Bajaj Housing Finance Ltd (NSE: BAJAJHFL) Q4 2025 Earnings Call dated Apr. 23, 2025
Corporate Participants:
Atul Jain — Managing Director
Gaurav Kalani — Chief Financial Officer
Analysts:
Anuj Singla — Analyst
Piran Engineer — Analyst
Shubhranshu Mishra — Analyst
Shashi Kumar — Analyst
Viral Shah — Analyst
Raghav Garg — Analyst
Abhijit Tibrewal — Analyst
Dhaval Gada — Analyst
Pranuj Shah — Analyst
Nischint Chawathe — Analyst
Kayur Asher — Analyst
Shreepal Doshi — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Bajaj Housing Finance Limited Q4FY25 earnings conference call. This call will be recorded and the recording will be made public by the company pursuant to its regulatory obligations. Certain personal information such as your name and organization may be asked during the call. If you do not wish to disclose, please immediately discontinue this call.
Ladies and gentlemen, please note this call is not for media representatives or bank of America investment bankers or commercial bankers, including corporate and commercial fx. All such individuals are instructed to disconnect now. A replay will be available for bank of America investment bankers and companies and commercial fx. All such individuals are instructed to disconnect now. A replay will be available for bank of America investment bankers and commercial bankers including corporate and commercial fx. The replay is not available to the media.
As a reminder, all participant lines will remain in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal the operator by pressing Star then zero on your touch tone telephone.
I now hand the conference over to Mr. Anuj Singla. Thank you. And over to you sir.
Anuj Singla — Analyst
Thank you, Ryan. Good evening everyone. This is Anuj Singhla from Bank of America securities. Thank you very much for joining us for the Bajaj Housing Finance earnings call to discuss quarter 4 and full year FY25 earnings. To discuss the earnings, I’m pleased to welcome Mr. Atul Jain, Managing Director, Mr. Gaurav Kalani, CFO, and they are joined by other senior members of the management team.
Thank you very much Atul sir for giving us the opportunity to host you. I now invite Mr. Atul Jain for his opening remarks, post which we will open the floor for Q and A. With that over to you sir.
Atul Jain — Managing Director
Thank you Anuj and Buffer team for hosting us. A very good evening to those who are in India joining this call and good morning. Depending upon the geography, if someone is joining from the Western hemisphere, I have with me Gaurav our CFO and Jasmin there our President, Home runs Vipin, evp, cre, Neeraj Risk Officer, Dushan, our developed construction finance head and Pawan heading our near time and affordable SBU.
I’ll take 15, 20 minutes to cover the important sections of the investor deck which is now uploaded on the website as well as on the stock exchange and later on leave the balance tank for utilizing for question answer session.
Quickly going to panel number three on the presentation. Overall good quarter across metrics AUM asset quality and profit. As of 31st March 25th, AUM has stood at 1 14,684 crores growing 26% while we have maintained asset quality with GNPA of 0.29% and NPA at 0.11% respectively. Q4FY25 pad has grown by 54% and annualized ROA was steady at 2.4%. Opex trajectory continue to improve from 27.1% Opex to net NTI in Q4FY24 to 21.7% in Q4FY25. This for Q4 overall yearly numbers also we will talk about as we go forward.
We are currently present across 174 locations through a network of 216 branches. Annualized ROE for the quarter was 12.1% while annualized credit cost was 0.12%. Capital adequacy has remained very strong supported by capital raise during the year and CAR was staggered below 28.25% and PVC ratio which is a critical metric from a HSC point of view which is a 60% and a 50% requirement. From the regulatory point of view we were 63.28% which was well above the regulatory requirement of 60% as of 31st March 25th.
I’ll move to panel number four. As spoken about the overall evium growth on the previous panel. In terms of a product level, the growth was decent across quarters. Home loans grew by 22%, Lab by 28%, LRD by 24% and Developer Finance by 49%. The company total added 6,370 crores of AUM during the quarter as against 5 5,442 crores in Q4FY24. Overall portfolio mix also remained well diversified with some movement between the products. HL stands at 56.2%, LAP at 10.7%, LRD at 19.1 and Developer Finance at 12.5. Company disbursed 14,254 crore during the quarter as against 11,393 crore against in Q4FY24 so hence overall disbursements grew by 25% on YoY basis for the quarter.
As we had updated in the last quarter regarding launch of our SBU of near prime and affordable housing, the business is growing steadily and is in line with our expectations to meet the future goals of the business during the quarter. The company has also strengthened its management team to support future growth. We will continue to invest in the coming year in SBU which is for nearby and affordable housing and also non top six market markets to generate future growth for the company.
I’m jumping to the next panel. Cost of funds remained flat sequentially at 7.9% for Q4 FY24. Our well diversified borrowing mix has further improved with mix of money market instruments at 49% followed by bank borrowing at 41% and NHB refinance at 10%. Aspect to NTI as followed out earlier moved from 27.1% in Q4FY24 to 21.7 in Q4FY25 and on a full year dropped from 24% in FY24 to 20.8% in FY25. Company also continues to leverage technology for digitalizing various processes which is now reflecting from our increasing penetration of new initiatives like E Agreement. We are crossed on 93% penetration of our entire customer base whom we are onboarding New and online customer onboarding journey is also crossing 80% penetration in month of March. gross spread was marginally lower at 1.8% from 1.9% in Q3 FY25 going to reduction in yield because of the market competitive pressure while the net interest margin was flat on sequential basis at 4%.
