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Bajaj Housing Financeprofitclimbs 21

Bajaj Housing Finance Posts 21% Profit Growth in Q2, Driven by Strong Loan Disbursements and Asset Quality

In a significant boost to the housing finance sector, Bajaj Housing Finance Limited (BHFL) has reported a robust 21% year-on-year increase in its net profit for the second quarter of the financial year 2024-25. The company, a wholly-owned subsidiary of Bajaj Finance, announced these figures in its latest earnings release, highlighting the resilience of India's real estate market despite broader economic headwinds. This performance underscores BHFL's strategic focus on affordable housing segments and efficient risk management, positioning it as a key player in the competitive landscape of non-banking financial companies (NBFCs) specializing in home loans.

The net profit for the July-September quarter stood at approximately Rs 546 crore, up from Rs 451 crore in the corresponding period last year. This growth was primarily fueled by a healthy expansion in the company's assets under management (AUM), which surged by 26% to Rs 97,071 crore as of September 30, 2024. The increase in AUM reflects a strong demand for housing finance, particularly in urban and semi-urban areas, where rising incomes and government incentives like the Pradhan Mantri Awas Yojana (PMAY) have encouraged homeownership. BHFL's loan disbursements during the quarter also saw a notable uptick, reaching Rs 10,781 crore, a 24% rise compared to the previous year. This disbursement growth indicates the company's ability to capture market share in a sector that's witnessing renewed vigor post the pandemic-induced slowdown.

Delving deeper into the financials, BHFL's net interest income (NII), a critical metric for lenders, climbed 13% to Rs 833 crore from Rs 737 crore a year ago. The net interest margin (NIM), however, experienced a slight compression to 4.1% from 4.3%, attributed to rising funding costs amid a high-interest-rate environment maintained by the Reserve Bank of India (RBI). Despite this, the company managed to keep its operating expenses in check, with the opex-to-NII ratio improving marginally, signaling operational efficiency. Provisions for potential loan losses were also contained at Rs 47 crore, reflecting prudent underwriting practices and a stable asset quality. The gross non-performing assets (GNPA) ratio improved to 0.31% from 0.35% a year earlier, while the net NPA stood at a low 0.12%, well below industry averages. These figures demonstrate BHFL's robust risk management framework, which has been honed over years of navigating economic cycles.

Sanjiv Bajaj, Chairman and Managing Director of Bajaj Finserv, the parent entity, commented on the results, emphasizing the company's commitment to sustainable growth. "Our focus on customer-centric solutions and digital innovation has enabled us to deliver consistent value even in challenging times," he stated. Bajaj highlighted how BHFL has leveraged technology to streamline loan approvals, reducing turnaround times and enhancing customer experience. This digital push includes the adoption of AI-driven credit assessment tools and seamless online platforms, which have helped in expanding reach to underserved segments. The company's emphasis on affordable housing aligns with national priorities, contributing to the government's goal of 'Housing for All' by 2024, now extended under various schemes.

To understand the broader context, it's essential to look at the Indian housing finance industry's dynamics. The sector has been on an upward trajectory, with total housing credit outstanding crossing Rs 30 lakh crore as per RBI data. Factors such as urbanization, favorable demographics, and low mortgage penetration (around 10% of GDP compared to 50-60% in developed economies) present immense growth opportunities. However, challenges like inflationary pressures, elevated interest rates, and regulatory scrutiny on NBFCs persist. BHFL's performance stands out against this backdrop, especially when compared to peers like HDFC (now merged with HDFC Bank), LIC Housing Finance, and PNB Housing Finance. For instance, while some competitors have reported moderated growth due to asset quality concerns, BHFL's low NPA levels and steady disbursements indicate a competitive edge.

A key driver of this quarter's success has been BHFL's diversified portfolio. Home loans, which form the bulk of its business, grew by 25%, but the company has also made inroads into lease rental discounting (LRD) and developer finance segments. LRD, in particular, saw a 30% increase in AUM, catering to commercial real estate needs. This diversification mitigates risks associated with over-reliance on residential mortgages and positions BHFL to capitalize on the commercial property rebound. Moreover, the company's capital adequacy ratio remains strong at 22.5%, well above the regulatory requirement of 15%, providing ample headroom for future expansions.

Looking ahead, BHFL's management is optimistic about sustaining this momentum. They project AUM growth of 25-30% for the full fiscal year, supported by expected interest rate cuts in the coming quarters as inflation moderates. The RBI's recent repo rate stability at 6.5% has kept borrowing costs high, but any dovish shift could lower home loan rates, boosting affordability and demand. Additionally, BHFL plans to enhance its presence in tier-2 and tier-3 cities through branch expansions and partnerships with real estate developers. This strategy is crucial as smaller towns are emerging as hotspots for affordable housing, driven by infrastructure developments like highways and smart cities initiatives.

The profit surge also has implications for investors and the stock market. Shares of Bajaj Finance, which owns BHFL, reacted positively to the announcement, gaining over 2% in intraday trading on the Bombay Stock Exchange. Analysts from firms like Motilal Oswal and ICICI Securities have maintained 'buy' ratings, citing BHFL's strong parentage and growth prospects. However, they caution about potential risks from economic slowdowns or regulatory changes, such as tighter norms on liquidity coverage ratios for NBFCs.

From a macroeconomic perspective, BHFL's results mirror the broader recovery in India's real estate sector. Residential sales in major cities hit record highs in the first half of 2024, with Mumbai, Delhi-NCR, and Bengaluru leading the charge. Government policies, including tax incentives for first-time homebuyers and subsidies under PMAY-U 2.0, are expected to further stimulate demand. Yet, affordability remains a concern, with property prices rising faster than income growth in many areas. BHFL's focus on loans below Rs 50 lakh caters precisely to this segment, making it a beneficiary of inclusive growth policies.

In terms of corporate governance and sustainability, BHFL has been proactive. The company has integrated ESG (Environmental, Social, and Governance) factors into its lending practices, promoting green buildings and energy-efficient homes. This not only aligns with global trends but also attracts socially conscious investors. Furthermore, its employee-centric policies and diversity initiatives have contributed to high retention rates, ensuring operational stability.

Critics, however, point out that while the 21% profit growth is impressive, it's partly aided by a low base from last year when the sector was recovering from COVID-19 impacts. Sustaining such growth will require navigating potential headwinds like geopolitical tensions affecting commodity prices and thus construction costs. Nevertheless, BHFL's track record—having grown its AUM from Rs 50,000 crore in 2020 to nearly Rs 100,000 crore now—suggests resilience.

In conclusion, Bajaj Housing Finance's Q2 results paint a picture of a company firing on all cylinders, capitalizing on India's housing boom while maintaining financial prudence. As the sector evolves with digital disruptions and regulatory reforms, BHFL's strategic agility will be key to long-term success. For homebuyers, investors, and policymakers alike, this performance signals positive momentum in one of India's most vital economic engines—the housing market. With continued innovation and market expansion, BHFL is well-poised to contribute to the nation's growth story, potentially setting benchmarks for peers in the process.

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Read the Full The Financial Express Article at:
[ https://www.financialexpress.com/business/industry/bajaj-housing-finance-profit-climbs-21/3924660/ ]