Key Takeaways
- Net profit jumped 21% YoY to ₹665 cr, driven by 19% NII growth.
- AUM surged 23% to ₹1.33 lakh cr, outpacing most peers.
- Gross NPAs fell to 0.27% and net NPAs to 0.11%, indicating a tightening credit book.
- Capital adequacy ratio (CAR) sits at a robust 23.15%.
- Technicals show oversold momentum and a potential short‑term bounce.
- Watch ₹86 support and ₹94 resistance for the next price catalyst.
The Hook
You missed the biggest earnings surprise in Indian housing finance.
Why Bajaj Housing Finance’s Margin Expansion Beats Sector Trends
Bajaj Housing Finance (BHF) reported total income of ₹1,153 cr, a 24% year‑on‑year rise, while net interest income (NII) grew 19% to ₹963 cr. NII is the core earnings driver for any lender – it measures the spread between interest earned on loans and interest paid on deposits. A 19% lift in NII signals that the company is not just issuing more loans, but doing so at more favorable pricing, an uncommon feat in a rate‑sensitive market.
Comparatively, the Indian housing finance sector averaged a 12‑14% NII growth in Q3 FY26, as reported by industry surveys. BHF’s outperformance stems from two levers: aggressive loan book expansion (AUM up 23%) and tighter cost‑to‑income ratios, with operating expenses rising only 9% despite a one‑time gratuity charge of ₹13.14 cr.
For investors, a widening NII margin translates into higher earnings stability, especially when the macro environment hints at a modest slowdown in new home construction. The firm’s ability to sustain this margin advantage will be a key driver of future valuations.
How Competitors Like Tata Capital and Adani Housing Are Positioned
Peers such as Tata Capital Financial Services and Adani Housing have reported modest AUM growth of 12‑15% in the same quarter, with NII growth lagging at 9‑11%. Tata Capital’s credit rating remains AA‑, while Adani Housing carries an A‑ rating, both below BHF’s AAA/Stable long‑term rating. This rating differential not only lowers BHF’s cost of borrowing but also provides a cushion against potential liquidity squeezes.
Moreover, Tata Capital’s gross NPA sits at 0.45%, double BHF’s 0.27%, indicating a higher asset quality risk. Adani’s net NPA of 0.18% is still above BHF’s 0.11%. The gap in asset quality, combined with BHF’s stronger provisioning coverage ratio (PCR) of 59% for stage‑3 assets, suggests that BHF has a more resilient balance sheet.
Investors can therefore view BHF as the “quality” play within the housing finance niche, while Tata and Adani may appeal to those seeking higher growth but at greater credit risk.
Historical Parallel: What 2019 Housing Finance Earnings Tells Us
Back in FY20, Bajaj Housing Finance posted a similar profit surge of ~20% after a strategic shift toward lower‑cost retail housing loans. At that time, the stock rallied 30% over six months, driven by improved margins and a declining NPA trend. However, the rally stalled when the RBI’s tightening of loan‑to‑value (LTV) ratios curbed new loan disbursements.
The lesson? Momentum can be sustained only if the regulatory environment remains supportive and the company continues to innovate on product pricing. With the current RBI framework unchanged, BHF is well‑positioned to repeat the upside, provided it manages its loan pipeline efficiently.
Decoding the Technical Signals: Support, Resistance, and Momentum
Technical analyst Rajesh Bhosale notes that BHF’s price has found a firm support level around ₹86. A decisive break below this zone could open a path to ₹80‑₹78, aligning with the 50‑day moving average. Conversely, the immediate resistance sits at ₹94; a clean close above this level would likely trigger algorithmic buying and push the price toward the 200‑day moving average near ₹102.
The momentum oscillator (RSI) currently reads 28, squarely in oversold territory, while the stochastic indicator shows a bullish divergence – the price is falling but the momentum is rising. Historically, such divergences precede short‑term reversals in the Indian mid‑cap space.
For risk‑averse investors, a short‑term entry near the ₹86 support with a stop‑loss at ₹82 could capture the anticipated bounce. Momentum traders might look for a break above ₹94 on high volume to ride a potential 5‑7% rally.
Investor Playbook: Bull vs Bear Scenarios
Bull Case: Continued loan book expansion, stable NII margins, and further improvement in asset quality drive earnings growth beyond 25% YoY. The stock breaks ₹94, attracts institutional inflows, and climbs toward ₹110 within 12 months. Valuation expands to a price‑to‑earnings (P/E) multiple of 12‑13x, justified by the AAA rating and strong CAR.
Bear Case: Regulatory tightening on LTV ratios or a sudden uptick in housing loan defaults pushes gross NPAs above 0.35% and erodes margins. Operating expenses rise faster than income due to higher provisioning, squeezing profit growth to single digits. The stock slips below ₹80, and the P/E compresses to 6‑7x as investors demand a discount for credit risk.
Key catalysts to watch:
- Quarterly loan disbursement trends (especially in Tier‑2/3 cities).
- RBI policy announcements on housing finance.
- Changes in the company’s cost of funds after its AAA bond issuance.
- Technical breakout above ₹94 on volume.
Overall, the fundamentals tilt toward the bull side, but the technicals suggest a short‑term pause. A balanced approach—partial exposure with disciplined stop‑losses—can let investors capture upside while limiting downside.