Coming to panel number six, overall asset quality has remained healthy during the quarter. GNP was in line with previous quarter at 0.29%. NNPA improved on sequential basis from 0.13 to 0.11%. Credit costs have stood at 0.12% in Q4FY25. This improved from 0.18% in Q4FY24. Quarterly profit has grown by 54% from 381 crores to 587 crore. The company has revaluated its income tax position while the PBT has grown by 48% while PAT has grown by 54% because of a one time tax position revaluation by the company on deductibility of a second expenditure. Accordingly the company has reversed 24.44 crore tax expense from the previous year and reduced FY25 provision by close to 10 crores. So thus there has been a total tax reduction of 34 crores in the queue for FY25.10 crore out of it is in pertaining to FY25 while 24 crores is pertaining to the previous year’s expense. Annualized ROA for the quarter was in line sequentially at 2.4% and it has improved by 40 beeps against an ROE of 2% in Q4FY24. Annualized ROE for the quarter was 12.1% against a 12.7% in Q4FY24 owing to the impact of capital raise during the year. Absolute net worth of the company stood at 19,932 crores as of 31st March 25th, just a tad below 20,000 crore.
I’m moving to panel number 15 which is a medium term guidance. There is no change in the medium term guidance on the key financial indicators what we had added from last quarter’s investor present. Quickly moving to panel number 17 which is a quarterly financial snapshot as well as a yearly financial snapshot. We have already discussed about quarterly financials for full year FY25 net total income has grown by 23% and pre provisioning operating profit grew by 28% year on year profit before tax was up 28% and tax grew by 25%. Full year credit cost has been at 0.09% and ROA stood at 2.4% and ROE at 13.4%.
Moving to panel number 19, portfolio yield has come down to 9.7% in Q4 FY25 witnessing a 10beeps reduction sequentially and 20bas reduction on YoY basis while COP was flat at 7.9% sequentially and 10 weeks higher on YoY basis. Accordingly, gross spread reduced by 10 beats sequentially at 1.8% going to portfolio yield reduction and 20 pips on YoY basis. Topics to NTI already improved at 21.7% in Q4 FY 25 while it has inched ups on sequential basis due to investment in new business and management team strengthening as followed out in earlier panel in terms of asset quality GNPA flat on the sequential basis and I have already covered credit cost, ROA and ROE on the previous panel.
I’ll move to panel number 20. Just a reiteration of our well diversified borrowing relationships we have borrowing relationship across 17 banks NCD share has inched up by 2.3% sequentially. Coming to panel number 23, portfolio mix remains within our guided range with slight increment in LAP and developer financing on sequential basis. As of 31st March HLS stood at 56.2%, LAP at 10.7% and LRD at 19.1 with construction finance at 12.5.
Moving to panel number 28, stage one assets have improved by 5 beeps to 99.39 as of March 25th stage two assets have witnessed reduction of 5bps so there’s a intra movement from stage two stage one in that sense from 0.37 in Q3FY25 to 0.32 in Q4FY25 while provisioning coverage has improved from 55.4% in Q3FY25 to 60.3% in Q4FY25.
I’m jumping to panel number 30 which is a product wise product wise provisioning coverage. It remains healthy across products. Coming to product wise GNPA there’s a slight movement of 1 beeps in home loan GNPA to 0.34% lab has improved by 9 beeps to 0.65%, LRD continues to have nil GNP and Developer finance GNP has reduced by 4 beeps to 0.05% NNPA has reduced across product because of increase in the provisioning coverage. OMG NNPA has improved by 3 beeps lat by 7 beeps and DF has improved by 1 beep. There are delivering the overall NMP at 0.11%.
Now that was all what I would have wanted to talk about on the important figures from the deck. Happy to take questions. Me and the management team is here to provide answers to the questions from the team.
Questions and Answers:
Operator
Thank you ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press Star and one on your touchtone telephone. If you wish to remove yourself from the question queue you may press star and 2. Participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Pyren Engineer from clsa. Please go ahead.
Piran Engineer
Yeah hi team, congratulations on your results. Just a couple of questions. Firstly, have we cut our home loan rates after the 50 BB repo rate cut and is it only on incremental or also on the back book?
Atul Jain
Okay, thanks. So we have yes we on the acquisition of course because we are competitive. We are in a competitive industry. We have to cut as in line with what competition is to the second question on the on the portfolio. Yes, the benefit has been passed on in the acquisition. While there may be some differential on the what is the repo book? The repo book asset book we have to pass on in line with the repo non repo book while there is a differential but there is a benefit which has been passed on.
Piran Engineer
No, I mean could you quantify it? Is it 50 bits only?
Atul Jain
So 50 bits is a repo. So the repo book it’s a full 50 bits which is passed on while on the non repo book there is a differential. If you can say in the in the range of 10 to 15 bits which has been passed on.
Piran Engineer
That don’t fear will lead to BT out because the banks would have anyway passed on 50 bits.
Atul Jain
Now the banks would pass on 50 beeps over a period of next three months. So this 15 beeps what we are talking about, we are talking about till now which is effectively the February cut conversation we are doing. April cut conversation will take the view in the month of beginning May. So even the bank report pass does not happen immediately. It happens over a period of three months. So the apple cut pass on has not happened in terms of. In our case the repo book is repricable as and when. So that’s why the repo cut entire 50 beeps is passed on. While in case of internal FRR there is a decision which algo will take in the April end for the market there will be some incremental pass on which will happen on the other. So 15 this is not the final number 15 this is 15 this is representing of February number.
Piran Engineer
Yeah. Okay. And even on the incremental loans it’s fair to say that how much you’ve cut your plr, that much is the incremental yield cut at least for the non repo link loans.
Atul Jain
No, it can be higher as well or lower as well because there is a spread adjustment also an incremental book which can happen not on the pass book. Pass book there is no spread adjustment but in incremental book this is a market pricing. You cut your PLR but there can be a plus and a minus in the margin side also depending upon what is the market pricing at that point of time.
Piran Engineer
Understood? Understood. This is very clear. And also just a follow up on this would be what percentage of your home loans are repo linked versus say PLR linked on book.
Atul Jain
Our book is close to 13,000 odd crore which is repo link out of $64,000. 13,500 crore is a repolite book against a $64,000.
Piran Engineer
Understood. Secondly, just for Gaurav, over the last one year we’ve increased our NCD share from 35% to 45%. Just wanted to get the logic behind, you know raising fixed rate instruments when we know rates are going to decline.
