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Mumbai: In its first quarterly earnings call on Monday since going public on 16 September, Bajaj Housing Finance said its construction finance business, which currently accounts for 11.7% of its assets under management (AUM), largely operates as a funnel for its home loan portfolio. The management said the aim is to take this share to around 16% of the product mix.
Bullish on the lease rental discounting
The housing financier is also bullish on the lease rental discounting (LRD) business and plans to continue to grow it at a steady pace. LRD is a term loan offered against properties that generate rental income, allowing property owners to avail higher financing against rental receipts. This model is in vogue largely for commercial property.
“We remain bullish on LRD because it is always low-risk business and a scale business, delivering optimal returns. It is very low risk given the choice of customers,” the management said, adding that it is doubly secured against the underlying property as well as cash flows being generated in the form of rental income.
As of 30 September, pure home loans comprised 57.2% of the company’s total portfolio, lease rental 19.6%, loans against property 9.8%, and construction finance (also called developer finance) 11.7%.
The bulk of Bajaj Housing’s loan against property (LAP) is to self-employed customers, who may be taking the loans for growth capital or working capital requirements of their micro or small-to-medium enterprises, in-line with the industry, the management said in the analyst call.
Some such loans taken by individual or salaried customers are largely for their own consumption, given that the average ticket size in the segment is around ₹80 lakh to ₹1 crore, they added.
In comparison, the ticket size for lease rental tends to be in the upper band in-line with the company’s target property and customer segments, they said, adding that this is based on ‘self declarations’ made by borrowers.
The comments come after the Reserve Bank of India’s (RBI’s) recent warnings on certain unscrupulous lending practices in some segments of mortgage loans including lack of proper monitoring of end-use of funds and high interest rates.
For Bajaj Housing, lending rates for the home loan portfolio are currently around 8.8-9.2%, for LAP around 10-10.5%, for lease rental discounting 8.5-9%, and for developer finance 11.5-13%.
The home loan lender posted a net profit of ₹546 for the July-September quarter, up 21% year-on-year (y-o-y). Net interest income increased 13% y-o-y to ₹713 crore.
The lender’s AUM crossed the ₹1 trillion mark to touch ₹1.03 trillion as of end-September, a growth of 26% y-o-y. Home loans’ AUM was up 24%, loan against property AUM up 18%, LDR was higher by 28%, and developer finance rose 56% on-year.
Loan disbursements during the quarter were ₹12,014 crore, only slightly lower than the record disbursements of ₹12,154 crore seen in the year ago period—driven by a “few marquee transaction in commercial business”, the company said.
Loan losses and provisions for the quarter were ₹5 crore, lower than ₹18 crore in the year-ago period. As of 30 September, the company held management and macroeconomic overlay of ₹44 crore. Provision coverage ratio on stage 3 assets stood at 58%.
Gross NPA (non-performing assets) ratio worsened slightly to 0.29% as of end-September from 0.24% a year ago, and net NPA ratio also slid marginally to 0.12% from 0.09%.
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