LIC Housing Finance Limited (LICHSGFIN.BO) Q2 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to LIC Housing Finance Q2 FY '26 Investors Conference Call hosted by Axis Capital Limited. This conference may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. Now I hand the conference over to Mr. Praveen Agarwal from Axis Capital Limited. Thank you, and over to you, sir.

Thank you, Sonali. Good day, everyone, and welcome to this earnings call of LIC Housing Finance. Today with us, we have the management team led by Mr. Tribhuwan Adhikari, MD and CEO. Along with him, we have Mr. Lokesh Mundhra, CFO, to discuss the initial results, post which we'll open the floor for Q&A. I would request Mr. Adhikari to share his initial remarks. Over to you, sir.

Thank you, Praveen. A very good morning to all of you, friends, and welcome to the post earnings conference call of LIC Housing Finance Limited for Q2. As you are aware, we declared our Q2 financial results yesterday after the Board meeting. Before I start with the highlights of Q2 results, a brief outline of some of the developments in the economy over the last quarter. The RBI as in the October meeting kept the repo rates unchanged at 5.5% and retained a neutral stance while upgrading growth projections, a signal that the monetary conditions are stable and supportive of credit growth. Retail inflation has moderated sharply with the CPI printing at a multiyear low in recent months, which reinforces RBI room to remain accommodative. On the housing front, we have witnessed a good resilient demand in Q2 as compared to Q1, which was slightly muted. For this, it translates into an environment of sustained demand and improved asset quality dynamics and good opportunities to grow the market share while maintaining credit discipline in Q3 and Q4, which are traditionally the strong quarters for the company. With that as an overview, I'd like to share the key financial highlights for the quarter. Total revenue from operations were at INR 7,163 crores as against INR 6,926 crores for the corresponding quarter of the previous year, up by 3%. Outstanding loan portfolio stood at INR 3,11,816 crores at the end of the quarter as against INR 2,94,588 crores as on the same period last year, reflecting a growth of 6%. Out of this, the individual housing loan portfolio stood at INR 2,64,096 crores as against INR 2,50,879 crores, up by 5%. The housing loan portfolio infinitely constitutes 85% of the total portfolio. Total disbursements for the quarter were at INR 16,313 crores as against INR 16,476 crores for the corresponding period. Out of this, disbursements in the individual home loan segment were up by INR 13,490 crores as against INR 13,051 crores, up by 3% Y-o-Y. Sequentially, the disbursements were up by 24% as against the Q1 number of INR 13,116 crores. Disbursements in the project loans were muted at INR 378 crores as against INR 1,397 crores for the same period of the previous year. The overall project loan portfolio now stands at about 3% of the overall portfolio. We continue to be cautious and selective in our approach in this segment. Net interest income stood at INR 2,038 crores as against INR 1,974 crores for the same period in the previous year and INR 2,066 crores for Q1 of financial year '26. Net interest margins for Q2 financial year '26 stood at 2.62% as against 2.71% of Q2 of FY '25 and 2.68% of FY '26. PBT, profit before tax for the quarter was at INR 1,704.71 crores as against INR 1,664.36 crores in Q2 of financial year '25, a growth of 2%. As compared to Q1, the PBT recorded an increase of 0.32% from INR 1,699.16 crores to INR 1,704.71 crores. Profit after tax for the quarter stood at INR 1,353.87 crores as against INR 1,328.89 crores for the same period in the previous year, a growth of 2%. In terms of asset quality, Stage 3 exposure at default as on 30th September '25 stood at 2.51% as against 3.06% as on September 30th of last year. Total provisions as of 30th September of current year stood at INR 5,074 crores, reflecting a provision coverage ratio of above 53% as against a provision coverage ratio of 49% as of at the end of the quarter last year. A technical write-off of INR 133 crores has been made during the quarter. These loans were all carrying 100% provision. Also, there was a recovery from written-off loans to the tune of INR 83 crores. In the coming months and quarters, we expect the asset quality to improve further and this trend to continue. On the funding side, the cost of funds stood at 7.42% as on 30th September of the current fiscal as compared to 7.73% as on 30th September last year and 7.50% as on 30th June of last year, a decline of 8 basis points sequentially against the entire borrowing pool of INR 2.72 lakh crores. Incremental cost of funds stood at 6.73% for Q2 FY '26 as against 7.71% for the corresponding period last year and 6.97% for Q1 of the current fiscal. That is a decline of 24% sequentially in incremental cost. With this brief introduction, I would like to invite you for your queries. Thank you.

[Operator Instructions] The first question is from the line of Mahrukh Adajania from [ Nomura ].

Sir, I just had a few questions. Firstly, on growth, right? So our growth is flat Q-o-Q, then in general, seasonality should be better this quarter. And the repayment in core retail also looks on the higher side. So possibly there are BT outs. How do we plug that? How do we accelerate growth from here on? Because it's just stuck on a year-on-year basis also in that single-digit range. So what is -- how do we view growth going forward? That's the first question, especially even in core retail. I'm not even talking about developer all that.

Okay. Is that the only question, Mahrukh?

No, I have one more. Sir, also in terms of credit costs, so now we see them settling at in this 20, 22 basis points range. Is that the right way to look at it? Of course, and if and when recoveries come, then that's an additional upside. So will it be in that range, the credit cost? Or would it be slightly higher or lower?