Gaurav Kalani
So this is taken a decision, the fundraising decision is taken at the point of a time which is a multiple factor of. Let us say what is a variable mean you are able to raise at that point of a time versus a fixed money. Taking a call on saying that what is the maximum downward trajectory on the variable money you will encounter versus what is the upfront benefit you are getting? So it’s a calibrated call always at that point of a time what is beneficial for the company. We take a interested view so that when you raise a fixed money you take the interested view versus variable money available at that point of a time.
Because we as a finance company have to keep on borrowing at all points of a time. So what is the variable money cost versus a fixed cost? And in terms of an NCD as well we have raised last year as a variable interest rate NCDS which was one issue was on an NCD which was on a variable interest rate. So there is a variability there on the fixed sensit is also to some extent we cover through our OS hedging as well. So there is a various strategies which are available to manage your cost of fund flow through the cycles. Because we are cognizant of our book and we are cognizant of that we in the interested downward cycle there is a pass through which happens.
Piran Engineer
Understand just it today’s time point of time a fixed rate instrument versus a variable rate borrowing which would be a bank borrow. What would be the difference in cost?
Gaurav Kalani
It will be. I’ve after the second rate cut we have not borrowed in the variable rate from the bank. So but I’ll say still the differential at the because there will be a tenor differential let us say a three year bond versus a bank line today differential would close to 50 to 60 days.
Piran Engineer
Okay, 50. Okay, got it. I’ll get back in the queue for more questions but thank you so much and all the best.
Atul Jain
Thank you. Thank you.
Operator
Thank you. The next question comes from the line of Shubranshu Mishra from Philip Capital. Please go ahead.
Shubhranshu Mishra
Hi Apple, I got questions the first partner. What is the total number of election enrolled employees?
Atul Jain
I’m not hear you clearly. Can. Can you come closer to the mic and speak because we are not able to hear you clearly. Right. Is this better? Slightly better, yeah. Please go ahead. We’ll try to make out of the question.
Shubhranshu Mishra
How many collection on employees and how many connection agents do we deploy and if we can split that asset class. Right. Second is that what percentage of our production finance book would be and when does. If we can give this plate of what comes out in this year and what comes out in the next one or two years.
Atul Jain
Sorry. So if I’ve understood your questions right I’ll. The first question is how many are the regular employees of the company versus the off road contractor. So the absolute number is 1977 are company on road employee and total manpower is 4811 as of the 31st March 25th. So you can say balance 2900 are off role or contractual implies 1900 and 77 are on roll employees. That’s first part.
Second part you are seeing on the construction finance Morad book is my understanding, right? That’s a question you asked how much book is on Morad? See, I had explained last time also I think Shuban Shuki that the morad see we when we give a construction finance there is not a case where we don’t have a sweep from the day one in terms of principal repayment as the sales happen. While the first on a paper the morad period is still the point of a time the project gets completed which is close to 36 months kind of a normal scenario which is a morad. So largely in that sense, if you look at from the contracted term it is larger part of the book will be more act.
However, the sweep on the sales collection starts from the day one. If I look at the past experience of last four years there is no case which eventually comes out of the morad because before the three years because of the sales and the cash flows coming stronger, the entire loan gets repaid before the morad period is over. So we don’t give any holiday on any collection as it starts. So our construct is clear. We disburse on tranches. This is the movement of the stage in construction we have a sales milestone and a collection milestones linked to each stage of a construction. At each tranche and each amount of rupee collected from day one there is a sweep structure which comes as a principal payment and interest has to be serviced by the developer on a monthly basis on the separate side. So morat is a technical question because you are that I am assuming you are coming from the banking side because in the banks they follow different structure public public sector banks where they give a complete morat upfront and then they collect the money later on. In other case, the repayment starts from day one. Am I ever been clear?
Shubhranshu Mishra
The first question was around the collection employees. What are the total number of collection employees?
Atul Jain
So in our case we don’t have much of off road employee because we are not a very heavy collection heavy infrastructure company. Number of 250 odd would be the number of collection employees,
Shubhranshu Mishra
Right? Sure. I’ll come back.
Operator
Thank you. The next question comes from the line of Sashi Kumar from Trade Brains. Please go ahead.
Shashi Kumar
Good evening, sir. I have observed a strong absolute growth in both AD and total income over the past few years. However, the year on we have group brands appear to be moderating recently. For instance, ad growth declined from 77% in FY23 to 25% in FY25. While total income growth also slowed from 50% in FY23 to 26% in FY25. Could you please share your perspective after driving this moderation in growth rates? Additionally, do you see this as a natural normalization following a high growth phase or there are specific challenges or strategic shift impacting this phase of growing?
Atul Jain
Shashi, I think we are I can request WAFA team to see the connectivity because we have we have guessed your questions. Shashi you can correct and Gaurav will try to answer the question. If the answer is right, you are talking about growth moderating in the pad from FY23 to now as a percentage. Is that I heard you right or yes yes sir. Can check on FY23 growth percent because FY23 because we are so far looking at FY24 versus 25. Just give us a minute for to look at the number to refer the what number you are referring to.
Gaurav Kalani
PAT growth is current year is 25. Last year was 38%. You’re looking at NII or NTI growth rate which was 19 last year and 2016% this year, right? Yeah. So reasonable movement from 19 to 38 last year versus 23 to 25 this year. If I can request you to be explained maybe I can take it offline as well. Yeah no but if because we are not able to understand the question.
Shashi Kumar
So once again the patent total income over past few years like last three FY23 to FY25 PAD tax declines from 77% to 25% in FY25. So total income also declined from 50% to 26% for FY22.
