereign rating, and despite that, we are trading at such steep discounts. I don't know why other shareholders are not speaking up on this matter.
Ayush, you are very right. The stock is highly undervalued. It's trading around 0.65. That is the price-to-book value multiple. Prices are definitely the market-driven only. The company's role is to perform only. The company's performing, started performing, and they are showing a good disbursement growth. Other things, what you are saying, how to reward my shareholders, definitely we'll discuss all other options available in the next board meeting. If board approves, then definitely we'll come out with a very nice, you can say, dividend. Either dividend should be better, or we'll offer some other options.
Okay. Thank you very much.
Thank you. The last question is from the line of Karan Singh, an individual investor. Please go ahead.
Hi, good morning. Actually, my question was on the same thing as the previous participant.
Sorry to interrupt, Mr. Singh. May we request you move a bit closer to the microphone?
Sorry, is it better now?
Yeah, please go ahead.
Yeah, my question is along the lines of what the previous participant alluded to, and I think a lot of people have spoken about this. What I would just like to pass on is, you know, looking at dividend on face value and then saying that bonus is a capital allocation, I do not think the board and the management is giving it due consideration in terms of minority shareholders. This message should be passed on fairly seriously, because you have to look at capital requirements as a basis of, as a percentage of what is required. I do not think that is being handled, and I just want to highlight that. I think the previous participant covered it fairly well. I hope this gets covered in the next board meeting.
At least there is a clear policy because earlier you used to pay out 18%-20% of profits as dividend. Looking at it as percentage of face value, whether it is 50, 100 really does not make any difference. One is that. Second is there was a question on the exposure to the Zee Group promoter. What is the outstanding gross and net on the books? Because that number was not mentioned.
Yeah. What was your last question? Outstanding cost?
Not the cost, the exposure to Dr. Subhash Chandra's group, the gross and net on the books, because it was mentioned that there is something. What is the gross and the net? I understand you have cover for it, but what are the gross and net on your books today?
I can say one thing only. There are two loan accounts in that group. One loan account is 100% provided, and second one, I think 75% we have already provided. The total outstanding amount, it is around INR 1,365 crores, including interest and other things. My principal outstanding is quite below, and we are sufficiently covered. We have two good properties in the South Mumbai, and the value of those two properties quite sufficient to recover my outstanding dues right now.
I got that. I got that one of them is 100% covered, so I am guessing that is not there. Is it technically written off? Does it come as gross NPA or what?
No, no. It is technically written off. It is in the books appearing as non-performing assets, NPAs.
Both the total 1,300 is appearing as non-performing, and the provision against that is also reflected.
It is in one case it is 100%, in other cases it is 75%.
What is the net NPA towards this group? That's basically the unprovided part.
That figure I don't have right now, but it is sufficiently we have already provided.
Okay. On the dividend, just I would appreciate if you start looking beyond the percentage on face value. I would just say bonus is good, but bonus, if it becomes a proxy for paying a higher dividend, is good, but otherwise, it really is a shift from reserves to equity.
Thanks.
So it really doesn't make-
We have taken your suggestion positively and I said for that.
Yeah.
Thank you.
Thank you.
Thank you. Ladies and gentlemen, that was the last question for the day. Now I would like to hand over the conference to the management for closing comments.
Yes, I thank all my investors on the call and all my analysts for having trusted us in past and at present and future also. I wish them a very happy Deepavali. I think this is around the festival, we should celebrate. Definitely, this quarter and the next quarter will also be very celebrating to all our investors. Thank you. Thank you very much.
Thank you. On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Thank you. Thank you, everybody, and wish you happy Diwali.