Skip to content

    Home First Finan

    HOMEFIRSTGood
    Financial Services·29 Jan 2025
    Management Summary

    Home First Finance delivered a robust Q3 FY25 with 30% AUM growth and steady asset quality despite minor seasonal upticks in early-stage delinquencies. While NIMs saw some compression due to rising cost of funds, the company maintained healthy spreads of 5.2%. Management signaled high confidence in future growth by announcing a ₹1,250 crore capital raise and setting an ambitious AUM target of ₹35,000 crore by 2030.

    Highlights

    8

    • AUM crossed ₹12,000 crore, maintaining a strong growth trajectory of 30% plus YoY.

    • Profit After Tax (PAT) stood at ₹97 crores, representing a 24% increase on a YoY basis.

    • Return on Equity (ROE) improved to 16.6%, up 10 basis points compared to the previous quarter.

    • Net Interest Margin (NIM) compressed by 24 bps QoQ to 4.9%, primarily due to increased borrowing costs and liquidity management.

    • Gross Stage 3 NPA remained stable at 1.7%, with credit costs at 30 basis points.

    • Board approved a fresh equity capital raise of up to ₹1,250 crore to fund the next phase of growth.

    • Branch network expanded to 149 branches across 13 states and Union Territories, with 7 new branches added in Q3.

    • Disbursals for the quarter were ₹1,193 crores, slightly impacted by regulatory issues in Karnataka and tighter credit filters.

    Key financials

    Single quarter

    06 metrics
    1. 01AUM₹12,000 Cr+30%YoY
    2. 02PAT₹97 Cr+24%YoY
    3. 03NIM4.9%-4.6%QoQ
    4. 04Spreads5.2%0%QoQ
    5. 05GNPA1.7%0%YoY

    Segment breakdown

    AUM MixDisbursal Growth
    Home Loan (HL)85%16.5%
    Loan Against Property (LAP)15%23.5%
    Heatmap· 2 shared metrics

    Guidance & targets

    6
    CategoryTargetPriority
    Market Share
    AUM Target
    ₹20,000 crores
    		High
    Market Share
    Long-term AUM Target
    ₹35,000 crores
    		Medium
    Margin
    Spreads Band
    5.0% to 5.25%
    		High
    Profitability
    Credit Cost Guidance
    30 bps to 40 bps
    		High
    Other
    LAP AUM Mix
    20%
    		High
    Revenue
    Insurance Commission
    ₹15 crore to ₹18 crore
    		High

    Risks & concerns

    4
    RiskSeverity

    Regulatory Issues in Karnataka (e-khatas)

    Impacted disbursals by ₹10-15 crores during the quarter; management expects this to be temporary. — Management acknowledged

    medium

    Rising Cost of Borrowing

    Cost of borrowing rose to 8.4% due to MCLR increases; management is managing this through diversified funding and spread guidance. — Both acknowledged

    medium

    Competitive Intensity from Large HFCs

    Management believes large HFCs target higher ticket sizes (₹20L+) compared to Home First's core bucket (₹10-13L). — Analyst downplayed

    low

    Areas of Evasion(1)

    • Specific details on the 'nuanced' product-specific credit filters were withheld for competitive reasons.

    Q&A highlights

    3

    “So out of 24 basis points, 11 basis points was the increased cost of borrowing, 7 basis points are liquidity and leverage put together... The remaining 7 basis points... is coming from a lower realized yield.”

    Provides a granular breakdown of margin pressure, distinguishing between temporary liquidity impacts and structural cost increases.

    asked by Abhijit Tibrewal

    2 min read5 chapters

    Detailed Narrative

    01

    Aggressive Growth Strategy and Capital Infusion

    Home First is planning for its next phase of growth by seeking a ₹1,250 crore equity raise, despite currently having capital well above regulatory requirements. This move is aimed at supporting a target AUM of ₹20,000 crores by March 2027 and a long-term vision of ₹35,000 crores by 2030. Management noted that their growth has been non-dilutive since listing and they intend to continue using capital judiciously to gain market share in the affordable housing segment.

    02

    NIM Compression and Spread Resilience

    The company experienced a 24 bps QoQ compression in NIM, bringing it to 4.9%. This was driven by an 11 bps increase in the cost of borrowing (now at 8.4%) and 7 bps from higher liquidity levels. Despite these pressures, Home First maintained its spreads at 5.2%, which is at the upper end of its guided range of 5.0% to 5.25%. Management expects NIMs to improve as leverage increases and borrowing costs eventually stabilize.

    03

    Asset Quality and Underwriting Discipline

    Asset quality remains a core focus, with GNPA holding steady at 1.7%. While there was a minor seasonal uptick in early-stage delinquencies (1+ DPD at 4.8% and 30+ DPD at 3.1%), management attributed this to festive season impacts and a generally weak macro environment. Proactively, the company implemented tighter credit filters in certain product categories, which impacted quarterly disbursals by approximately ₹10-12 crores but ensured the long-term health of the portfolio.

    04

    Strategic Shift in Product Mix

    The company is intentionally shifting its product mix, targeting a 20% contribution from Loan Against Property (LAP) over the next 2-3 years, up from the current 15%. While LAP typically carries higher NPA rates, management emphasized that it also has significantly lower Loss Given Default (LGD) due to lower Loan-to-Value (LTV) ratios. This shift is expected to support overall yields without materially increasing credit costs, which are guided to remain between 30-40 bps.

    05

    Distribution and Technology Leverage

    Home First continues to deepen its footprint, adding 7 new branches in Q3 to reach a total of 149. The company aims to add 30-40 branches annually, focusing on emerging markets like UP, MP, and Rajasthan. Technology remains a key differentiator, with 96% of customers registered on the mobile app and 88% of service requests being raised digitally. Account aggregator adoption has also surged to 61% for new approvals, enhancing operational efficiency.

    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.