Atul Jain
We are a three year old company. The base is very small. So so as the company will go forward because if I look from FY18 to total cumulatively we look like the growth of a 90% or 80% because company started in 1718. So the initial period on a very small base. As the book grows the income levels will grow in a very different level. There is no decline or there is no decline or there is no other than a normal sizing conversation. Because once you grow at a certain size then the growth happens at a particular percentage while the growth at a much smaller scale will be at a very different level. In terms of income growth right there because there when you are adding the book. You are almost doubling the book. Increasing the book by more than I think in FY22 or 23 probably your book grew by 40 45%. Correct. If I FY22 to 21 in FY22 versus 21 probably book was much higher. You have to take a base impact at a base impact suffer in that sense from in 18 to 19 the book would have grown more than 100%. The income would have been much more than that. It’s a question of a relative sizing and the baselining. There’s no other impact.
Shashi Kumar
Okay. And my follow up question is on like sir, recent in Maharashtra there was a recent hike in ready record rates on demand patterns of average ticket size in the region. Does this influence our growth like in this investment guidance for FY26.
Atul Jain
So there is no impact of ready reckoner rates on the home loan growth. Because ready reckoner rates are in terms of increased by the government. After three years government has increased the rated recognition rate by 6.7%. In my individual assessment I don’t think it is going to result into any impact in demand for homes or versus home loan demand. Because if you have to buy a house, you are buying a house. It is not dependent upon the ready recognized rate. And in any case is a reflection of what is the pricing in the market which you are currently buying. So in our to the best of my understanding or assessment there is no impact going in the home loan and growth from different to include.
Shashi Kumar
Thank you.
Atul Jain
Thanks.
Operator
Thank you. The next question comes from the line of viral shah from IIFL Capital. Please go ahead.
Viral Shah
Yeah. Hi Atul and Gaurav, thanks for the opportunity. I have a few questions so just one is first clarification. Atul, you mentioned on that hedge book to kind of manage this fixed rate borrowings that you have done. So can you quantify the extent of this hedging? Is it material at all which can help us convert this fixed kind of liabilities into a floating nature? Effectively.
Atul Jain
It is. It is to some extent material. It is close to 23 inductor if I have to give the absolute number.
Viral Shah
Okay, so the way to look at it is 2300 crores of your bonds would behave like a floating rate bond.
Atul Jain
Yeah. The market 28. Yes. That is the same way to look at it. 2300 crore because there is a hedging visual is taken in a various forms. So like if you have a 10 year NCD you don’t take a hedging against a 10 year because that is supposed to play over the interest rate cycle, it is largely a five year bond what you hedge. Because that is where you can be on the one end of the interest rate cycle. You can enter at the same cycle and exit at the same a two year or a three year. Again you are able to take take a very calibrated call at the time of a raising saying that whether how it will play out during the tenor as you raise the money. So you can take the calibrated call at that point of time. What is the differential between a floating rate money versus a fixed rate money what you are getting into. And take an interested view ahead of a two year or a three year ten year. In any case there is no hedging instrument available. And don’t take the view at a 10 year. So this is a five year which falls in between where the hedging takes place.
So from that point of view that is covered the other way is EUR2 here when you raise the money at that point of time only you take the call calibrated call on basis of saying that whether you are taking a fixed call versus a floating money what is available.
Viral Shah
Got it. So basically on this 23 crore, 2300 crore. Effectively have we seen already effective bips kind of a decline.
Atul Jain
More than that adjusted.
Viral Shah
Okay. So we have already seen that on the borrowing cross.
Gaurav Kalani
Because OASIS have they run ahead in the market. This is the future rate cut expectations as well.
Viral Shah
Got it. Makes sense. Yeah. The other question is on basically the credit cost, right? So now we are still at 12 bips kind of a credit cost. And with no more buffer provisions there. And also some bit of I would say changing book mix like say within lab the share of self employed is increasing. When do we see kind of a normalization on the credit cost plant?
Atul Jain
There is another complexity to the credit cost which is a factor of assignment. What assignment we do. Because when we do an assignment there is a stage one provisioning goes down. So that’s why when we guide further credit costs we see on a steady state basis 20 to 25 beeps of the credit cost is what we. So if you have to say that we are not. If you don’t do any assignment and the book mix remains same in terms of a medium term, that is a 2025 piece of a credit cost is the guidance what we give which is put as a part of our medium term guidance that because if we continue to let us say assign more the credit cost looks lower because of a lower stage one provisioning. But 2025, this is from A business modeling perspective is a credit cost not more than that, not less than that can be a factor of a time or the decision to do assignment less or more.
Viral Shah
Got it So basically effectively this 2025 is on assets not on eun.
Atul Jain
Yeah.
Viral Shah
Got it And Atul if you can see quantify the.
Atul Jain
Correct your understanding I if you. I think 12 bits is also an asset not on um.. Which is the current cost because there is no credit cost on the AUM er what is now my off book But I am saying that because the year if you do a more assignment the credit cost for the year looks lower because you release the general provisioning on the assets what you have assigned out so there is a. There are multiple mixes of a GP provision that’s where I be saying that if assuming we don’t do any assignment out in a year and the kind of business we are pursuing 2025 bips is the credit cost what we bake in in our business mathematics or a business calculation and which is what we guide for it is always on AR bond book it’s not never on a so the 0.12 is also on ar only I just wanted to clarify.
Viral Shah
Got it atul atul next is if you can quantify the impact from say the removal of the exit penalties on the floating rate loans which is say lap of course the home loans you don’t have the exit penalties but on the LAB front the proposed circular from RBI what could be the impact of that if at all that gets into implementation.
Atul Jain
It won’t be very material for us at an absolute level because home loans as you have already called out are already exempt from FC charges Commercial businesses also as per the draft circular are exempt so the only business impacted would be loath against properties if I look at the last year entire fortresses as its collection in that business was less than 12 to 13 odd crore so if you have to take a zeroisation that is the kind of a number we are talking about it’s not material number for us.
Viral Shah
And the second order impact do you see btouts increasing over there and maybe you will have to work more on the pricing front over there also.
