LIC Housing Finance , one of India's leading housing finance companies, reported its Q2 results, showcasing stability in financial performance while facing growth challenges. The company's focus on maintaining profitability over aggressive expansion was evident in the quarterly figures.

Financial Highlights

Key Performance Indicators

• Net Interest Margin (NIM): Stood at 2.62% compared to 2.71% in Q2 FY25.
• Asset Quality: Stage-3 exposure improved to 2.51% from 3.06% year-on-year.
• Provision Coverage Ratio: Increased to 53% from 49% in the previous year.
• Cost of Funds: Declined to 7.42% from 7.73% year-on-year.

Business Performance

LIC Housing Finance faced significant challenges in growth during Q2. The company reported:

• Total disbursements of Rs. 16,313 crores, marginally lower than Rs. 16,476 crores in Q2 FY25.
• Individual home loan disbursements grew by 3% YoY to Rs. 13,490 crores.
• Project loan disbursements were muted at Rs. 378 crores, down from Rs. 1,397 crores in Q2 FY25.

A notable concern was the substantial increase in balance transfer outflows, which doubled to Rs. 4,014 crores from the normal quarterly run rate of Rs. 2,000 crores. This surge in balance transfers significantly impacted the company's growth trajectory.

Strategic Initiatives

To address growth challenges, LIC Housing Finance has implemented several measures:

1. Rewriting Rates Adjustment: The company reduced rewriting rates to lending rate plus 50 basis points to combat balance transfer pressures.
2. Exploring New Avenues: Management is considering co-lending arrangements and direct assignment to boost growth.
3. Focus on Margin Protection: The company maintains a stance of prioritizing margin protection over aggressive expansion.

Management Commentary

Tribhuwan Adhikari, Managing Director and CEO, commented on the results: "We are balancing growth with spreads and NIMs in this challenging year. While our growth has been subdued, we are taking steps to improve our competitive position without compromising on profitability."

Outlook

LIC Housing Finance remains cautiously optimistic about the future. The management expects:

• Improvement in asset quality in the coming quarters.
• Potential resolution of two to three large loans (Rs. 200 crores and above) in the near term.
• Better performance in Q3 and Q4, which are traditionally strong quarters for the company.

The company aims to achieve double-digit growth in both disbursements and loan book by the end of FY26, while maintaining focus on profitability and asset quality.

As LIC Housing Finance navigates through a competitive landscape, particularly from aggressive public sector banks, it continues to explore strategic options to enhance growth while maintaining financial prudence.

LIC Housing Finance , a prominent player in the Indian housing finance sector, has set its sights on achieving double-digit loan book growth for the fiscal year, despite facing challenges in the second quarter.

Q2 Performance and Growth Targets

The company reported a 6% growth in Assets Under Management (AUM) during Q2, falling short of its internal target of 8%. This performance has prompted LIC Housing Finance to recalibrate its strategy for the remainder of the fiscal year.

Factors Affecting Growth

MD and CEO Tribhuwan Adhikari attributed the slower growth to two primary factors:

1. Weak performance in the construction finance segment
2. Balance transfer outflows caused by aggressive rate cuts by banks

Interest Rate Dynamics

The company's growth strategy has been impacted by the interest rate environment:

• Banks quickly repriced loans following repo rate reductions
• LIC Housing Finance's prime lending rate is not repo-linked
• The company requires board decisions for rate adjustments

In response to market pressures, LIC Housing Finance implemented a 25 basis points cut in lending rates in April. However, this measure proved insufficient to prevent outflows, which ultimately reduced the expected loan growth by 1.5%.

Future Outlook

Despite the Q2 setback, LIC Housing Finance remains optimistic about its growth prospects:

• The company is targeting double-digit loan book growth
• Expectations are pinned on improvements in retail disbursements in Q3 and Q4

Market Response

The market reacted to the news with caution:

Investor Communication

In line with regulatory requirements, LIC Housing Finance has made efforts to enhance transparency:

• An investor presentation and conference call audio recording for Q2 have been uploaded to the company's website
• The call discussed the unaudited financial results for Q2 and H1

Investors and analysts can access these materials at www.lichousing.com for a more detailed understanding of the company's performance and strategy.

As LIC Housing Finance navigates through these challenges, stakeholders will be keenly watching how the company's strategies unfold in the coming quarters to achieve its ambitious growth targets.