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    Home First Finan

    HOMEFIRSTGood
    Financial Services·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

    8

    • 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

    Single quarter

    06 metrics
    1. 01Total Income₹455 Cr+33.4%YoY
    2. 02PAT₹119 Cr+35.5%YoY
    3. 03NIM5.2%+2.0%QoQ
    4. 04Gross Stage 31.8%+5.9%QoQ
    5. 05RoA3.7%

    Segment breakdown

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

    Guidance & targets

    5
    CategoryTargetPriority
    Volume
    Annual Disbursal Guidance
    ₹5,600-5,800 crores
    		High
    Profitability
    Return on Equity (ROE)
    15%
    		Medium
    Margin
    Credit Cost Guidance
    30-40 bps
    		High
    Market Share
    Origination Market Share
    5%
    		Medium
    Other
    Co-lending contribution to disbursements
    10%
    		Medium

    Risks & concerns

    4
    RiskSeverity

    Regional Asset Quality Stress

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

    medium

    Karnataka Market Headwinds

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

    medium

    Competitive Intensity from Large NBFCs

    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

    low

    Areas of Evasion(1)

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

    Q&A highlights

    3

    “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

    2 min read5 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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%.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.