Atul Jain
That will let it play out how it plays out vital because it’s a guess what yes exit rate exit barrier going down or not being there it can result into a higher BTO but in that sense if you look at a home loan even today also the exit exit rates of LAB prepayment or a BTO trades of LAB are not very different from SL in fact they are on a higher rate. So there is a LAB is slightly higher even with the exit cost clause or exit penalty as well. Homeland, there is no exit clause or a penalty. It depends on various factors. So I’ll not say it is assumed to be much higher. But of course we have to generally talk intuitively. Yes, we can say there can be a more BT out when there is no exit clause.
Viral Shah
Got it. And Atul, if I may, one more question more from a quarter perspective. So there’s been a sharp increase in the OPEX on a quarter on quarter basis. And also secondly the PBC number on a sequential basis seems to have increased by around 100 basis points despite say home loan growing slower. So what can be the expansion for both of these things?
Atul Jain
First part, we had already called out that we have invested deep and we are going to invest deeper as far as in both in the management team and the new businesses, both SBU which we have set up and the top six plus market we are investing so that sequentially it has moved up by close to 1%. It has not moved up dramatically in that sense corrected 20.9% has moved to 21.7 or 21.8 and generally March is always heavier. If you look at the large I think there’s a Ladies, ladies, we have the hatchback reconnected. Are we audible Anuj? Yes sir, you are audible. Yeah. Okay. Sorry Vidal, just to continue the conversation. Sorry we got dropped out.
So we were talking about impact of on the topics to NTI growing 1 it has grown by close to 1% in the current quarter versus the previous quarter if I see a marginal increase but if we see the previous years also quarter four is always the heaviest because generally you tend to place all your orders and investments in the quarter four. That’s a bio comparison and a trend. Second, we had called out clearly saying that we are investing deep in our SBU as well as our non confident structure. So that is where it has inched up to that extent on OPEX to NTI for the current quarter.
Your question was on why it has inched up or if I missed PBC has moved up Vidal on account of two factors. While unknown growth has been lower than the overall growth it’s supposed to. The assignment out during the quarter was largely non home loan assets. So the PBC is calculated on the assets with us if there was a large assignment out of non home loan assets. So that’s where PBC you see an improvement by 1% on a quarter on quarter.
Second also on reduction of cash holdings because in for PBC computation, even cash holdings are taken as a denominator. You see on a quarter on quarter as the everyday quarter. If there is a drop in the cash holding that is also resulting into improvement in the PBC criteria.
Viral Shah
Got it. Very healthy. Do I have chance of one more question?
Operator
Ladies and gentlemen, the management line has dropped once again. Please stay connected while we rejoin. Ladies and gentlemen, we have the management reconnected. We take the next question from the line of Raghav Garg from Ambit Capital. Please go ahead.
Raghav Garg
Hi, good evening and thanks for the opportunity. I just have two questions. One, I know there’s been a fair bit of discussion on the liability side but I still have one question. Can you please comment on the trajectory for cost of funds for FY26? What is your expectation in terms of how much can it decline because of the repo rate cuts?
Atul Jain
So our estimate, our estimate is to assuming that two cuts which has happened and one cut more happens Y o Y I think we should see a drop 34 to 35 beeps roughly.
Raghav Garg
You’re saying on a 75 basis points rate cut cumulatively. Right.
Atul Jain
On a 75 basis rate cut cumulatively we should see 34, 35 bips kind of pass through on a full year basis in FY26.
Raghav Garg
Understood. Thanks. And the second question is I wanted to understand if how are you looking at your market share in retail home loans at the developer counter? So why I’m asking this question is when I look at the home loan aum as a multiple of say one year or two year lakh developer loans, right Then that multiple of that number has been continuously declining for last several quarters. I don’t know if it makes sense to you or not. Probably you can guide me better but if you can just comment what is your retail home loan market share maybe based on sourcing at the developer counter?
Atul Jain
Raghav, our home loan market share in the market has been improving every quarter from last two years. If you look at our market disbursement versus what we discuss, we have been inching up in our market share. Now the method, what you are seeing is to my mind I think that’s not a. Because we don’t acquire only the home loan at our developer counters where we have funded a project with that that’s a minor part of our acquisition. That’s not a minor but that’s a. It is not the only part where we are acquiring the home loan penetration. Home loan business Home loan business is acquired at multiple counter and the home loan evm growth is also a factor of acquisition minus the retention and minus what has gone out in terms of a competitive market a lot of time in last year there has been a kind of a significant pressure on the book from a BTO perspective with acquisition prices have run much lower than the pre cost of contract also or a pre replicate as well. So the metric with the way you are looking at is not the rightful metric in that sense. Our market share has moved up gradually on a quarter on quarter basis from last two years, three years on an acquisition basis at a total level.
Raghav Garg
Understood. So what percentage of home loan sourcing that you do comes from the developers that you have funded to.
Atul Jain
So I’ll assume close to 15 to 20% kind of a number. I’ll come back with you exact number but my ballpark figure will be 15 to 20% kind of an.
Raghav Garg
Understood. That’s, that’s, that’s enough. That’s all from my side. All my other questions have been answered. Thanks.
Atul Jain
Thanks.
Operator
Thank you. The next question comes from the line of Abhijit Tibrawal from Motilal Oswal. Please go ahead.
Abhijit Tibrewal
Yeah, Good evening everyone and thank you for taking my question. So first clarification in the previous question when you said with the assumption of a 7075 basis points repo rate cut you foresee a 34, 35 basis points pass through. Were you talking about the pass through to the customers if there is a 75 basis points rate cut?
Atul Jain
No, we are talking about pass through number cost of funds to the company. The pass through their customer can would be higher. It will be 45 to 50 basis kind of a number which will get passed through. Of course it will depend upon the company competitive intensity in the market. How the yield impact can be 45 50bps on a 75bps kind of a cut.
