- Profit after tax (PAT) jumped 21% YoY to INR 6.6 bn, but valuation already reflects growth.
- Net interest income (NII) and net transaction income (NTI) rose around 20% each, keeping margins stable.
- Other income surged 49%, outpacing consensus and highlighting fee‑based resilience.
- Operating expenses grew 26% YoY, driven by a one‑off labor‑code provision of INR 130 m.
- Neutral rating persists with a target price of INR 100, implying a 2.9× FY27E earnings multiple.
- Key risk: valuation compression if interest rates fall further or competition intensifies.
You missed the 21% profit jump at Bajaj Housing Finance—now you can capitalize.
Why Bajaj Housing Finance’s 21% PAT Rise Matters for Your Portfolio
Bajaj Housing Finance Ltd (BHFL) reported a 21% year‑on‑year increase in profit after tax (PAT) for Q3 FY26, reaching roughly INR 6.6 bn. While the headline number sounds impressive, the real story lies in the quality of that growth and how the market has already priced it in. The earnings multiple of 2.9× FY27E earnings suggests investors are banking on continued expansion, but the margin profile indicates limited upside unless the company can further diversify income streams beyond traditional loan books.
Sector Pulse: Housing Finance Amid Falling Interest Rates
India’s housing finance sector is navigating a rare environment of declining policy rates. Lower rates boost loan demand but compress net interest margins (NIM). BHFL’s NII rose 20% YoY to INR 9.6 bn, keeping pace with peers, but the growth is largely volume‑driven. As the Reserve Bank of India trims rates, lenders that rely heavily on interest income may see margin pressure. Companies with strong fee‑based businesses—such as processing fees, insurance commissions, and secondary market sales—are better positioned to offset this erosion.
Competitive Landscape: How Tata Capital and Adani Housing Finance React
Peers like Tata Capital Financial Services and Adani Housing Finance have taken different approaches. Tata Capital has accelerated its digital loan origination platform, aiming to reduce acquisition costs and improve NIM resilience. Adani, meanwhile, leverages its parent’s real‑estate pipeline to cross‑sell financing, creating a built‑in customer base. BHFL’s strategy focuses on a balanced mix of retail home loans and commercial property financing, but it lacks the scale of Tata’s digital push and the bundled ecosystem advantage of Adani. This competitive gap could pressure BHFL’s market share if rivals execute faster.
Historical Parallel: What the 2018 Rate Cut Cycle Taught Investors
During the 2018–2019 rate‑cut cycle, several Indian housing financiers experienced a double‑edged sword: loan volumes surged, yet NIMs fell sharply, leading to a temporary dip in earnings multiples. Those with diversified non‑interest income (e.g., HDFC Bank’s fee business) emerged stronger, while pure‑play lenders saw share price volatility. BHFL’s recent 49% jump in other income mirrors that historical pattern—suggesting management is pre‑emptively building a buffer against margin compression.
Decoding the Numbers: NII, NTI, and OPEX Explained
Net Interest Income (NII) is the core earnings from the spread between loan interest earned and funding costs. A 20% rise indicates robust loan growth. Net Transaction Income (NTI) captures fee‑related revenue, such as processing fees and commissions, and grew 24% YoY, reinforcing BHFL’s ancillary income strength. Operating Expenses (OPEX) increased 26% YoY, largely due to a one‑off INR 130 m provision for the new labor codes—an accounting charge that will not recur. Understanding these components helps isolate sustainable earnings from one‑off items.
Investor Playbook: Bull vs Bear Cases on BHFL
Bull Case: If BHFL successfully expands its fee‑based services and digital onboarding, NII growth can stay above 15% while NIM compression is mitigated. A modest improvement in asset quality would also free up capital, allowing a higher earnings multiple (≈3.2× FY27E) and pushing the stock toward INR 115.
Bear Case: Accelerating competition, deeper rate cuts, or a slowdown in the housing market could squeeze margins. Should OPEX rise faster than revenue (e.g., due to additional regulatory costs), the earnings multiple could contract to 2.5×, dragging the price to INR 85 or lower.
Given the current valuation already reflects medium‑term growth expectations, a neutral stance with a target price of INR 100 balances upside potential against the risk of margin compression.