In the recent Q2 FY24 conference call, LIC Housing Finance provided insights into its performance and strategic outlook, revealing both achievements and challenges.
Loan Portfolio and Disbursals:
LIC Housing Finance reported a 6% YoY growth in its loan book, reaching Rs 2.7 lakh crores, with individual home loans constituting a dominant 84% of the total portfolio. However, disbursals witnessed a decline on a YoY basis.
Tech Ramp-Up and Growth Expectations:
The company expressed optimism about the loan book’s future growth trajectory, citing the completion of a tech ramp-up that is expected to facilitate a higher pace of expansion in the coming quarters.
Asset Quality Improvement:
Noteworthy improvement was observed in asset quality, as Gross Non-Performing Assets (GNPA) reduced from 4.9% to 4.3% YoY. The management expressed confidence in further enhancing asset quality by working closely with delinquent customers and emphasizing significant efforts towards recoveries.
Guidance for FY24 and PCR Status:
LIC Housing Finance provided guidance to grow the loan book by 10-12% YoY in FY24. Despite this, the Provision Coverage Ratio (PCR) currently stands below the RBI mandate of 50%.
Net Interest Margins (NIMs) and Sustainability:
The company acknowledged that the NIMs, which currently stand above 3%, may not be sustainable at this level. The management expects NIMs to stabilize around 2.6-2.8% in the coming quarters, reflecting a realistic view on the interest rate environment.
Industry Position and Perceptions:
The Home Loan (HL) book’s growth, growing at a slower pace than the industry, has attracted criticism from the analyst community, accusing the company of operating in a manner akin to a government entity. This perception raises questions about the company’s agility and competitiveness in a dynamic market.
H2 Expectations and Festive Season Boost:
Despite challenges, the management expressed hopes for a better H2, buoyed by expectations associated with the incoming festive season, a traditionally active period for the housing finance sector.
In conclusion, LIC Housing Finance’s Q2 FY24 conference call provides a nuanced view of its position in the market. While grappling with challenges like slower HL book growth and NIM sustainability, the company is proactively addressing asset quality concerns and gearing up for future growth, especially with the completion of technology enhancements. The guidance for FY24 reflects a commitment to expanding the loan book, and the management’s optimism for a better H2 suggests a proactive stance towards navigating market dynamics.