Abhijit Tibrewal
Got it. And I was just trying to understand, I mean you shared earlier in this call that almost 20% of your home loan book is linked to repo rates and the remaining is linked to your internal PLR where you have Already effected out 15 basis points rate cut even when in this quarter our cost of borrowings will largely flat. Q. Q. So just trying to understand, I mean in this internal PLR book, right? More linked to how market forces are, how the competitive intensity is instead of how your cost of borrowings are going to evolve.
Atul Jain
It is both ways because there is one is a projected cost of funds trajectory as well. Abhijit, because you have to pass on in the market as a rate cut expectations happen to protect Rightfully the BT out kind of a portfolio because there can be a more btout seekers. If you don’t pass through in your internal link rate internally, sometimes you run ahead of passing by. This is your projected reduction in the cost of fund like our projected cost of introduction probably in this quarter would be close to 20 weeks from what last quarter had been there. So if you have to pass on a bit ahead of one or two months ahead of the time on the reset to protect the book from there, that’s a temporary mismatch which happens.
Abhijit Tibrewal
And the other thing I was trying to understand in this last three months or so, I mean has anything changed in terms of. In terms of the aggression from bank.
Atul Jain
We have not seen. I think the aggression is not changed even post March end from a private sector banks we saw a fair bit of aggression in month of March, I think April in our assessment. What we have seen in the market is we are yet to fully form of the mind I think but there is a bit of a Public sector banks continue to be more. Much more aggressive. Private sector banks are not that aggressive in months of April but March everyone was as aggressive as what we could have.
Abhijit Tibrewal
Got it. So essentially speaking, I mean March aside, right. Which is where we continue we’ve always seen this competition from banks but beyond that because of rate cuts you have not seen any additional aggression from banks either PSUs or private.
Atul Jain
After the first rate cut I think PSUs was far more aggressive after the second rate cut. The market is yet to find its feet or get settled in the pricing because pricing gets settled after 15, 20 days of the rate cut. So it’s yet to settle down the market. The what I talked about the early indicators that early indicators were pillars in the market we can we’ll have to finally arrive at the conclusion in month of May because February rate cut we saw the impact in the month of March. April rate cut probably month of May is where we’ll be able to appropriately rightfully answer thing that what we are seeing in the market.
Abhijit Tibrewal
Got it. That is useful and the last question that I had was I mean in terms of assignments. While you explained how credit costs can vary when you do assignments because there’s a general provision release. I was just trying to understand how are we thinking about assignments going forward because as you’ll appreciate there is a component of upfronting of assignment income that comes through. So how are we thinking about assignments more structurally going forward?
Atul Jain
So assignment is an integral part of a mortgage balance sheet because of a ALM match. What we get because we are essentially lending for long term and we are borrowings are not for that long term. For a mortgage company assignment at a particular portion of a 12 to 15% of our book normally we keep it and that’s a long term strategy as well. You will continue to see the percentage at that ratio. It is nothing to do with the upfront of income. Yes that’s a index accounting which results into so in this last quarter. In that sense there is a assignment income of 46 crore which is booked in because of the assignment. But if we exclude assignment income also then also the income growth would be in line with Q4FY24 in terms of a non interest income growth.
Abhijit Tibrewal
Got it, Got it. This is useful. Thank you so much and wish you and your team the very best.
Atul Jain
Thanks.
Operator
Thank you. The next question comes from the line of Dhaval from DSP Mutual fund. Please go ahead.
Dhaval Gada
Hi Atal. Congrats on the quarter. Just had three questions. First was relating to spread. So till now whatever we’ve discussed around pricing and cost of funding is it safe to assume that next year we could see about 10 basis points of spread compression from where we end Q4 and so any comment around that would be useful.
The second question is relating to the target mix asset mix and so if my understanding is right directionally we expect the developer book share to increase we expect the deeper market share to increase and those should be yield benefit outcomes. How much of that can play out next year and sort of help you protect on the mixed related benefit asset mix related benefit. Any comments around that would be useful.
And the last bit is you know the minimum public shareholding, you know just any color around that. How do you intend to sort of get to that 75% will there be a fresh equity etc in FY26 or we intend to use that in FY27. Any comments around that would be useful? Yeah those are three questions. Thank you.
Atul Jain
Thanks. On your first question if we maintain as it is book mix yes you can see a NIM compression of 10 to 15 bips during the year. Because if the. Because if you are going. If you are saying 34 35bps is what we expect the differential in the cost going down And I said 45 to 50 beeps on the yield impact which can be there as a. If you take a 75bps kind of a rate cut scenario. However as you have only called out there is a target mix which is a play around for us available whether a developer finance book going up from 12.5% to 15% what we had called out last year also which results into compensating increase of our non top six markets which we have invested deep or increase of contribution from the SBO in terms of a near prime. And there we will target to cover a reasonable portion of that hit what we expect from the nim. Of course a pool cannot be covered because there is a larger book sitting there.
But to some extent, to the extent of our intent would be to compensate or mitigate a larger part of the hit what is going to be there from the yield or an incompression in terms of a declining rate scenario. However I would just like to call it. We had always called out earlier as well even in when we were talking about in the interest rate cut scenario was not there. Mortgage is a cycle business. When the interest rates are up, of course the returns are margins are expand. Margins expand for a point of a time. Then the liabilities catch up on the going interest rate scenario While the assets run a bit ahead of a liability on a downward cycle it will be a reverse way. Barring the change of the mix play. What as I called out we will try to do but through a cycle that is where it remains and that’s where we’ll remain.
Our ROEs will remain within the guidance range of a medium term ROE range. What we have given with the plus minus versus right whether an interest rate rising cycle or whether a decrease in date cycle. Of course in that scenarios we’ll try to play it a bit different to over manage so that there is a less of a disruption. That is where so 10, 15 weeks on a steady state. But we are confident that we should be able to mitigate a larger part of it through the asset mix change strategy. What what we are trying to execute.