Okay. Fine. I'll take your first question on growth. Yes, I do agree that the growth has been, I would say, flat, as you said, we are just showing growth of 5%, 6% Y-on-Y and Q-on-Q also, there's not too much of a growth. Yes, you are right, the growth, to some extent, has been hit by BT during this second quarter. If I take off -- as I take on Q2, the BT has been to the tune of INR 4,014 crores against a normal run rate of about INR 2,000 crores in a quarter, right? So in Q1, it was INR 2,195 crores. So there was a slight pressure on BT largely because of, I would say, the rates, the banks are -- and in case of BT, what usually happens when a person goes out, he gets [ new ] the -- what we call the normal lending rate, which is available, which is roughly in the -- which starts from 7.50 by and large in the industry. So that was one of the reasons. Yes, we were aware of this. We keep waiting and watching that what would be the impact. And this INR 4,000 crores of BT out in the quarter did sort of take away about INR 2,000 crores of business from our loan book. So had we decided to lower our -- what we call the rewriting rates, we could have probably saved on this INR 2,000 crores. But then again, as I said in the beginning of the year, this year is going to be a year of challenges in the sense of sort of balancing growth with the spreads and the NIMs. So we did, I would say, decide not to be very aggressive on reducing rates as a result of it, which probably took a hit. But we have done it now very recently, we have reduced our rerating rates to some extent. And we are hopeful that this BT challenge is now over. The BT challenge is now over as witnessed in the month of October of Q3, the BT is at lower levels as compared to July, August and September of Q1. So the BT challenge is over, yes. The other part is, of course, we have to grow the disbursements. The disbursements, though quarter-on-quarter have grown by about 24%, but year-on-year, the disbursements are up just by 3%. But again, the quarter-on-quarter growth of 24% gives us hope that we will do much better in Q3 and Q4. And traditionally, for LICHFL, Q3 and Q4 have been the most productive quarters when compared to Q1 and Q2. So we had in the beginning of the year given you a guidance of about 10% growth, both in disbursements as well as the book. We right now stand at 6%. So we are hopeful that the green shoots we see in the increase in disbursements from Q1 and Q2 will continue to further accelerate further. And probably by the end of the year, we'll be closer to the guided figure of double-digit growth. As regards credit cost, yes, in the beginning of the year, we had given a guidance of keeping credit costs within 15 basis points. Right now, in Q1, it was 6 basis points. In Q2, it was 5 basis points, together 11 basis points. But if you see though our asset quality has been improving, we have been making a slightly higher provision. Our PCR currently stands at 53%, whereas at the end of last year, it was at 49% as in the last quarter, it was 51%. And that is partly because of some of the, let me call it, the principal or let me say, the -- what we call is -- we have something called the management overlay. Though traditionally, it means it is at the discretion of the management to decide how much to provide and how much not to provide. But here in this company, we have formulated this or we have had a written down 6-point formula on what are the management overlays we are going to provide for. So there's not too much of a, I would say, management discretion on that. And because of that, some of the stressed loans, which are outstanding for a longer period of time, even though as per the ECL, we did not require to provide for them. But as per the formula we have fixed for ourselves, we have to provide for a little bit more. So the management overlay has been additionally provided in the quarter, which has resulted in a better PCR or bigger PCR by an increase in the PCR by 2%. So probably that was one of the reasons why our credit cost appears to be slightly higher. But going forward, I believe we have made whatever provisions are required to be made. The asset quality is improving quarter-on-quarter. A lot of efforts have been taken place to get these recoveries, especially the legacy loans, which form a major portion of our Stage 3 portfolio to get these resolved either through legal methods, SARFAESI or through the [ NCLT ] or through the DRTs and also through conciliation negotiation and settlement. We expect in the remaining 2 quarters, Q3 and Q4, at least 3 big loans to be settled. They're very close to resolution. And almost literally, I would say, the final stages of resolution. The final small formalities and modalities need to be worked out. So going forward, I'm pretty sure the, I would say, credit costs would be further reduced. And I think we would be able to achieve the guided range of 50 basis points, which we had alluded to in the beginning of the year.

Got it, sir. Sir, what is the new rewriting rate now that you've adopted now?

Well, it is the lending rate plus 50 basis points, by and large, by and large.

What would it be?

The lending rate is about 7.50. So 50 basis points would mean closer to it.

Okay. So there's still a difference with banks, but it's lower than earlier. So it's helping business. That's correct?

Yes, it will help BT out. It will help in containing and reducing BT out. Yes, of course, we are at a very peculiar situation. The portfolio we deal in and the segments we deal in are exactly the same ones which banks are lending to. And banks, since everything is repo rate dependent and banks are very aggressive also, their rewriting rate for them, any BT in gets written at the normal lending rate of approximately around about 7.5%, 7.6%. It will be difficult for us to match that. We cannot go so far low. But yes, we have taken a conscious call that, yes, we need to be competitive. We need to somewhat put the brakes on the BT out, which was slightly at elevated levels in Q2. And the October results tell us that, yes, I think we have been successful. We are now back to normal.

The next question comes from the line of Renish from ICICI Bank.

Just 2 things from my side. One on the -- so just 2 things, one on the NIM. So from last 2 quarters, we saw a significant reduction in incremental cost of borrowing. And I do understand that it will not reflect in NIM immediately. But just wanted to check when do you see the book cost coming down materially and drive NIM higher? And also does your PLR is directly linked to your book cost because in that case, NIM will structurally remain low. At the moment your book cost comes down next quarter, you have to adjust your PLR and which will result in asset yield compression. So how do you see the NIM trajectory in near term, say, next 2 to 6 quarters?

