Home First Finance Company India Limited — Q3 FY25 earnings call

Call held 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

  • 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

  1. AUM ₹12,000 Cr +30%YoY
  2. PAT ₹97 Cr +24%YoY
  3. NIM 4.9% -4.6%QoQ
  4. Spreads 5.2% 0%QoQ
  5. GNPA 1.7% 0%YoY
  6. ROE 16.6% +0.6%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

SegmentAUM MixDisbursal Growth
Home Loan (HL)85%16.5%
Loan Against Property (LAP)15%23.5%

Guidance & targets

Market Share

  • AUM Target Market Share · by March 2027 · High confidence ₹20,000 crores
    Thus, we would need to raise equity funds over the course of next 6 to 9 months as we continue to strive towards a Mar’27 AUM of INR 20,000 crores.

    — Nutan Gaba Patwari, CFO

  • Long-term AUM Target Market Share · by 2030 · Medium confidence ₹35,000 crores
    broadly, we are looking at an INR 35,000 crores kind of a number by 2030.

    — Manoj Viswanathan, MD & CEO

Margin

  • Spreads Band Margin · Ongoing · High confidence 5.0% to 5.25%
    The spreads will remain in the 5% to 5.25% range that we have been guiding all along.

    — Nutan Gaba Patwari, CFO

Profitability

  • Credit Cost Guidance Profitability · Medium-term · High confidence 30 bps to 40 bps
    We continue to maintain our conservative medium-term cost -- credit cost guidance of 30 basis points to 40 basis points as we focus on growth.

    — Nutan Gaba Patwari, CFO

Other

  • LAP AUM Mix Other · next 2 to 3 years · High confidence 20%

    Previously 15% → 20%

    So maybe in the next 2 to 3 years, we are looking at a 20% LAP contribution and an 80% Home loan in our AUM Mix.

    — Manoj Viswanathan, MD & CEO

Revenue

  • Insurance Commission Revenue · per quarter · High confidence ₹15 crore to ₹18 crore
    We expect the insurance commission to be in the range of INR 15 crore to INR 18 crore per quarter going ahead.

    — Nutan Gaba Patwari, CFO

Risks & concerns

  • Regulatory Issues in Karnataka (e-khatas)

    medium

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

    Management acknowledged

  • Rising Cost of Borrowing

    medium

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

    Both acknowledged

  • Competitive Intensity from Large HFCs

    low

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

    Analyst downplayed

Areas of evasion (1)

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

Q&A highlights

3 direct
NIM Compression Drivers Direct
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

Tightening of Credit Filters Direct
It has impacted our volumes to the extent of maybe around INR 10 to INR 15 crores for the quarter... This is a number that we should now be able to compensate from other markets in the coming months.

Explains the slight miss in disbursal volumes as a proactive risk management measure rather than a demand slowdown.

Asked by Rajiv Mehta

LGD and ECL Calculation Nuances Direct
Higher NPA but lower LGD. LTV is low... So, we recover the entire amount... The mix is improving towards lower LTV loans.

Clarifies why provisioning remains stable despite rising LTVs on the live book, highlighting the superior recovery profile of self-construction and LAP segments.

Asked by Divyansh Gupta

2 min read 5 chapters

Detailed narrative

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.

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.

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.

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.

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.

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