Second question. Oh yes, you asked on the public shareholding. It’s a way it’s two and a half year away to meet a 25% requirement. Of course categorically I can tell you there is no plan to raise New Capital in FY26 by BHF because our leverage is 5.1 or 5.2 as of 31st March 25th. As a mortgage company it does not make sense for us to raise money anywhere less than seven and a half kind of a lever. Seven and a half kind of a lever. So there is no conversation or a thought process around any public issue part for meeting the guidelines there is a mix upper whether it can be a secondary offering from Bajajsan as a shareholder at their appropriate time. The board of Bajaj Finance will have to take the call at appropriate time to say that how do we meet that. But there is no primary conversation which will happen for next at least 1 1/2 2 years. This primary requirement of a capital.
Dhaval Gada
Understood. Thanks and all the best.
Atul Jain
Thanks sir. Thank you.
Operator
Ladies and gentlemen, if you wish to ask a question, please press star and 1. The next question comes from the line of Pranoj from JP Morgan. Please go ahead.
Pranuj Shah
Thanks for the opportunity. I hope I’m audible question.
Atul Jain
You’re not clearly audible here.
Pranuj Shah
I think now better.
Atul Jain
Yeah, yeah, now it is perfect. Yes, please go ahead.
Pranuj Shah
Again. Yeah, thanks for the opportunity. So my first question is on your incremental loan sourcing that you’re doing, on what basis do you decide whether you have to link it to repo or your plr? Like is it purely based on competition, some customer cohort or on an incremental basis should we see this Q continuing to move towards higher repo link loans.
Atul Jain
So this is dependent upon market scenario and also variability to sell in the customer port. So incrementally you should see more of a PLR rather than rep. Because repo we offer up to it’s an internal setting. We offer repo asset size only to the extent of repo liabilities. We have to not to carry an interest rate festival risk in the balance sheet.
So if I have to say if there was a 14,000 quote repo book on the SSI, there’s a 16,000 quote book on the liability side. For us to not have a mismatch in the interest rate risk side because we can’t carry interest rate side we are only a credit risk company which we have to take a credit risk because we are in a lending business. Apart from that we don’t want to take an interest rate risk. So the ability to grow repo book is linked to our ability to grow repo list liabilities. Rest has to be in the internal plr.
Pranuj Shah
Okay, so the preference would be for plr but I’m guessing because of higher competition it could shift more towards repo. also.
Atul Jain
It will be determined by availability of our repo liabilities rather than the competition because we will not want to create an interest rate risk in the balance sheet.
Pranuj Shah
Okay. Okay, understood. And it’s fair to think that this 15 KCR rep pulling liabilities will be all bank loans.
Atul Jain
Largely.
Pranuj Shah
Okay. And thank you. Thanks for that. The second question is on your affordable and near prime SB unit. So will the growth over here be purely organic or will you also try To BT out customers from some of the affordable housing companies.
Atul Jain
We are looking at organic growth here. The BP is in this business. What we have started as an SBU will not be more than 10 to 12% of the. Even now, also what we are acquiring, 10 12% of the mix only comes as a balance transfer because we want to look at an organic number and we want to build a purchase transaction mix because we are yet to learn the ropes of the trade in this business as we are going forward. And we know from experience that balance transfer is slightly more riskier than the organic purchase which is a monetization versus investment or a purchase of an asset. So our focus will largely be on purchase assets here as we grow this business.
Pranuj Shah
Okay, understood. And what would be the ease as compared to your current on book on book yields of 9.7% in the affordable and near prime segments?
Atul Jain
The yield you don’t have to compare with the current book because in a home loan to home loan versus a prime home loan to a near prime and affordable book, that difference in yield will be close to 180bps on acquisition.
Pranuj Shah
Okay, understood. That’s very clear. Thank you. That’s it from my side.
Operator
Thank you. The next question comes from the line of Nischent Shawate from Kotak Institutional Equities. Please go ahead.
Nischint Chawathe
Yeah, thanks for taking my question. You know, you mentioned about, you know, approximately a 10 basis points kind of in. Kind of a hit this year because of rise in. Sorry. Because of the fallen interest rates. I mean, I was just curious whether this is only for the home loan book or is it kind of, you know, kind of doing a math for the entire book. And in that sense, what role can really be played by the change in business?
Atul Jain
So Nishant, this week you are talking about book stock as of today. So which includes the book stock. That is where we said that a part of it or a larger part of it will try to mitigate through the asset mix change as we acquire during the year. So because if it take a. We are taking a stock on the stock today when we are calling it.
Nischint Chawathe
And this is not home loan book. This is the entire book that we’re talking.
Atul Jain
I’m talking about the stock.
Nischint Chawathe
Yeah, I understand. The stock of not home loans for the entire book.
Atul Jain
Sorry, the full entire entire company book stock. I’ll books.
Nischint Chawathe
Got it. And on the bank borrowing side of 34,000, not crores. How much is linked to repo?
Gaurav Kalani
This is MCLR is close to 23, 24% balance is either repo or repo equivalent which can be a T bill or a GSEC where the pass through is as close to repo.
Nischint Chawathe
Got it. And on the disbursement side, how much is linked to repo.
Atul Jain
On disbursement side, repo would be in the last quarter would be quite low. I don’t have the exact number there, but it would be quite low. Largely this, if you look at the repo book, it would have remained stable versus last quarter to this quarter.
Nischint Chawathe
Got it. Thank you very much and all the best.
Atul Jain
Thanks Nish.
Operator
Thank you. The next question comes from the line of Kayur Asher from PNB MetLife India Insurance. Please go ahead.
Kayur Asher
Yeah, thank you for the opportunity, sir. So I just wanted to get your sense with respect to just trying to better understand how do you manage ALM risk in this, in this business. So just if you could give some flavor on what could be roughly the tenor of the loans that you extend across these product classes of home loans lab. And just against that, how are we placed on the borrowing side? Just because I’m trying to understand from the deck I see that close to 50 to 60% of your liabilities are up to three year tenor. So just trying to better understand the ALM risk aspect. Yeah.
