LIC Housing Finance Q2 FY27 Earnings Call: Reaffirms 12-14% Growth Guidance, Pivots to Self-Employed and LAP (LICHSGFIN)

Solid Earnings Growth on a Muted AUM Base

• Revenue from operations of Rs.7,175 crore — Q2 FY 2026-2027, up from Rs.7,074 crore in Q2 FY 2025-2026; NII at Rs.2,088 crore vs Rs.2,038 crore YoY.
• PAT of Rs.1,508.78 crore, up 11% YoY — vs Rs.1,353.87 crore in Q2 FY 2025-2026; PBT at Rs.1,918.55 crore, up 13% YoY.
• NIM held at 2.58% — flat sequentially vs Q1 FY 2026-2027 and down ~4 bps YoY (vs 2.62% in Q2 FY 2025-2026); CFO noted peer margins have declined 10-20 bps, framing LICHFL as relatively better placed.
• Loan book of Rs.3,26,173 crore, up 5% YoY — as of 30 September 2026; retail at Rs.3,16,433 crore (up 4%) and project loans at Rs.9,740 crore (up 12%).
• Disbursements of Rs.18,127 crore, up 11% YoY and 21% QoQ — retail disbursements Rs.17,563 crore (up 10% YoY); project loan disbursements Rs.564 crore (up 49% YoY).
• Stage 3 improved to 2.05% — vs 2.51% as of 30 September 2025; recoveries of ~Rs.553 crore in Q2 FY 2026-2027 plus Rs.84 crore from written-off accounts.
• Leadership transition — Sandeep Kumar took charge as MD & CEO on 29 August 2026 (joined as CEO in May 2026), with 2 years of association with the LIC HFL group.

Double-Digit Disbursement Guidance; Pivot to Self-Employed and LAP

• FY 2026-2027 guidance of 12-14% growth reaffirmed — management said it may surpass the target, having already logged >11% growth across Q1-Q2 FY 2026-2027 (retail plus project loans).
• AUM growth remains muted — despite ~20% QoQ disbursement growth in Q2 FY 2026-2027, the large Rs.3.26 lakh crore base mutes AUM impact; management targets ~15% disbursement growth in FY 2026-2027 and has taken an "ambitious target" of ~8-10% AUM growth (period unspecified).
• Self-employed disbursement share rose from 12% to 17% — Q1 to Q2 FY 2026-2027, as the company pivots from prime salaried IHL to non-housing individuals (LAP/LRD); yield differential of 150-200 bps vs IHL, with ~9.15% self-employed yield vs 7.40% salaried.
• Targeting 20% of FY 2026-2027 sales from LAP — the retail book is currently 100% salaried; management is moving focus toward the self-employed segment for better margins.
• Project finance shifted to small-ticket loans in FY 2026-2027 — beyond big-ticket loans of Rs.400-600 crore, the company now pursues Rs.50-100 crore loans sourced via regional offices from tier 2/3/4 cities; portfolio yielded 10.62% as of 30 September 2026.
• Growth levers deployed — 8,000+ active DSAs, marketing subsidy spend up 25-30% QoQ (Q2 FY 2026-2027), and rate increases on certain products that boosted margins without hurting volumes.
• Prepayments flagged at ~12% — vs historical 9-10% (analyst, MK Global); CFO noted net BT-out of only ~Rs.500 crore per month and a corporate-level retention cell that reprices loans to retain customers.

PLR Hikes and Cheap Funding Defend a 2.5-2.6% NIM Band

• PLR raised 25 bps effective 31 October 2026 — across all segments, on both the back book and new disbursements; new loans now start at 7.40% vs 7.15% earlier, following RBI's 25 bps repo hike to 5.5% in the October 2026 policy (stance shifted to calibrated tightening).
• Margin guidance for FY 2026-2027 maintained at 2.5%-2.6% — management expects to maintain the Q2 FY 2026-2027 level of 2.58%; the PLR increase will reflect in NIM from Q3-Q4 FY 2026-2027 onwards.
• Incremental cost of funds at 6.91% in Q2 FY 2026-2027 — vs 7.06% in Q1 FY 2026-2027; cumulative cost of funds at 7.29%, an improvement of 13 bps YoY; average yield on Q2 disbursements was 8.29%, with spread pegged at ~1.75%.
• ~82% of borrowings raised from banks in FY 2026-2027 — CFO cited "parent advantage LIC" for cheaper fundraising; bank-borrowing cost of 6.93% as of Q2 FY 2026-2027; management estimates only ~10 bps impact on cost of funds by end of FY 2026-2027 from the repo hike (32-35% of borrowings are repo/EBLR-linked bank loans).
• NHB outstanding rose from ~Rs.10,000 crore to ~Rs.25,000 crore — FY 2025-2026 to Q2 FY 2026-2027; blended NHB cost 6.91%, with 25-30% of affordable-segment funding in FY 2026-2027 via NHB refinance and the remainder at 7.75%; CP outstanding of ~Rs.12,000 crore at 6.69% average cost as of 30 September 2026.
• Analyst modelled portfolio yield rising to ~9.2% by 1 January 2027 — from 8.96% in Q2 FY 2026-2027; management detailed the reset mechanics (one-third reprices quarterly, two-thirds the following month) but did not confirm the 9.2% figure.
• Rate backdrop remains a headwind — the 10-year G-Sec has risen to ~7.49% and was at ~7.36% as of the call date; management noted market expectations that RBI may maintain a higher policy stance, with rates elevated for longer.

