Release Date: February 03, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- LIC Housing Finance Ltd (BOM:500253, Financial) reported a 24% increase in profit before tax for the quarter, indicating strong financial performance.
- The company's asset quality improved significantly, with stage three exposure at default reducing to 2.75% from 4.26% the previous year.
- The individual home loan portfolio grew by 7%, comprising 85% of the total portfolio, showcasing robust demand in this segment.
- The company launched a new product in the affordable housing segment, which is expected to drive growth and improve margins.
- LIC Housing Finance Ltd (BOM:500253) successfully resolved issues in Hyderabad, which had previously impacted disbursements, and anticipates resolving Bangalore's issues soon.
Negative Points
- The company's total revenue growth was modest at 4%, indicating potential challenges in expanding its top line.
- Disbursements were impacted by external issues in Bangalore and Hyderabad, leading to a marginal increase of only 2% in total disbursements.
- The cost of funds increased to 7.78%, reflecting tight liquidity conditions and rising benchmark rates.
- The net interest margin remained flat at 2.70%, suggesting limited improvement in profitability from interest income.
- The company faces intense competition in the prime segment, which is affecting its ability to grow its loan book at a faster pace.
Q & A Highlights
Q: With the interest rate scenario and potential rate cuts, how is LIC Housing Finance managing the risk of balance transfers?
A: (CFO) We are aware of the risk and are prepared. We anticipate improvements in bond market rates due to RBI's liquidity measures. By the time rate cuts are announced, we expect to match rates without cutting margins.
Q: What is the growth outlook for FY26, considering the current 6% growth rate?
A: (MD & CEO) We expect to reach around 9% growth by the end of FY25, with a double-digit growth anticipated for FY26. This is supported by our foray into the affordable housing segment, which shows promising early trends.
Q: Can you provide details on the recent ARC sale and its impact on provisions?
A: (MD & CEO) We sold a stressed account with a principal of 510 crores to an ARC for 250 crores in cash. This account was fully provided for, so the sale positively impacted our provisions.
Q: How is LIC Housing Finance planning to address the challenges in the affordable housing segment?
A: (MD & CEO) We are cautiously entering the affordable housing market, recognizing its potential for growth and higher margins. We plan to build a separate infrastructure and team for this segment over the next 2-3 years.
Q: What are the expectations for asset quality and credit costs moving forward?
A: (CFO) We are optimistic about improving asset quality, with stage three exposure at 2.75%. We expect credit costs to be lower than our initial guidance of 20-30 basis points, positively impacting our profitability.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
