/** blogpostTitle: LIC Housing Finance Q4 FY26: Profit Up, Margins Tight, Growth Levers Turn On */

LIC Housing Finance Q4 FY26: Profit Up, Margins Tight, Growth Levers Turn On

LIC Housing Finance ended Q4 FY26 with a familiar pattern for prime mortgage lenders: steady profit growth, improving asset quality, and ongoing pressure on margins in a market dominated by banks.

For the quarter ended March 31, 2026, revenue from operations was INR 7,194.34 crore versus INR 7,281.17 crore in Q4 FY25. Despite the small decline in revenue, profit after tax rose to INR 1,497.41 crore from INR 1,367.96 crore, helped by higher net interest income and lower impairment for the quarter.

For the full year FY26, profit after tax stood at INR 5,595.15 crore, up 3% year on year. The loan book crossed INR 3,20,707 crore as of March 31, 2026, up 4% from INR 3,07,732 crore a year earlier.

The quarter in numbers: profitability holds up

The company’s net interest income for Q4 FY26 came in at INR 2,221.78 crore, up 3% year on year. Net interest margin improved sequentially to 2.80% in Q4, compared to 2.69% in Q3 FY26, although it remained lower than Q4 FY25’s 2.85%.

For the full year, NIM was 2.68% versus 2.73% in FY25. Management described this as within its earlier guidance band and acknowledged that competition with banks, repricing, and customer rewrites continue to compress spreads.

Loan disbursements showed better momentum in Q4. Total disbursements were INR 21,019 crore, up 10% over INR 19,156 crore in Q4 FY25. Individual housing loan disbursements were INR 16,672 crore, up 8%, while non housing individual disbursements rose 25% to INR 3,348 crore.

Dividend remained stable. The Board proposed a final dividend of INR 10 per share (500% on face value of INR 2), consistent with the prior year.

Asset quality: retail clean up continues, wholesale still the watch area

The company reported continued improvement in asset quality. Stage 3 exposure at default was 2.16% at March 31, 2026, improving from 2.47% at March 31, 2025. Stage 2 exposure also declined to 2.78% from 3.43%.

Total ECL provisions were INR 4,569 crore as on March 31, 2026, versus INR 4,899 crore a year earlier. Stage 3 provision cover was disclosed at around 50%.

Management also highlighted a stressed asset sale through an ARC for cash consideration of INR 70 crore during Q4 FY26.

A key nuance from the concall was the divergence between retail and the project or corporate segment. Segment wise Stage 3 data shared on the call indicated Stage 3 for individual loans at about 1.03%, versus about 3.51% for non housing individual and about 21% for non housing commercial. In other words, the core mortgage book is comparatively healthy, while the non retail exposures remain a focus for resolution and provisioning.

Margins and funding: lower cost of funds, but spreads under pressure

LIC Housing Finance’s funding profile improved in FY26. The weighted average cost of funds declined to 7.27% from 7.73% a year earlier. Management stated incremental cost of funds was 6.94% in FY26 and 6.86% in Q4 FY26.

However, yields also declined. For FY26, yield on advances annualised was 9.21% versus 9.79% in FY25, and spreads reduced to 1.94% from 2.06%.

This dynamic came up repeatedly in the concall. Management described intense competition in individual home loans as the major structural factor. Banks have lower cost of funds and reprice quickly, while housing finance companies operate with a lag and are forced to respond to protect inflows and limit balance transfers.

Management’s near term margin commentary reflected that caution. It indicated an expectation of 2.6% to 2.7% NIM for Q1 and an aim of 2.5% to 2.7% for the year, subject to macro conditions.

FY27: growth levers, tech upgrades, and a new playbook

The strategic tone of the concall was shaped by management’s intent to shift from a purely organic sourcing model toward a broader set of growth levers.

One initiative already launched is a straight through process project in February 2026, described as machine enabled credit appraisal and automated underwriting. Management said it expects the initiative to reduce manual intervention and improve customer experience through shorter turnaround time.

Beyond technology, the company outlined four operational levers for FY27:

First, co lending and direct assignment. Management stated the company has formulated a co lending and direct assignment policy and plans to pursue co lending more in retail and cautiously in project finance.

Second, adding new sourcing channels. Management said it will engage with business aggregators and indicated a first year volume expectation of about INR 4,000 to INR 5,000 crore.

Third, building an affordable housing vertical. Management said it plans to set up a separate affordable vertical and hire external talent, with separate sourcing, underwriting, recovery, and collections.

Fourth, adding marketing capacity. Management stated it has approval to onboard about 200 people for the marketing vertical, with completion targeted by end of Q1.

For FY27, management indicated a loan book growth expectation of 10% to 12%, and discussed a disbursement budget of about INR 78,000 crore (INR 73,000 crore retail and INR 4,500 crore in construction finance).

It also highlighted a business retention focus to reduce balance transfer outflows, noting that customer retention can be more profitable than constantly sourcing new loans.

A corporate announcement also disclosed a senior management appointment: Shri Sandeep Kumar was appointed as Chief Operating Officer. On the concall, management stated he will take over as MD and CEO on August 31, 2026.

Takeaways

LIC Housing Finance’s FY26 performance reflects a company defending profitability in a highly competitive mortgage market. Profit growth in Q4 and improving Stage 3 metrics are positives, supported by lower cost of funds and reduced provisions.

But the margin outlook remains constrained by bank competition and declining yields. The next phase depends on whether the company can convert its stated levers into durable growth without sacrificing spreads and underwriting standards. The FY27 plan is explicit: scale retail with new channels, push higher yielding LAP and LRD, cautiously rebuild construction finance, and modernise underwriting through automation.

The company enters FY27 with improving asset quality and strong capital adequacy, but the operating environment described by management remains volatile. Execution on retention, new origination channels, and resolution of corporate NPAs will be the main signposts to track.