Yes. Right now, the NIMs are at 2.62% for the quarter, right? And the beginning of the year, we had given a guidance that NIMs would be in the range of 2.6% to 2.8%. Now as regards the transmission of the lowering of the PLR, we lowered the PLR in the month of April. 1/3 of my book, that means out of INR 15 lakh loan portfolio, number of loans, INR 15 lakh loans, lakhs were on monthly reset. So they got reset from the 1st of April itself. The rest 2/3, that means INR 10 lakh loans got reset from the first day of the next quarter because they were on quarterly reset. So the entire reset on the INR 10 lakh loans happened on the 1st of July. So the full impact of the PLR reduction was felt in quarter 2 because the reset happened in the -- from the 1st of July on the remaining 2/3 of the portfolio. So I think as far as the reset is concerned, all loans have been reset. There are no further resets which are going to take place. So I believe this 2.62% NIM, which we are seeing at the end of Q2 is the bottom that we have seen. I do not see any reason why there should be any compression on NIMs any further. Going further, as the cost of borrowing decreases, as far as the cost of borrowing is concerned, my borrowing book of INR 2,70,000 crores, we divide into 2 parts. 53% of my book, the borrowing is at fixed cost in the form of NCDs. So that is not going to get repaid. That will only happen when the NCDs go out of my books. 43% of my book is linked to the repo. These are basically bank borrowings, where I do get the benefit of reduced repo rates. So this, I would say, a compression in the cost of borrowing, it has -- part of it has come into Q2 and some -- a little bit more will be transmitted in Q3. So we can expect the incremental and the cumulative cost of borrowing, the incremental cost of borrowing right now stands at 6.85% and the cumulative cost of borrowing stands at 7.42%. We expect -- of course, there has been a compression, but we expect it to compress a little bit more further, probably by 5 or 6 basis points further in [ Q ]. So that will also translate into a better NIM, I would say, in adding to the NIM. So going forward, I believe the NIMs, the range which we had given 2.6% to 2.8%, we shall be maintaining it, 2.62%. I believe the bottom of the curve, which we are experiencing right now at the end of Q2. Going forward, I expect the NIMs to improve slightly.

Lokesh Mundhra, CFO, I just want to add something to it. So last quarter as on 30th June, our cumulative cost of borrowing was 7.50. Now it has come down to 7.42, reduction of almost 8 bps points. If you compare the quarterly basis, the last quarter for the deposit last quarter, incremental cost of borrowing was 6.9%, it has come down to 6.73%. So there is a reduction of 24 bps. And this year almost INR 15,000 crores, INR 14,000 crores to INR 15,000 crores [ entities ] are going to be repriced by end of March. So we are expecting 10 to 12 bps further cut in our cumulative cost of borrowing.

Got it. Okay. Just a follow-up on that. I mean, the moment your cost of borrowing comes down, how often you sort of reassess the PLR rate? I mean, is it quarterly, 6 monthly? How is it?

The review is on periodical basis. Our PLR is repriced based on our cost of borrowing and other factors. On quarterly basis, we review it.

Sorry, sir, I didn't hear that. On quarterly basis you said?

We review it on quarterly basis and PLR after reviewing if cut is required and it all depends on the cost of borrowing and other factors.

Got it. Got it. And my second question is again on the growth side. So honestly, our growth is one of the lowest in prime housing despite such a strong track in operative pricing. And also I'm just referring to Slide #12 where the ticket size is increasing, however, [Technical Difficulty] have been lower in recent past. So what are the plans to accelerate logging and eventually [Technical Difficulty]? And also do you feel -- is there any need for a structural change we are doing the business considering the increased competition? I mean, do you feel there should be any incentive or a branch structure as to change to [Technical Difficulty]?

Yes, Renish, coming to growth, yes, that is the, I believe, the biggest point of worry for us as management also. Company have stagnated over quarters, but I believe over the last few years in spite of growth we envisaged or thought about have not come about. Yes, there is a lot of soul searching going on within the company what do we do? What do we do with the distribution model? Is there something done in the distribution model? Is there something to do structure of the company? And towards that, the Board has guided us or Board has asked us to go in for a comprehensive relook at the entire structuring of the company in terms of the offices, the locations, also in terms of the distribution channels and what we need to do. And we are right now in the process of onboarding a consultant for this process. So probably 3 to 6 months, we will be going through this entire exercise in conjunction with the Board and having a look at the overall structure and seeing that what are the -- what are the areas which are holding us back, which are the areas where we need some restructuring, some change, some slight tweaking or major rehaul, overhaul. So that is the process we are going through. For the current financial year, if you may ask me, 2 areas, 2 issues which we need to address directly. See, we are a company which is overly dependent on agency business. About almost 87% of my business is through agents. As you know, these are not tied agents in the sense they are not tied to our company alone. They are freelancers and they do business with other companies and other lending institutions. So the question is how do we sort of get more business out of them or rather how do we increase their productivity, how do we make sure that the businesses which they are diverting to other companies comes to us and they send that. That would include, of course, one is the cost factor and the rates. And of course, the other part of it is the tax and various other formalities which are also associated with it. So that we are doing. And the other part of it, we are also trying to develop an alternate channel. In fact, we are working on 2 alternate channels. One is the lead business. This is a business which we were not very much focused on. We started off last year. And the whole of last year, we did about INR 800 crores of business through this channel. This is a direct business channel. We get leads through various sources, online and offline. Now these lines are funneled or aggregated together and pushed down the chain to our operating offices who then follow up on these leads and convert them into business. Last year, we did INR 800 crores through this lead channel as we call it. This year, we have already crossed INR 750 crores in H1, which augurs well for us. Target for this year is INR 2,000 crores through the lead channel. So this is another channel which we nurture and we see a lot of potential and scope in this channel. It helps me also because it reduces my -- the cost also because I don't have to pay commission to the agents. So this is a cost neutral channel. So that -- and the other, we also have a subsidiary called LICHFL FSL, Financial Services Limited, which is a subsidiary of LICHFL, which was formed basically for doing sort of housing loan business and other business [indiscernible] insurance, life insurance. It was offered on the structure of HDB, the housing HDFC sales channel. So that is right now contributing to 10% of my business. We are strengthening the channel. We are after them. We are asking them to go in for further recruitments and increasing their marketing force. Here, we are looking at getting 15% of our total business to come from the FSL. And going forward in the next year, we want to them to contribute at least 25% of our business. So these are what we are doing. On the retail front, quarter-on-quarter, yes, there is a 24% growth in the business, Q1 to Q2. So that these green shoots gives us hope that Q3 and Q4, which are traditionally strong quarters for LICHFL, we will see better growth in Q3 and Q4. Only worry is the construction finance or the project finance channel, if I may call it, where the performance has been very, very muted this year as against INR 1,397 crores in H1 of last year, we have only been able to do INR 156 crores for H1 of the current fiscal. So there is a big dent of almost about INR 900 crores there, INR 800 crores, INR 900 crores there. But yes, this is -- as we said, we continue to be cautious and selective in our approach to this construction finance segment. But yes, we have a strong pipeline of undisbursed sanctions, which will be coming over there in Q4. So hopefully, this channel contributed about INR 4,000 crores of business last year, the construction finance channel. This year, we are hopeful that we are going to surpass this, not by much, but we are targeting at least INR 5,000 crores of business from the construction finance channel this year, which would come majorly in Q3 and Q4. So that is the guideline for -- yes.

