LIC Housing Finance Limited (NSE: LICHSGFIN) on Friday reported a slight year-on-year decline in net profit for the third quarter ended December 31, 2025, as the mortgage lender navigated a landscape of stabilizing interest rates and rising competition. Despite the bottom-line compression, the company recorded growth in its core interest income and marked improvements in asset quality, supported by a rebound in individual home loan disbursements.
Mixed Earnings Result with Revenue Growth
For the quarter ended December 31, 2025, the housing finance major posted a consolidated net profit of ₹1,398.27 crore, down approximately 2.6% from ₹1,434.89 crore in the corresponding period of the previous fiscal year. On a standalone basis, the profit after tax stood at ₹1,383.95 crore.
Total revenue from operations saw a modest uptick, rising 2% to ₹7,187 crore compared to ₹7,057 crore a year ago. The results largely aligned with analyst expectations, which had anticipated a minor dip in profitability due to elevated borrowing costs earlier in the fiscal cycle. Net Interest Income (NII)—the difference between interest earned and interest expended—grew by 5% to ₹2,102 crore, reflecting steady yields on the existing loan book.
Financial Performance and Asset Quality Trends
The company’s loan portfolio expanded by 5% year-on-year to reach ₹3,14,268 crore. Growth was primarily driven by the retail segment, while project loans remained relatively flat, indicating a cautious approach toward developer financing.
A significant highlight of the quarter was the improvement in asset quality. The Stage 3 Exposure (Gross Non-Performing Assets) ratio fell to 2.45%, down from 2.75% in December 2024. This sequential and annual improvement suggests robust recovery mechanisms and a stabilizing credit environment for borrowers.
Key Performance Indicators (Q3 FY2026):
Net Interest Margin (NIM): 2.69% (compared to 2.70% in Q3 FY2025)
Total Disbursements: ₹16,096 crore (up 4% YoY)
Individual Home Loan Disbursements: ₹13,094 crore (up 7% YoY)
Provision Coverage Ratio (PCR): 54%
Outstanding Individual Home Loan Portfolio: ₹2,65,890 crore
Strategic Focus and Business Outlook
Management indicated that the performance was characterized by “steady” growth, noting that sequential improvements in margins were a result of optimizing borrowing costs. The company is currently shifting its strategy to capitalize on the mid-income and affordable housing segments, which are expected to see renewed momentum following recent government policy initiatives.
Looking ahead to the final quarter of the fiscal year, LICHSGFIN anticipates a seasonal surge in demand. Historically, the January-March period is the strongest for Indian mortgage lenders due to fiscal year-end tax planning by individuals. The company expects that the recent stabilization of interest rates by the Reserve Bank of India (RBI) will lower the cost of funds, potentially providing a tailwind for margin expansion in the coming quarters.
Macro Context and Industry Landscape
The Indian housing finance sector is currently benefiting from a resilient domestic economy, with the national GDP growth projected at 7.4% for the current fiscal year. However, the industry faces headwinds from intense competition among both public and private sector banks, which have been aggressive in the retail mortgage space.
While LICHSGFIN’s stock has faced some technical pressure over the past year—underperforming the broader housing finance index—its current valuation at approximately 0.75 times book value has drawn attention from value-oriented investors. The company’s ability to maintain its Net Interest Margin near the 2.7% mark despite competitive pricing remains a critical metric for market analysts monitoring the stock’s recovery potential.
Reasons to Pass on LICHSGFIN
- Earnings contraction despite revenue growth: Net profit declined 2.6% year-on-year, indicating margin and cost pressures even as operating revenue and NII posted modest increases.
- Margin compression risk persists: Net Interest Margin remained effectively flat at 2.69%, with limited near-term visibility on sustained expansion amid competitive pricing in the mortgage market.
- Competitive intensity in core segment: Aggressive lending by public and private sector banks in retail mortgages could cap pricing power and constrain future profitability.
- Moderate loan growth profile: Loan book growth of 5% year-on-year is steady but not standout, suggesting limited upside versus faster-growing peers in housing finance.
- Provision coverage remains moderate: A PCR of 54% may limit flexibility if asset quality were to deteriorate again under adverse macro or borrower stress scenarios.
- Underperformance relative to peers: The stock has lagged the broader housing finance index over the past year, reflecting muted investor confidence and weak momentum.
- Valuation reflects caution, not a clear catalyst: While trading at about 0.75x book value may appeal to value investors, the discount appears justified given subdued earnings growth and margin uncertainty.
- Dependence on rate-cycle tailwinds: Expectations of margin improvement hinge on further easing in borrowing costs, leaving performance vulnerable if interest rates remain higher for longer.