PNB Housing Finance vs. Indiabulls Housing Finance vs. Bajaj housing finance

The housing finance sector in India has witnessed significant growth over the years, driven by increasing demand for housing, government incentives, and the expansion of credit to homebuyers. Among the key players in the sector, LIC Housing Finance (LICHFL), PNB Housing Finance (PNBHFL), Indiabulls Housing Finance (IBHFL), and Bajaj Housing Finance (BHFL) stand out as prominent competitors. This article will explore a detailed comparison between these four companies, considering their business models, financial metrics, market positioning, and future strategies.

1. Business Models and Segmentation

Each of these housing finance companies operates with a slightly different business model and focus, depending on their parent company’s financial strength, customer base, and strategies.

• LIC Housing Finance: A subsidiary of the Life Insurance Corporation of India, LICHFL benefits from the immense brand value and trust associated with LIC. Its business model revolves around offering home loans to individuals, with a focus on salaried and self-employed individuals. The company also provides loans for construction and repairs, benefiting from the wide distribution network of LIC’s agents.
• PNB Housing Finance: Backed by Punjab National Bank, PNBHFL is another leading player in the sector. It focuses on providing home loans, loan against property (LAP), and construction finance. Its business model is slightly more diversified, catering not only to retail homebuyers but also to developers in the real estate sector. PNBHFL also has a large portion of its loan book focused on non-metro areas, catering to the rising demand in Tier 2 and Tier 3 cities.
• Indiabulls Housing Finance: As a part of the Indiabulls Group, IBHFL has a more aggressive business model, focusing on a broader portfolio that includes home loans, LAP, and developer financing. It has traditionally been more inclined toward the middle and upper-middle-income groups, positioning itself as a lender of choice for larger home loans.
• Bajaj Housing Finance: A subsidiary of Bajaj Finance Limited, BHFL follows a digital-first approach with a focus on efficiency in disbursing home loans. Its business model emphasizes a streamlined, tech-driven process, offering a wide range of products including home loans, loans against property, and balance transfer of existing loans. With strong parent support from Bajaj Finance, it leverages the group’s financial muscle and customer base.

2. Market Capitalization and Financial Strength

As of the most recent data (Q2 FY24), the market capitalization of these companies reflects their market positioning and investor sentiment.

• LIC Housing Finance: With a market cap of approximately ₹26,000 crores, LICHFL is the largest among these four. Its long-standing presence, along with its association with LIC, gives it a steady base of investors. However, it operates in a more conservative manner compared to the private players.
• PNB Housing Finance: PNBHFL has a market cap of around ₹8,000 crores. The company has faced challenges in recent years due to asset quality concerns and competition. Nevertheless, its affiliation with Punjab National Bank provides it with a safety net and recognition in the market.
• Indiabulls Housing Finance: Once a fast-growing player in the sector, IBHFL has seen its market capitalization shrink to around ₹5,500 crores. This is primarily due to challenges in liquidity management and a shift in focus from riskier developer financing toward retail housing loans.
• Bajaj Housing Finance: Since BHFL is not separately listed and operates under Bajaj Finance, its market cap is tied to its parent company. Bajaj Finance has a market cap of over ₹4.5 lakh crores, giving BHFL a strong backing. However, Bajaj Housing Finance’s individual financials aren’t disclosed separately from its parent company.

3. Profitability and Revenue Generation

Profitability is a crucial factor in evaluating these companies, as it reflects their operational efficiency and growth potential.

• LIC Housing Finance: LICHFL’s net profit for Q1 FY24 stood at ₹1,319 crores, reflecting a strong growth of 44% YoY. The company’s cost of funds has remained stable due to its ability to raise debt at competitive rates, courtesy of its backing from LIC. Its loan book is large but has a focus on lower-risk salaried individuals, making its asset quality relatively strong.
• PNB Housing Finance: PNBHFL reported a net profit of ₹270 crores in Q1 FY24, which is an improvement after a series of quarters where asset quality concerns led to a decline in profitability. The company has been working on reducing its exposure to developer financing and focusing more on retail housing loans to improve margins.
• Indiabulls Housing Finance: IBHFL’s Q1 FY24 net profit was ₹280 crores, showing a recovery after a tough few years. However, the company’s profitability remains under pressure due to higher borrowing costs and a strategic shift away from high-risk loans. The focus on retail housing loans is expected to stabilize the profit margins, but the pace of growth has slowed.
• Bajaj Housing Finance: As part of Bajaj Finance, BHFL’s exact profitability is bundled within the broader company’s results. Bajaj Finance reported a consolidated net profit of ₹3,437 crores for Q1 FY24. BHFL, being a key part of this growth, has benefitted from Bajaj Finance’s diversified business model and low-cost borrowing capability.

4. Asset Quality and Loan Book

A key metric to assess any financial institution is its asset quality, which reflects how well the company manages its non-performing assets (NPAs).

• LIC Housing Finance: LICHFL’s gross NPAs stood at 4.2% as of Q1 FY24, which is manageable but still a concern for the company. It has been working to bring this number down, but its conservative lending approach has helped keep NPAs in check compared to some of the more aggressive players.
• PNB Housing Finance: PNBHFL’s gross NPAs were at 6.2% in Q1 FY24. The high NPA ratio is a result of legacy issues with its exposure to developer loans. The company has been actively working to reduce this exposure and improve asset quality, but it remains one of the key risks for investors.
• Indiabulls Housing Finance: IBHFL’s gross NPAs stood at 3.4% in Q1 FY24, reflecting an improvement from previous quarters. However, the company’s past exposure to real estate developers still poses risks to asset quality, which it is gradually mitigating by shifting toward safer retail loans.
• Bajaj Housing Finance: BHFL, being part of Bajaj Finance, has maintained a robust asset quality with low NPAs. Bajaj Finance’s conservative risk management has resulted in gross NPAs below 1%, and BHFL benefits from the same stringent credit policies.

5. Future Strategies and Outlook

Looking ahead, these companies have distinct strategies for growth, influenced by their market positioning and financial health.

• LIC Housing Finance: LICHFL aims to maintain its stronghold in the affordable housing segment and expand its loan book at a steady pace. The company is focused on improving its digital capabilities to enhance customer experience and reduce turnaround times.
• PNB Housing Finance: PNBHFL is restructuring its business model to focus more on retail lending and reduce its reliance on corporate and developer loans. It is also planning to raise fresh capital to strengthen its balance sheet and fuel future growth.
• Indiabulls Housing Finance: IBHFL is in the process of shifting its focus entirely to retail housing loans, particularly in the affordable housing segment. The company is working on diversifying its borrowing base to reduce funding costs and improve liquidity.
• Bajaj Housing Finance: BHFL continues to leverage Bajaj Finance’s robust digital platform and customer base to drive growth. Its focus on maintaining low NPAs and expanding into new geographies positions it for long-term growth.