Home First Finance Company India Limited — Q1 FY26 earnings call

Call held 28 Jul 2025

Management summary

Home First Finance delivered a robust Q1 FY26, characterized by significant capital raising and a credit rating upgrade to AA. While disbursements started slow in April, management saw a strong recovery in May and June, maintaining their full-year guidance. Profitability remains high with RoA at 3.7%, though asset quality experienced a typical seasonal softening in specific regions like Surat and Coimbatore.

Highlights

  • AUM reached ₹13,479 crores, representing a strong growth of 28.6% YoY and 6% QoQ.

  • Profit After Tax (PAT) increased to ₹119 crores, up 35.5% YoY and 13.6% QoQ.

  • Net Interest Margin (NIM) improved to 5.2%, up from 5.1% in the previous quarter.

  • Successfully raised ₹1,250 crore through the company's first QIP, significantly strengthening the capital base.

  • Long-term credit rating upgraded to AA (Stable) by ICRA, India Ratings, and CARE.

  • Disbursements for the quarter stood at ₹1,243 crores, the second highest in company history despite a slow April.

  • Asset quality saw a seasonal uptick with Gross Stage 3 at 1.8% (+10 bps QoQ) and 1+ DPD at 5.4% (+90 bps QoQ).

  • Return on Assets (RoA) stood at 3.7%, with a proforma pre-money RoE (adjusted for QIP) of 16.6%.

Key financials

  1. Total Income ₹455 Cr +33.4%YoY
  2. PAT ₹119 Cr +35.5%YoY
  3. NIM 5.2% +2%QoQ
  4. Gross Stage 3 1.8% +5.9%QoQ
  5. RoA 3.7%
  6. Cost to Income 34.2% -4.2%QoQ

What they filed

Q1 FY27: revenue up 18.5%, net profit up 34.5% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue373 406 415 454 477 +28%482 +19%501 +21%538 +19%
Net profit92 97 105 119 132 +43%140 +44%149 +42%160 +34%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Individual Housing Loans
    84% AUM Share13.4% Origination Yield
  • LAP
    17% Disbursement Share

Guidance & targets

Volume

  • Annual Disbursal Guidance Volume · FY26 · High confidence ₹5,600-5,800 crores
    Our disbursal guidance for FY26 remains in the range of Rs. 5,600-5,800 Cr.

    — Manoj Viswanathan, MD & CEO

Profitability

  • Return on Equity (ROE) Profitability · next 5-6 quarters · Medium confidence 15%
    We aim to deliver 15% ROE in the next five to six quarters and then build from there.

    — Nutan Gaba Patwari, CFO

Margin

  • Credit Cost Guidance Margin · FY26 · High confidence 30-40 bps
    We continue to maintain a credit cost guidance of 30 to 40 bps, ensuring disciplined risk management even as we scale.

    — Manoj Viswanathan, MD & CEO

Market Share

  • Origination Market Share Market Share · next 4-5 years · Medium confidence 5%

    From 2.3% today

    our ambition is to take this number to closer to 5%, say, in the next four years to five years.

    — Manoj Viswanathan, MD & CEO

Other

  • Co-lending contribution to disbursements Other · as we scale · Medium confidence 10%
    We aim to take co-lending contribution to 10% of disbursements as we scale.

    — Nutan Gaba Patwari, CFO

Risks & concerns

  • Regional Asset Quality Stress

    medium

    Seasonal uptick in delinquency was more pronounced in Surat and Coimbatore-Tirupur due to sluggishness in factory-based employment sectors.

    Both acknowledged

  • Karnataka Market Headwinds

    medium

    Ongoing e-Khata issues in Bangalore have impacted volumes for the last three quarters and remain unresolved.

    Analyst acknowledged

  • Competitive Intensity from Large NBFCs

    low

    Management argues that large NBFCs entering the affordable space cannot sustain lower rates without sacrificing ROE, maintaining that a 5% spread is the industry floor.

    Analyst downplayed

Areas of evasion (1)

  • Specific July disbursement numbers were not shared as the month was not yet closed.

Q&A highlights

3 direct
Weak Disbursement Growth in Q1 Direct
April alone came a bit lower. I think it was around Rs. 380 crores... We caught up in May and June, and even July, the trends are good. So, I think, it was just a blip in April.

Analysts were concerned that the 7% YoY disbursement growth in Q1 was too low to meet the 24-25% growth required for full-year guidance.

Asked by Suraj Das, Sundaram Mutual Fund

Asset Quality and DPD Uptick Direct
The slippage was high in April, yes. In May, we kind of pulled back... July is much better than June. It is much better than May also.

Management clarified that the 90 bps jump in 1+ DPD was seasonal and concentrated in specific markets (Surat/Tirupur) rather than a systemic portfolio issue.

Asked by Abhijit Tibrewal, Motilal Oswal

Stress in Small Ticket LAP Portfolio Direct
We are not worried about the LAP portfolio and it is not giving us any additional stress in spite of all the noise in the market. Because the contribution of LAP to disbursement is only about 16% or 17%.

Management distanced themselves from broader industry concerns regarding LAP stress, citing low exposure and minimal overlap with the MFI segment.

Asked by Renish, ICICI

2 min read 5 chapters

Detailed narrative

Capital Infusion and Rating Upgrade

Home First significantly bolstered its balance sheet by raising ₹1,250 crore through its first QIP, which increased net worth to ₹3,855 crores. This capital infusion, combined with a credit rating upgrade to AA (Stable) by major agencies, has lowered the company's marginal cost of borrowing to sub-8% in June and July. Management expects this to translate into a 20 bps reduction in reported cost of borrowing by Q2 FY26, providing a significant tailwind for margins.

Disbursement Recovery Post-April Blip

While Q1 disbursements of ₹1,243 crores were the second highest in history, growth was muted by a slow April, which saw only ₹380 crores in disbursals—about ₹40-50 crores below expectations. Management characterized this as a temporary 'blip' caused by seasonal factors and internal collection focus. They reported a strong rebound in May and June and maintained their full-year disbursal guidance of ₹5,600-5,800 crores, expecting to cover the shortfall in the second half of the year.

Asset Quality and Regional Nuances

Asset quality metrics saw a seasonal uptick, with 1+ DPD rising 90 bps to 5.4% and Gross Stage 3 increasing 10 bps to 1.8%. This stress was primarily concentrated in the Surat and Coimbatore-Tirupur regions, linked to sluggishness in the textile and diamond industries. However, management noted a significant 'claw-back' in July, particularly in Surat, and remains confident in maintaining their annual credit cost guidance of 30-40 bps.

Profitability and ROE Expansion Path

The company reported a PAT of ₹119 crores with a healthy RoA of 3.7%. While the recent QIP temporarily diluted RoE to 14.9%, management has laid out a clear path to return to 15% RoE within the next 5-6 quarters through increased leverage. NIMs improved slightly to 5.2%, and the company intends to maintain spreads in the 5.0% to 5.25% range, even as they begin to pass on lower borrowing costs to customers in the second half of the year.

Technology and Digital Adoption

Home First continues to leverage technology as a core differentiator, launching 'Pulse', an omnichannel AI platform for customer conversations in 7 Indian languages. Digital adoption remains high, with 78% of approvals facilitated by the account aggregator framework and 96% of customers registered on the mobile app. These efficiencies contributed to a 150 bps QoQ reduction in the cost-to-income ratio to 34.2%.

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