Why LIC Housing Finance Share Price is Falling

The housing finance sector in India is growing steadily, driven by increasing urbanisation, rising disposable incomes, and government initiatives.

With the demand for home loans rising, housing finance companies are crucial in providing affordable credit to individuals.

However, the sector is highly competitive, with several players vying for market share by offering competitive interest rates and attractive loan terms.

LIC Housing Finance, a subsidiary of LIC, the largest insurance company in India, is a behemoth in the housing finance sector. Established in 1989, LIC Housing Finance offers home loans, loans against property, and loans to builders, catering to various segments of the market.

The company has built a strong reputation over the years as one of the leading housing finance institutions in India, serving millions of customers across the country.

Recently, LIC Housing Finance share price was under pressure due to renewed competitive pressure.

Let's explore in detail how this competitive landscape is impacting the company's share price.

Bajaj Housing Finance's Stellar Debut on the Bourses

The housing finance sector has recently witnessed a shift, with Bajaj Housing Finance's strong listing shaking up the competition.

On its debut, Bajaj Housing Finance share price surged 114%, listing at a premium and continuing to climb by another 10%.

This remarkable performance quickly overshadowed LIC Housing Finance, whose share price dropped over 6%, along with other peers like PNB Housing Finance and Can Fin Homes, which also experienced declines.

LIC Housing Finance, known for its strong presence in the housing finance sector, is now facing competitive pressure from Bajaj Housing Finance.

Bajaj's entry has been a game-changer due to its solid asset management, impressive growth trajectory, and low non-performing assets (NPAs).

With gross NPAs at just 0.3% and net NPAs at 0.1%, Bajaj Housing Finance has set a high benchmark. This sharp contrast with the fundamentals of LIC Housing Finance has made investors rethink their position, leading to the recent drop in its stock.

Analysts attribute the decline in LIC Housing Finance's share price to the superior performance and growth prospects of Bajaj Housing Finance.

Bajaj's assets under management (AUM) have grown by 30.9% between FY22 and FY24, with profit growth soaring 56.2% in the same period.

This growth, backed by the strength of the Bajaj brand, has given it a competitive edge over LIC Housing Finance, whose fundamentals appear weaker in comparison.

Bajaj Housing Finance's listing has not only shifted investor attention but also placed pressure on LIC Housing Finance to improve its offerings.

In summary, Bajaj Housing Finance's entry has shifted the spotlight, causing investors to shift focus from established players like LIC Housing Finance.

What Next?

Looking ahead, LIC Housing Finance aims to focus on long-term growth through multiple strategies.

The company is working on improving its disbursement growth, especially in individual home loans, where it has already shown a 19% increase in Q1.

Its project loan disbursements have also picked up, and this momentum is expected to continue.

Additionally, the company plans to reduce prepayment pressures by revisiting its interest rates to retain more customers and loans.

LIC Housing Finance is confident in maintaining its double-digit loan growth target for the year despite a slower start. The company also expects its margins to improve after hitting a low of 2.76% in Q1.

As recoveries from non-performing assets (NPAs) strengthen and new strategies are implemented, LIC Housing Finance anticipates better financial performance in the upcoming quarters.

Asset quality remains a focus, and the company is working on resolutions to improve provisions, particularly in Stage 1 and Stage 2 loans. LIC Housing Finance is optimistic that its provisions will stabilise as loan upgrades continue, boosting overall profitability.

The combination of growth in loan disbursements, focus on lowering prepayment rates, and improving asset quality positions LIC Housing Finance for a stronger future. However, its ability to navigate interest rate changes and maintain steady recoveries will be key to its success moving forward.

How LIC Housing Finance Share Price has Performed Recently

In the past five days, LIC Housing Finance share price has slipped 0.6%. In the last month, it is up 1.3%.

The stock price has rallied 20.2% in the 2024. Additionally, it has surged 48.5% in the last year.

The stock touched its 52-week high of Rs 827 on 16 July 2024 and a 52-week low of Rs 432.4 on 26 October 2023.

About LIC Housing Finance

Incorporated in 1989, LIC Housing Finance is one of the largest housing finance companies (HFC) in India, with the key objective of providing long term finance to individuals for the purchase or construction of a house or a flat for residential purposes.

The company also provides finance on an existing property for business or personal needs, and also gives loans to professionals for buying office space and equipment.

Over the last few years, the company has sharpened its focus on the affordable housing sector and has managed to grow substantially.

To know more, check out LIC Housing's financial factsheet and its latest quarterly results.

You can also compare LIC Housing with its peers:

LIC Housing vs Aavas Financiers

LIC Housing vs GIC Housing

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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