And Renish, silver lining is -- last year in the same quarter, average yield on the project finance was 10.35%. So that has increased to almost 12.68%. So there is a increase of almost more than 200 bps in the project finance yield. So this is selective cost on case-to-case basis. That is why our margins are, in fact we are focusing more on margins.

The next question comes from the line of Kunal Shah from Citigroup.

So again, just harping on this question of PLR. So the last cut was in April and thereafter, we have seen rate actions in terms of the repo. And we are seeing the incremental cost of borrowings also coming off like almost 16-odd basis points, maybe 24 basis points this quarter itself. So would we be revising the PLR or maybe we are good enough with the rewriting rates, new rewriting rates and there is no need to change the PLR at this juncture because we want to protect the margins? Yes.

Yes, Kunal, yes. At the beginning of the year, I said this year is going to be a difficult year for us because we would be required to balance our growth of books, growth of disbursement with the NIM and the spreads, right? So this is what we had said in the beginning of the year. And I had also said that push through the wall, I would prefer to protect my margins and NIMs rather than going for growth of business at what -- which is not very profitable to the company. We have been doing that. Yes, we have cut our overall PLR by 25 basis points across the board. So you may say this is less when compared to the 100 basis point cut in the repo rate. But then the repo rate transmission does take time. Yes, 24 basis points incremental cost of borrowing has gone up by 24 basis points quarter-on-quarter and about 90 basis points from the beginning from year-on-year. So the full transmission would not been felt. Now going forward, as I said, we would like to protect our margins. And while answering to Renish, I had said my construction finance portfolio is down this year, almost INR 900 crores deficit. But again, that is a conscious call we have taken. Banks are very aggressive on this front. They are giving construction finance loans almost at home loan rates, which we are not comfortable doing. We would like to have some margins in the project and the construction finance business, as CFO said. The margins in the CS business are almost what our yields are almost 12%, 12.5%, right? These have gone up from almost 11% of last year. So yes, we would like to do business, but definitely, we would like to do profitable business. So going forward, I do not -- until and unless something drastic happens on the repo rate front in probably December or something of that sort, I do not see any scope for any further reduction in rates. Also considering that we have very recently in the last month, in the month of October -- September -- October only, we have sort of reduced our rewriting rates quite significantly, almost by 75 basis points. Our early rewriting was at a flat 8.75%. Now we are offering them at the lending rate plus 50 basis points, which roughly translates to 8%. So given these 2 reductions in the rewriting rates and the overall PLR, I do not see any scope for any further reductions.

Got it. Perfect. And secondly, when we look at it in terms of the overall BP out of INR 4,000-odd crores, what was the request that had come in and how much we have been able to retain? And finally, we saw this BP out of INR 4,000 crores?

I don't have the figures, Kunal, honestly, what were the total number of applications received, how much did we retain and how much went out. I don't have the figure exactly with me. That can be found out. But yes, overall, the BT out was at a...

Yes. Just wanted to get the sense since you mentioned like now it will be much controlled with this newer rewriting rate. So just wanted to ensure that maybe was maximum the BT out was already there and maybe now you would be able to retain some part of it and that's giving you the confidence.

Definitely Kunal. Right. Because at 8.75%, even if we had tried to retain, I don't think we could have made much of an impact when banks were offering at 7.5% and it is difficult to retain a customer at 8.75%. That you would also allude to. But with the reduction in BT rates, we have seen it in October. Our October BT out has reduced significantly when compared to July or August or even September. And I think at 8% roughly, we should be able to retain much, much more as compared to what went out. See, normally, our run rate was about INR 2,000 crores per quarter, yes. So in the last quarter, it was INR 4,000 crores. So straight away, meaning that our BT out had doubled. So I lost almost about INR 2,000 crores. Okay, out of this INR 2,000 crores, even if I assume that INR 500 crores would have got -- we would have gone. At least INR 1,500 crores definitely because of higher rates would have taken place. So probably my book would have grown by INR 1,500 crores more had I lowered my rerating rates at the beginning of last quarter. So I think that rerating rates reduction has taken place. And Q3, I am expecting the BT to come down to normal at INR 2,000 per quarter. I expect that to be at that level.

Got it. And lastly, in terms of the improvement in GS3 and GS2, is it largely retail because of this focused collection side, which was there post Q1? Or there is some element of corporate recoveries in this improvement in GS3, GS2?

