Detailed Narrative
Sustained Growth Momentum and Market Expansion
Home First continues to outpace the industry with 34.2% YoY AUM growth, reaching ₹11,229 crores. The company achieved its highest-ever quarterly disbursal of ₹1,177 crores in Q2 FY25. Management is aggressively expanding its footprint, adding 9 new branches this quarter to reach a total of 142, with a focus on high-growth states like Uttar Pradesh, Rajasthan, and Madhya Pradesh. They aim to maintain a 30% growth rate by increasing monthly disbursal run rates to ₹500-600 crores over the next two years.
Resilient Asset Quality and Conservative Provisioning
Asset quality remains a core strength, with GNPA stable at 1.7% and 30+ DPD improving by 10 bps to 2.8%. Credit costs were maintained at a low 20 bps, which is at the bottom of the management's 20-30 bps guidance range. The company continues to follow a conservative provisioning approach, maintaining a Stage 3 provision coverage ratio of 48% (64% before RBI reclassification). Management noted that housing loan customers remain disconnected from the current stress seen in the microfinance (MFI) sector.
Strategic Human Capital Investment
The company saw a significant 20% sequential increase in employee expenses, driven by a strategic decision to front-load hiring. Employee strength grew to 1,642 from 1,249 in just six months. This 'connector model' relies on employees to consolidate leads and close loans, and management believes this larger base is essential to support the planned 30% AUM growth over the next 2-3 years. Attrition has also improved, falling below 30% this year.
Diversified Funding and Margin Stability
Home First maintains a well-diversified borrowing profile with 60% from banks, 16% from NHB, and 13% from direct assignments. During the quarter, they added a $35 million 10-year fully hedged ECB from DFC. Spreads were maintained at 5.3% following a PLR hike in August, which management expects to fully reflect in Q3 yields. The company's cost of borrowing remains competitive at 8.3%, enabling stable NIMs of 5.2% despite the rising interest rate environment.
Digital Transformation and Fee Income Drivers
Technology remains central to operations, with 95% of customers registered on the mobile app and 75% of fulfillments handled digitally. A new driver for profitability is the reworked insurance partnership following the receipt of a corporate agency license, which is expected to contribute approximately ₹4 crores in commission income per month. This shift is expected to provide a net delta of ₹9-10 crores in fee income annually as marketing income is replaced by higher-margin commissions.