This article first appeared on GuruFocus.
Release Date: October 16, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
AUM grew 25% YoY to ?1.58 lakh crore, crossing the ?1.5 lakh crore milestone, with disbursements up 25% YoY.
Asset quality remained stable with GNPA at 29 bps and NNPA at 12 bps; credit costs moderated to 10 bps in Q2 FY27 from 16 bps in Q2 FY26.
Cost of funds reduced by 17 bps sequentially to ~7.0% due to conversion of fixed-rate liabilities to floating and a higher NCD mix.
Operating efficiency improved with OpEx to NTI ratio at 19.1% vs. 19.7% in Q2 FY26, and PAT grew 18% YoY to ?757 crore.
The affordable housing (Sambhav) segment crossed a monthly disbursement run rate of ?500 crore and now constitutes 16% of home loan originations, with plans to scale to 30% over the medium term.
Negative Points
NIM moderated by 10 bps sequentially to 3.7% in Q2 FY27 due to a 10 bps reduction in portfolio yield, and further compression of ~25 bps is expected for the full year.
Developer finance book declined 13% YoY due to higher repayments and slower disbursements; management expects growth to resume only in Q3/Q4.
Draft insurance commission guidelines could impact ~10-11% of PBT from cross-sell income, with only 4-5% offset possible, leading to a 6-7% PBT impact and flattish OpEx to NTI next year.
Salary expenses increased 19% YoY due to investments in Sambhav and non-top-6 markets, and will continue to rise YoY for the next four quarters.
Potential margin pressure and higher attrition risk in the prime housing segment if banks do not pass on repo rate hikes in acquisition pricing, which could slow AUM growth to 20-23%.
Q & A Highlights
Q: With the repo rate hike, how do you see margin trajectory playing out, and is there a risk of higher balance transfer (BT) pressure if banks don’t pass on acquisition pricing? A: Atul Jain (Managing Director) explained that the portfolio is largely floating-rate matched (88% on both asset and liability sides), so roughly 80-82% of any repo hike flows through to cost of funds and is passed on to the portfolio, meaning no margin compression from portfolio repricing. The risk lies in acquisition pricing: if banks don’t raise new-loan pricing in line with the repo hike, BT pressure could rise, especially in prime housing and LRD. He noted the company would wait to see market response over the next 5-7 days, and if prime pricing pressure persists, it would accelerate growth in the non-prime segment to offset margin pressure.
Q: What is the impact of the draft insurance commission guidelines on profitability, and can it be offset through higher fees or margins? A: Atul Jain (Managing Director) stated that cross-sell income is about 10-11% of PBT. Assuming final guidelines mirror the draft, roughly 4-5% of the PBT impact could be offset through higher processing fees, better efficiencies, and productivity, but 6-7% of the PBT impact is likely to remain. He noted that under Ind-AS accounting, fees are not recognized upfront, so a full offset in the short run is not feasible. This could also keep the OpEx-to-NTI ratio flattish next year instead of the usual ~1% annual improvement.
Q: What is the strategy and growth outlook for the developer finance (DF) book, which grew only 13% YoY? A: Atul Jain (Managing Director) attributed the slower DF growth to higher repayments from project-led cash flows coupled with lower disbursements, not a conscious strategy to slow down. He emphasized that sanctions in H1 FY27 increased significantly YoY, and sanctions translate to disbursements and AUM growth with a lag. The company remains committed to growing DF at around 15-17% of the portfolio and expects to return to the growth trajectory in Q3 and Q4, as DF remains the largest funnel for home loans and a key profit driver.
Q: How is the affordable/suburban housing segment scaling, and what are the medium-term targets? A: Atul Jain (Managing Director) said the suburban segment crossed a monthly disbursement run rate of INR 500 crore and constitutes 16% of overall home loan originations in Q2. The company follows a centralized underwriting model with regionalized operation centers, which has worked well. He expects to reach a INR 600 crore monthly run rate by year-end, take the segment to ~20% of the home loan mix in the medium term, and ~30% over three to four years, growing significantly ahead of prime to balance the mix and protect margins.
Q: What is the outlook on cost of funds given the repo hike, and how much of the fixed-to-floating conversion benefit is already captured? A: Atul Jain (Managing Director) noted that cost of funds fell 17 bps sequentially to ~7.0% in Q2 FY27, driven by conversion of fixed-rate liabilities to floating and a shift toward cheaper money market borrowings. He said the balance sheet is now largely optimized, with ~80-82% of any repo hike flowing through to cost of funds. If there are three hikes (hypothetical October, December, February), cost of funds could rise by around 60-61 bps from current levels, with each 25 bps hike translating to roughly 20 bps.
Q: What is the current status on the principal business criteria (PBC), and how is it measured? A: Atul Jain (Managing Director) stated that PBC stood at 60.49% as of September 30, 2026, against the 60% regulatory requirement, while individual home loans (IHL) stood at 50.6% against the 50% threshold. He clarified that these are computed on a regulatory basis using total tangible assets as the denominator (inclusive of all investments), not AUM. The IHL definition strips out top-up loans, VAS, and non-home-loan components, which is why the AUM-level home loan mix of 53.9% differs from the regulatory IHL figure.
Q: Why did fee income rise sharply this quarter, and how do you see it trending? A: Gaurav Kalani (Chief Financial Officer) attributed the higher fee income primarily to increased insurance income (with rising attachment rates in the suburban segment) and higher foreclosure income during the quarter. He noted that fee-related expenses are marginal (mainly charges on assigned portfolios) and will remain range-bound, while income expansion is driven largely by insurance income.
Q: Why have salary expenses risen ~19% YoY, and is this a clean run rate? A: Atul Jain (Managing Director) confirmed the increase is clean salary cost with no one-time adjustments, driven by heavy investment in the suburban segment and the non-top-six market structure over the past 1.5 years. He expects YoY salary cost increases to continue for the next four quarters as these manpower-intensive businesses are built out, after which it should stabilize on a YoY basis.
Q: How does housing demand correlate with interest rate cycles, and what drives prepayment behavior? A: Atul Jain (Managing Director) argued that housing demand is driven more by expectations of real estate price appreciation than by interest rates, citing that housing sales were highest in calendar 2024 when rates were at multi-year highs, while demand was sluggish in 2025-26 despite rate cuts. On prepayments, he noted that part-payment rates were highest last year despite low rates, and that BT-driven attrition rises during any interest rate instability (up or down), not specifically rate hikes.
Q: What is the floating/fixed mix on assets and liabilities, and what is linked to repo versus PLR? A: Atul Jain (Managing Director) stated that 88% of both assets and liabilities are floating rate. On the asset side, 25-30% of the book is linked to repo, with the balance linked to the internal PLR-based floating rate; of the 88% floating assets, roughly 54% of the total (about 60-62% of floating assets) is PLR-linked and
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