Yes. As the asset quality has been improving quarter-on-quarter, past 4, 5 quarters almost, yes. And this is -- see, if you understand the recovery thing is not that I do something this month and I get results next month. Especially if you look at our entire book, most of the Stage 3 is pertaining to our legacy loans, particular 2016 to 2019. And some of these loans, about 10, 12 of these loans are big loans, INR 400 crores and above. So it does take time, especially the legal process, as you know, in India, it takes time, whether it be the SARFAESI method or whether NCLT or DRTs, these all things take time. So this is a continuous process, which has been going on and the improvement in the asset quality which you see is the result of what has happened probably 3 quarters back or 4 quarters back. So there is no easing on on the pressure. We are increasing the pressure, in fact. There is another thing which we have not done so far is there is this willful default guidelines issued by RBI. We have not yet initiated this. But for the, I would say, very obstinate and tough people who are not willing to negotiate, not willing to settle, not willing to talk, I think we need to initiate the process of declaring them full defaulters and all that is basically to put on pressure. So going forward, I feel this recovery from NPA will improve. In this quarter, if I see that compared to the June quarter, my Stage 3 has come down by INR 742 crores, so recoveries are happening. Going forward, I am hopeful that 2 to 3 big loans and when I say big loans, I mean INR 200 crores and above, 2, 3 big loans to be settled. They are very close or almost on the verge of settlement or final agreement between us and the borrower. One is in NCLT. We are expecting a decision any day now in the next 14, 15 days. So these will all help us in improving the asset quality and reducing the credit costs.

Got it. No, I was just asking like this quarter also, was there any resolution or no in Stage 2 and Stage 3, the improvement was it from the corporate or it was from retail?

No, it was both. Corporate, I think there was one big loan of about INR 140 crores, which got resolved. But the whole -- the entire thing did not come. I think we got about INR 60 crores of that. The rest is to -- because it is scheduled, I would say, repayment. The rest of it would come in Q3 and Q4. But...

Okay. So this was in Stage 3?

Stage 3. Stage 3.

Got it. Got it. Perfect. So only INR 60 crores in Stage 3 from the corporate. Otherwise, balance was largely from retail?

Yes. Yes.

[Operator Instructions] The next question comes from the line of Abhijit Tibrewal from Motilal Oswal.

And sir, before I do that, may I request the operator that the operator lines and the participant lines are coming great, but the management line, at least for me is not really great. I don't know about the other part which [indiscernible]...

Yes. I'll try to come closer to the phone and speak so that you can hear me loud and clear. [Indiscernible].

[Indiscernible]. So sir, just two questions. First thing is, I mean, just a clarification. In terms of the PLR changes that we have done total until now, right, since the time the repo rate cuts have started, how much PLR cut have we taken? Is it 25 basis points or cumulatively 50 basis points, one 25 basis points effective from 1st April and the other one was 28 April, thereabouts, is it? Just a clarification on that front.

Okay. Abhijit, let me -- we have made only one -- we had changed the PLR only on. That was in the month of April, where we reduced the PLR by 25 basis points, right? There's been only one cut of 25 basis points. Now what has happened that my book is divided into 2 parts. There are about 1/3 of my loans, almost 5 lakh loans, which are on monthly resets. So 5 lakh loans got -- the PLR got reset from the 1st of April. The moment I declared my PLR cut, they immediately got repriced, 1/3 of my book. 2/3 of my book is on quarterly reset. That means the PLR reset happens on the first day of the next quarter. Since the cut was somewhere in the mid of April, the PLR got repriced from the 1st of July. So almost 10 lakh loans got repriced from the 1st of July. So right now, 100% of my book has been repriced by 25 basis points.

Got it, sir. So logically speaking, I mean, given that the entire back book has been reset, now what we are going to see is yields might stabilize till the time you take your next PLR cut and cost of borrowing should keep improving?

Yes. Yes, cost of borrowing should improve. Transmission the cost of borrowing should improve further. So expecting that another 10 basis points reduction in the cost of borrowing by the end of the year.

Got it. And sir, then my second question was, if I look at LIC Housing as a franchise for almost this decade from maybe 2012 to 2022, we used to operate at lower margins, still deliver respectable ROAs and because of that growth which was there and which used to give you leverage in the balance sheet, we still used to deliver very respectable ROEs. So essentially, I mean, we were still delivering growth and healthy profitability. Right now, I mean, I'm sure -- I mean, early in the call, you have made it very clear that we will prioritize profitability over growth. But can't we kind of do some trade-off in terms of margins to maybe at least get to a respectable double digit growth? Because when I look at it, right, since maybe 2020, the company has not been able to get to a double digit growth. I appreciate the fact that it's a much, much bigger franchise now. So growing at that same rate might not be possible. But I mean, you would have seen, right, I mean, all the participants who have participated on the call today, I mean, all of them have been asking about how -- what steps can be taken to spur growth. And lastly, sir, the data keeping question, you usually share the segment-wise Stage 3 on the earnings call. So if you can also share that with us.

Yes, Abhijit, as I said during my reply to Renish and others, this is one question which has been bothering me, growth. Yes, I do agree to what you're saying that we are a big company, INR 3 lakh crores of AUM. So definitely expecting me to grow at the same rate as some of the smaller companies, it is not possible. But definitely, this growth of, what, 7% or 8%, whatever you call it, not acceptable at all. This is the biggest question which is worrying me, which is worrying the Board as to how do we grow. Yes, one of the methods, I would say, slightly what I call it, inorganic method is probably going for co-lending or direct assignment. This is something which we have not at all tried in the past. All our business is totally what we directly source either from agents or through direct business or whatever. So definitely, one, there is a scope for getting into co-lending arrangements and going in for direct lending or direct assignment, which can also boost my book. Yes, that is something which we are exploring. Right now, we are framing a co-lending and a direct assignment policy, which we will get approved by the Board. The Board also agrees that, yes, we need to have a policy and need to explore this particular channel of growing the book. So probably that is one method which we need to deploy or employ, if you may call it, yes, definitely. And the other thing, as I said, I think we really need to have a relook at the organizational structure we have, the various marketing verticals we have. Do we need any change? Because something is sort of pulling us back, not allowing us to go because one thing is for certain. I will not say that there is no demand for housing loan. There is definitely a demand for housing loan. It is only going to grow as I see it, it is only going to grow as the economy grows and the sentiments turn positive. So definitely, we really need to do something about it. And yes, this year also, I do not say that we are going to do something exponential in the remaining 2 quarters. We would be very happy to achieve a double digit growth, both in the disbursement and in the book by the end of March. And traditionally, quarter 3 and quarter 4 are good quarters for us. Last year, it was slightly subdued because of certain problems in Bangalore and Hyderabad, 2 of our major contributors, 2 of the major regions contributing to our business. So this year, we -- those are -- both these regions are back on track. So this year, definitely, these 2 regions will contribute much, much more as compared to Q3 last year and partly Q4 of last year. So there will be growth, 24% growth from quarter-on-quarter. We want this growth to go up further. So hopefully, there will be growth in business. But again, again, even a double digit growth, I not think would satisfy me. We need to look at ways and means of coming to somewhere around probably 13%, 14%. And I think that is doable with a little bit of structural changes, probably some more rethinking, we look more brainstorming at the corporate level and pushing it down the line. So we are engaged. We are worried. And hopefully, we will be able to turn down the corner in probably 1 or 2 years.