Negative Credit Cost Masks Elevated Corporate-Book Stress

• Credit cost negative at ~-3 bps in Q2 FY 2026-2027 — driven by recoveries of Rs.560 crore, all from retail loans with no large cases; management guided credit cost to rise to 7-10 bps from current levels by end of FY 2026-2027.
• Segment-wise gross stage 3 diverges sharply — IHL at 1.09% and non-housing individuals at 2.36%, but project loans and non-housing corporates each at ~20% (Q2 FY 2026-2027); absolute stage-3 exposure under project loans plus non-housing corporates stood at Rs.2,720 crore.
• Z Group (Dr. Subhash Chandra) exposure of ~Rs.1,365 crore — two loan accounts (including interest and other charges) as of Q2 FY 2026-2027; one is 100% provided (technically written off but still an NPA) and the second 75% provided; NPA since FY 2022-23.
• Recovery backed by two South Mumbai properties — management stated their value is sufficient to cover outstanding dues; a criminal suit has been filed against Mr. Subhash Chandra and a complaint filed with the CBI as guarantor; recovery pursued via NCLT and SARFAESI, with an auction lined up against one property. Further details withheld as the matter is sub judice/with the CBI.
• Two projects lined up for ARC resolution — management hopeful of big recoveries in Q3 and Q4 FY 2026-2027; Q2 FY 2026-2027 saw no big-ticket ARC sale, but retail recoveries alone were Rs.563 crore and the recovery team is being expanded.
• PCR at ~48% — total provisions of Rs.4,292 crore reflect a 49% provisioning coverage ratio on Stage 3 as of 30 September 2026.

Investors Push for Higher Payout Against a 0.65x Book

• Capital adequacy of 25.48% vs the required 15% — per CFO Lokesh Mundra; an investor argued capital adequacy could cross ~27% over the next couple of years (period unspecified), making room for higher payouts.
• Dividend of 500% (Rs.10/share on Rs.2 face value) declared for FY 2026-2027 — analysts cited a historical payout of ~10% (or 18-20% of profits) versus RBI norms permitting up to 50% of annual profits; management did not commit to any increase in the payout.
• Stock trades at ~0.65x price-to-book — book value ~Rs.850/share, the lowest among HFCs vs PNB Housing at 1.4x, despite pseudo-sovereign rating and LIC parentage; CFO acknowledged the stock is "highly undervalued" but said prices are market-driven and the company's role is to perform.
• Board to discuss shareholder-reward options — CFO committed to discussing higher dividend or alternative payout options at the next board meeting, subject to board approval; bonus issue or discounted rights issue are "not in place right now."
• Investors urged a profits-based payout policy — individual investor Karan Singh asked the board to frame payout as a percentage of profits rather than face value, arguing a bonus issue is merely a shift from reserves to equity; CFO responded the suggestion has been taken, though hedged ("we have taken your suggestion possibly").

Guidance Intact, but AUM Trajectory and Execution Questions Remain

• Management targets ~15% disbursement growth in FY 2026-2027 — and is hopeful of decent AUM growth by end of FY 2026-2027; no multi-year disbursement number was given when asked about 2-3 year sustainability, with management calling disbursement growth the "first phase" that will reflect in AUM.
• No timeline committed for 10-12% AUM growth — the level the analyst raised (referencing FY 2027-2028 or FY29); the analyst also noted AUM growth has been range-bound (~5%) in recent years amid the rising rate cycle.
• Direct assignment/securitization expected in Q3-Q4 FY 2026-2027 — the DA policy is before the Board, which suggested minor modifications; approval expected at the next Board meeting; no co-lending update was provided.
• Institutional "rewriting" framework being implemented in FY 2026-2027 — to address balance-transfer-out risk; results may be forthcoming in Q3 FY 2026-2027 and Q4 FY 2026-2027.
• Affordable housing remains a stated ambition without a timeline — on the analyst-referenced Rs.1,000 crore affordable housing AUM goalpost (period unspecified), the CFO said the segment is yield-lucrative but risky, the current portfolio is negligible vs total AUM, and no separate team has been created; core strength remains the prime segment.
• Market position per NHB data cited by management — ~27% share in disbursements and ~40% in portfolio size; the book is predominantly individual home loans in the prime/salaried segment.
• Festive-quarter optimism, no numbers attached — MD & CEO Sandeep Kumar said Q3 FY 2026-2027 and Q4 FY 2026-2027 "will also be very celebrating to all our investors," tied to the Deepavali season; no quantitative guidance was provided in the closing remarks.