Atul Jain
If I have to take see the loan tenor. What we offer in various products is different. Like for a home loan, let us say the tenure can be anything from 15 years to 30 years as well. However, I have to call out that the behavioralized maturity of a home loan is less than seven to eight years because the extension of tenor initially is one conversation. But there is a behavioralized maturity of the book which is seven to eight years which is largely in line with what is in industry or what we see. And we are largely a prime company, a prime home loan company. So we see a behavioralized maturity at close to six to seven years only rather than even an age so that 30 year two and then the second part of the book which comes in terms of whether it’s a developer finance. Wherever we look at a behavioralized maturity at less than 24 months today. So there is a various parts of the book at the average behavioralized maturity of the book is not what is at which tenor you extend on the behavioralized maturity of the liabilities there is various mixes we play. I called out in the earlier answer saying that 12 to 15% of our assets we always do assignment out as a liability mix because that’s a perfect match funding.
Then it comes 10 year bond which is again a long term which is which Covers more than what you are what what we look at in terms of for covering of a liability then the bank loans or the NCDS which are largely between a average maturity of a three to five years. That is where it is managed. And there is a what we look at our alm we don’t factor in any kind of a rollout of the liability.
That’s what you are looking at a cumulative gap or there is a 10% it is well lower than if I say that from the regulatory definition permissible because we don’t even factor in rollovers available for the other loans. There is a rollover because in the market business you don’t get if I have to take a 8 year liabilities all 80 liabilities are not available neither in the bond market and not nor it is advisable to fill the entire bucket through a 10 year bond market. So the ALM is to be managed by the company actively which is in line with all mortgage players.
Kayur Asher
If I precisely. Right. Understood. Thanks. This is. This is helpful.
Operator
Thank you. The next question comes from the line of viral Shah from IIFL Capital. Please go ahead.
Viral Shah
Yeah, thanks for the opportunity for getting me again on the line.Just one last question. Atul was I was noticing your BSE disclosure. So there is some 4000 crores of portfolio that has been bought this year unlike in the previous years. So what exactly is this? If you can give some color from where we are acquiring this.
Atul Jain
There is so viral this is a portfolio what we purchase this is assignment into the portfolio from various players which is which can I can name the players where we purchase the various portfolio as a technically opportunity available in terms of from making a bit of a money that’s a portfolio which is a purchase cooling purchasing which is assignment in there is an assignment out what we do and there is an assignment in what we do. It’s a pure opportunistic a bit of a margin expansion strategy available.
Viral Shah
What he does come in any idea if you can share.
Atul Jain
It is incremental. It is roe creative to the business.
Viral Shah
Got it. Thank you.
Atul Jain
Thank you.
Operator
The next question comes from the line of Sri Pal Doshi from Aquarius. Please go ahead.
Shreepal Doshi
Hi sir. Thank you for giving me the opportunity. My question was on the developer finance portfolio. So if you. I was just checking the number of projects that we have. So there is a decline in the incremental projects that we are doing. So is there some reading with respect to decline in the conversion rates with respect to inquiry to purchase ratio in the real estate Sector that you see.
Atul Jain
Shirupal? No, we are not seeing any decline while there is a less launches which is happening in last six to nine months which is by as per various reports available in the market. There is a less launches which is happening. But at our state we have not seen kind of a decline that number, absolute number. If you are referring on a quarter, on quarter growth in terms of a number of projects it can be on a volume basis which is on a value basis. We have done better, we have done higher numbers. It can be that there is number of projects can be lower but it’s not structural in nature. I have not seen that number. That’s why I’m not able to give you absolute just one. That’s the question.
So there is also a factor of 60 last quarter 45 this quarter 60 but we had absolute number. We have added last quarter 45 projects. This quarter 60 is added. So I’m not sure from here the number is coming in terms of a decline.
Shreepal Doshi
Number of projects. Like it is 758. Right.
Atul Jain
748.
Nischint Chawathe
Right, right, right. So but are you seeing any trend there with respect to like decline in the, you know the inquiry to conversion rate at our, at our project that we have financed?
Atul Jain
No, no, no. You are talking inquiry to conversion of the retail sales or you’re talking about.
Shreepal Doshi
Yes, for the developers. Yes, for the developers.
Atul Jain
For the developers. So inventory. See while there is a slowdown in the sales, that is what if you’re referring to the market reports in terms of a slowdown of the sales. But you look at the inventory ratios is the ever lowest in the country today because the launches have declined more than the sales ratio. So there is net, net no impact in terms of an inventory because as the inventory is still going down only while the sales are slowed. So there is sales are slow but there is no stock also available proportionately.
Shreepal Doshi
That was the only question I had. Thank you for answering.
Atul Jain
Thanks.
Operator
Thank you. The next question comes from the line of Raghav Garg from Ambit Capital. Please go ahead.
Raghav Garg
Thanks for the follow up opportunity. Just one question from my side needed some clarification to my earlier question. So when you said 35 basis points reduction in funding cost you meant that over the next one year. Right? So 35 basis points lower on the exit quarter hundred for 26. Is that understanding correct?
Atul Jain
I meant yoy cost. So for the year what was our cost of fund versus next year projected cost of fund for the year to year? I’m not, I did not meant exit to exit quarter. I meant for the year.
Raghav Garg
Okay. Thank you. That’s all.
Atul Jain
Thanks, sir.
Operator
Thank you. Ladies and gentlemen, that concludes the question and answer session. I now hand the conference over to Mr. Anuj Singhal for his closing comments.
Anuj Singla
Thank you very much. Atul. Sir, any closing remarks from your end?
Atul Jain
No, no. Thank you very much. Thanks everyone for giving us an opportunity to explain our position.
Anuj Singla
Thank you. Back to you, Ryan. Thank you.
Operator
Thank you. On behalf of Bajaj Finance limited that concludes this conference. Thank you for joining us. And you may now disconnect your lines.