If you could just share the segment-wise Stage 3?

Yes. Segment-wise, yes. No, you want it separately for IHL, et cetera?

Yes, sir.

Abhijit, just a minute, sir.

[ Abhishek ], you want provision figure?

No, sir, if you could share both. One is the Stage 3 of IHL, NHL and project loans.

For individual, it is 1.15% only. Project plus non-housing corporate is 24.88% and non-housing individual, it is 4% only. And total it is 2.51% of the total portfolio.

And sir, what is the non-housing individual?

Non-housing individual only. Non-housing individual right now we don't have breakup of non-housing individual. Let's say -- just let me check it.

Sir, you said 2 numbers. One was IHL 1.15% project plus non-housing commercial, which is 22.88%. And then you said a third number, which was non-housing individual.

That's right. The 4%. 4%, 4%.

The next question comes from the line of Prithviraj Patil from Investec.

So my question was what is the incremental yield that we are seeing in the business? And -- yes. Sorry. What is the incremental -- yes, if you can hear me? So what is the incremental yield for the new disbursements?

Incremental yield for this first half is 8.78% -- and 8.78%, incremental yield as on 30th September '25.

The next call comes from the line of Shweta from Elara Capital.

Sir, just to close the argument on PLR front. So now given the fact that larger part of the book is priced at 8% level, so these are the comfortable levels for you wherein you are confident that BT outs will be restricted and therefore, no further PLR tweaks are required. So is this -- is my understanding correct?

Yes. We have repriced both our existing book as well as the rewriting rates, right? The existing book is repriced by 25 basis points and our rewriting rates, which were at a flat 8.75% have been repriced to 50 basis points above the fresh lending rate. So roughly around about 8%. I do not say that this will result in no BT out because, again, BT out, if you see the biggest problems in BT out when a loan goes out of my book, it enters the other institution as a fresh loan. And naturally, the fresh loan rates are lower than the existing loan rates. So for example, if I take -- supposing a loan goes out from my book to State Bank of India, the lending rates at State Bank start at 7.5%. So, probably he would be getting the loan repriced at probably 7.6% or 7.7%, whereas my repricing is at 8%. So there could be some customers who would go up because of this 20 basis point difference or 25 basis point difference. But by and large, I think customers are not so, I would say, sticky on 20, 25 basis point difference if their experience has been good in the existing company. So -- but I'm pretty sure that this huge uptick in the BT out -- doubling of the BT out, if I may say, because as I said, the average run rate was INR 2,000 crores and in Q2 we witnessed a run rate of INR 4,000 crores. So this doubling of the BT out will not happen. We expect this to come down to either the original levels of INR 2,000 crores or even further probably to INR 1,200 crores, INR 1,500 crores level.

Shweta, our rates for the new business is very competitive and it's matching with the other financial institutions like bank and other [ SFCs ]. So if what sir is -- what MD is giving example, if the customer is having a similar CIBIL score is [ offered ] 7.50, so if other institutions are offering a 7.50 or 7.65 [indiscernible], but definitely there is some documentation cost. And that documentation cost is almost 40 to 50 bps. In that case, about 7.5 and our rewriting rate is just 50 bps above the fresh lending rate. So it's a matching only. So I don't think our business will transfer out. Definitely, we are very confident that in this quarter, this BT will be restrict.

Fair point, sir. Sir, second question I had in terms of ECL. So when is the annual reset exercise for us as far as ECL is concerned? And what is the period of consideration for us for those PD, LGD calculations?

No, Shweta, PD and LGD is done on a quarterly basis, right? Every quarter, we run the ECL model. And our PD, LGD is calculated on a 10-year database. So for example, if I take the September quarter, so September quarter 2025, that means my thing, the assessment of PD and LGD would be on business done from the 1st of October 2000 and what, minus 25, minus 10, 15 from the 1st of October 2015 to the 30th of September 2025. So every quarter, 3 months would go out and 3 new months would be added to calculate PD and LGD. And what was the first part of your question?

Sir, when is the resale reset exercise that happened?

Resale reset. Can you just explain that?

Sir, how many months you consider for calculating the expected credit loss like backwards and ahead, what are the periods into consideration for calculating the expected credit loss?

As I said PD, LGD is on a 10 year from the end of the quarter, 10 years back, we take the go. And any loan -- all loans pertaining to those last 10 years are taken and based on their experiences, the PD and LGD is calculated. And the ECL is based on the PD and LGD, ECL is calculated on the current loan book. Does that satisfy you?

Yes. You answered the question by mentioning 10-year period. Got it, sir.

The next question comes from the line of Kushagra Goel from CLSA.

Most of the questions are already...

I'm so sorry to interrupt in between, sir. Your voice is not audible.

Just, sir, could you give some more color on the competitive intensity? So I know we have talked a lot about growth. But if you could just talk about more how you see the PSU banks behaving going forward? So that would be helpful. And secondly, if you could give some more color that I know we are not reducing PLR and all the impact is there, but can the incremental yields come down further from current levels? How should we think about it?

Yes, Kushagra, right? As regards what PSU banks are going to do, I don't know. I do not know whether I can take a call on that. But one thing definitely, PSU banks are very, very, very aggressive rates at the moment. I do not know why the aggressiveness has come about. Is it something to do with reducing their unsecured lending portfolio because housing finance, as you know, is 100% secured portfolio backed by solid collaterals. But yes, what we are seeing is PSU banks are very, very aggressive, right, offering rates as low as 7.35%, at least 2 banks I know offering new loans at 7.35%. Whereas most of the bigger banks, PSU banks are at 7.5%, where we are exactly right now. So I believe we are competitive as far as that is concerned, insofar as that is concerned. So yes, and unfortunately, we're a housing finance company. We're not a bank. But the segment we operate in, if you look at my book, it is almost 85% salaried and probably 10% self-employed and another 5% to the non-housing corporates, et cetera. So, the segment we operate in is exactly the segment in which the banks are operating. So quite naturally, there's a lot of competition. There's a lot of pressure and banks are very, very aggressive, as I said, even in the construction finance book, which we are not doing very well at the moment. Banks are very aggressive in the construction finance space also. There are cases which have come to me where PSUs have offered rates which are almost at par with the individual lending rates and these are rates being offered to construction finance companies, which we are not very comfortable with. We would not do. So yes, the competition is intense. The competition is quite aggressive. Nothing we can do right now. Overnight, is not going to change. I cannot ask my people to stop selling to salaried customers and totally focus on the self-employed. Yes, we are trying to change. We are trying to change our product mix so that we are a little more, I would say, focused on the self-employed segment. And the other segment, as I said, affordable, we explored it last year. We are very, very slow, cautious on that segment. We are growing the book, but very slow pace and we are comfortable with that. We don't want to take an aggressive stand on that and enter into problems. We are first trying to set up a new team, completely separate team for the affordable segment, something like what PNB has done for its Roshni vertical. It will take 2, 3 years' time. I do understand that. But yes, at the moment, competition from the public sector is very, very intense. And the other part, what was the second question, Kushagra, I just forgot.

That was on the incremental yield of...

Yes, the incremental yield...

Kushagra, yes, so incremental yield for this H1, it is 8.78%. So we don't see any downside in yield part. But on the other side, on the cost of -- incremental cost of borrowing, definitely, we are expecting 10 to 12 bps downside. So definitely, our spread would be in line with our expectations.

The next question comes from the line of Rajiv Mehta from Yes Securities.

Most of my questions are answered. But just 2 things. First on the borrowing side, this borrowing which you sourced in Q2 at 6.73%, can you tell us the mix? And also can you tell us the fresh pricing for NCDs for bank loans and whether the whole repo based on the bank loans -- on the existing bank loans has already come through?

So [ Rajesh ], our borrowing structure is almost 65% is fixed, what we have raised through NCDs and almost 45% is floating. So whatever we have raised funds at a floating rate, mostly from the banks only and total average borrowing cost is 7.42%. And this year, definitely, we are focusing more borrowing through banks only. And this quarter, almost 92%, 93% we have borrowed from banks.

Okay. Okay. But can you just quote the fresh bank loan pricing? I mean, is it below 7% and how much it is for the new facility that you would have taken from banks? And similarly, if you would also raise 3-year 39 months NCDs in the market right now, what will be the cost of NCDs?

Yes. So bank this quarter, we have borrowed banks between 6.75% to 6.90% and between 6.75% to 6.90%. And NCDs, we have raised around 6.89% to 6.90%.

Okay. And just one last thing. In terms of new home loan pricing, which I think we last reduced in June by 50 basis points, so given the fact that we want to preserve margins even at the cost of growth, if the competition were to become more aggressive in terms of new loan pricing, we will not follow competition. That seems to be the approach. Is that understanding right?

Yes. No, it's not 50 basis point cut. We have cut the home loan rates or PLR, if you may call it, by 25 basis points in the month of April. There have been -- after that, there have been no PLR cuts.

No, sir, in June -- I think in June, you reduced the new loan pricing by 50 basis points to 7.5%.

New loan, yes, new loans.

Yes, I'm talking about new loan.

Yes. And new loans, we brought it down to -- by 50 basis points to be competitive with the rates being offered by the PSUs, which is at almost 7.5% by and large. And we are also at 7.5%. So that has already been done. Now assuming the same scenario continues, I do not see any scope for any further reduction in the pricing for new loans. I think we are fairly competitive enough. We don't -- I don't see any -- we can afford to bring it down any further because as I said in the beginning of the year, we need to balance growth along with our spreads and margins. And given a choice, I would like to protect my spread and margins as compared to going aggressively for, I would say, nonprofitable growth. So we intend to follow that same trajectory. And I think as far as I am concerned, the new loan rates are where they are and we would like this to continue for the rest of the year until and unless there's something majorly happening probably in the December MPC or nearby or somewhere near that.

[Operator Instructions] The next question comes from the line of Bhaskar Basu from Jefferies.

I had 2 questions actually. So firstly, what would be the yield on the portfolio of home loans? You give the total portfolio yield of 9.2%, but the home loan yield for the portfolio? And also just wanted to understand how does this whole rewriting thing work? Someone is looking for a balance transfer, you offer an 8% yield for them?

Yes. And I'll come to the rewriting part regards the sort of yields, CFO sir will -- CFO, he will answer it. Coming to the rerating part of it, yes, over a period of time, the loans would have been given at various rates of interest and depending on the increase in PLR or lowering of PLR, the rates would have been reset either monthly or quarterly. And right now, the customer would be standing with a particular rate of interest. Whenever he comes to us for a rerating request, we do assess the CIBIL score because rerating rates are not flat 8%. They are dependent on the CIBIL score of the borrower as on date. So we will be assessing the CIBIL score and the other risk factors associated with the loan. And based on that, we would be giving him a rewriting rate at which we would rewrite his loan. Broadly speaking, the rerating rate is at 50 basis points higher than the lending rate. Lending rate right now, lowest lending rate is 7.5%, so add 50 basis points to that. So that comes to roughly 8%. Does not mean that everybody gets rewritten at 8%. It would also depend on the CIBIL score and other risk factors associated with it. So that is about the rerating. And as regard the yield on the various...

Yes, Bhaskar. So segment-wise, as of 30th September '25 for individual housing loan, it is 9.24% and for non-housing individual is 10.22% and for non-housing corporates, including project finance, it is 10.52%. So average is 9.40% for -- as on 30 September '25. On an incremental basis, so segment-wise, IHL is 9.03%, non-housing individual is 10.21% and non-housing corporate including project is 10.47%.

Right. So my corrected question was that, say, your overall housing portfolio is sitting at around 9.2%, I understand that there will be various borrowers at different categories of CIBIL score. But this is still fairly above -- well above your rewriting rate. So don't you see a lot of these borrowers coming for reset or at least coming down to that 8% or whatever the rewriting rate? So my question is whether this back book continues to reprice going forward, even though you may not have another PLR cut?

For rewriting, that 8% is a minimum rate. If the customer is having the highest CIBIL score of more than 800 points, in that case, we are offering at 8%. For new business, it is 7.50%. But it depends on the CIBIL score of the customer. 8% is a minimum rate for rewriting.

That I understand. My -- yes.

I do agree, yes. By reducing the rewriting rates, the question is, do we expect all people to come to us for rewriting? No, that usually doesn't happen. That usually doesn't happen. So if you take the experience of Q2 out of a book of 15 lakh loans, a total of 13,715 customers took a BT, right, transferred their loans from us to the banks. So by and large, I would say the rewriting would happen for what in a quarter, about INR 1,000 crores, INR 1,500 crores of business. So it is not that my entire back book is going to get repriced because of the rewriting facility which I offer. But yes, definitely people will be coming and anybody who is probably at say 8.5% or more than that would definitely want to reprice this loan at 8% or near abouts.

Right. So -- I get it. So basically, there is some repricing which will continue, obviously, not to the extent of the PLR cut, but at least a reasonable portion of your back book will contribute to some repricing?

It's a call. Rather than have INR 4,000 crores of business go out of my books completely where I earn nothing, it's better to get something at 8% given my cost of borrowing at 6.7%, 6.75% on at least 1.25% rather than nothing at all.

Understood. And just one last question. On the OpEx side, we saw a sharp decline in the employee cost. Any specific reason for that? And how should we think about sustainable employee cost, et cetera? So it was like INR 140 crores versus...

Bhaskar, last year was, let me call it a year of wage revision and [indiscernible], right? The wage revision of all the employees in the company was due. So we were making provisions all through last year. Every quarter, we're making provisions for this, what we call -- what you can call it, the supposed increase in the salaries of the employees. So now that the wage revision has been done, the salary cost is now fixed. There is not going to be any other -- there is no impending wage revision until the 1st of August 2027. So no provisioning for wage revision has been made. So that is the reason why the cost -- salary cost has come down.

But say, for example, between 1Q and 2Q, 1Q was like INR 160 crores, 2Q was INR 140 crores. So where is the kind of -- how should we think about the run rate actually, whether 1Q is a better benchmark or 2Q?

Salary cost, you have the breakup? Yes, just -- so this is basically the impact of provisioning only. So I don't see any reason why -- just a minute, just give me -- yes. The employee cost. Employee cost, the actual for Q2 FY '25, '26 was INR 143 crores, right?

Yes. And 1Q was INR 160 crores. INR 160 crores. So even between 1Q to 2Q, we've seen a INR 20 crore drop.

I think the employee cost would remain at the current levels, I think, INR 143 crores at the most, probably INR 150 crores, not more. There is nothing which is going to get added to employee cost, except probably in Q4, where we do make provisioning for gratuity. I think Q3 is going to be in the INR 150 crores range. It should not be INR 160 crores, which is what it was in Q1. It would probably be in the range of INR 150 crores. Nothing in employee cost -- nothing has been done which is going to increase in the employee cost. No new hirings or anything of that sort.

The next question comes from the line of Subramanian Iyer from Morgan Stanley.

My questions have been answered.

Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference back to the management for closing comments. Over to you, sir.

Yes. Thank you. Thank you, friends, for your questions and the concerns which you have shared for the company. Yes, overall, the company is doing well in all fronts, except the growth front, as all of you alluded to. And as I said during my conference call, this is something which is worrying us, not only the management, the Board also. And this is something, if I may call it this, we need to get out of this trap and move forward towards an assured path of growth which continues quarter-on-quarter. We are working towards that on various fronts. Q3 and Q4 traditionally are very strong quarters for the company. And going by the situation in the market at present as far as demand is concerned, as far as all the other factors are concerned, I think are all positive. There is nothing which I see in the horizon which is going to sort of retard our progress or stop our progress from growing aggressively in these 2 quarters. As I said, Q1 to Q2, we have seen green shoots already, especially on the retail front, the 4% growth displayed from -- in Q2 as compared to Q1. So I believe that Q3 is going to be even stronger. And going forward, the company expects to do better, both on the disbursement front, the loan book front. The asset quality front is doing well progressively and we will continue to grow progressively. The asset quality is going to improve. Provisioning requirements are going to reduce and some big resolution is expected. Hopefully, all this put together will turn out -- will transform into Q3 into much stronger quarter for LIC Housing Finance. Look forward to your assured support and cooperation. Thank you. Thank you, all.

Thank you. On behalf of LIC Housing Finance, that concludes this conference. Thank you for joining us today and you may now disconnect your lines.

Thank you very much.