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    Home First Finan

    HOMEFIRSTGood
    Financial Services·2 May 2025
    Management Summary

    Home First delivered a strong finish to FY25, characterized by robust 31% AUM growth and stable asset quality. The company successfully executed a significant capital raise of ₹1,250 crores, which provides a long runway for growth but will temporarily dilute ROE. Management remains confident in maintaining spreads above 5% and achieving an AUM of ₹20,000 crores by FY27.

    Highlights

    7

    • Assets Under Management (AUM) reached ₹12,713 crores, growing 31.1% YoY and 6.4% QoQ.

    • Full-year PAT stood at ₹382 crores (up 25% YoY), with Q4 PAT crossing the ₹100 crore milestone at ₹105 crores.

    • Successfully raised ₹1,250 crores via QIP in April 2025, issuing 1.3 crore equity shares.

    • Asset quality improved with 1+ DPD at 4.5% (down 30bps QoQ) and 30+ DPD at 3.3% (down 10bps QoQ).

    • Net Interest Margin (NIM) for Q4 expanded by 20bps QoQ to 5.1%.

    • Return on Equity (ROE) for Q4 FY25 touched 17%, while full-year ROE was 16.5%.

    • Disbursements for FY25 were ₹4,805 crores, up 21.2% YoY, meeting annual guidance.

    What Changed1

    vs Q1 FY26

    Guidance items5 → 6 (+1)

    Key financials

    Single quarter

    06 metrics
    1. 01AUM₹12,713 Cr+31.1%YoY
    2. 02PAT₹382 Cr+25%YoY
    3. 03NIM5.1%+4%QoQ
    4. 04Gross Stage 3 Assets1.7%0%QoQ
    5. 05ROE16.5%

    Segment breakdown

    AUM ShareNPA
    Home Loans85%1.9%
    Loan Against Property (LAP)15%125%
    Heatmap· 2 shared metrics

    Guidance & targets

    6
    CategoryTargetPriority
    Volume
    AUM
    ₹20,000 crores
    		High
    Volume
    Disbursement Growth
    20%+
    		High
    Volume
    AUM
    ₹35,000 crores
    		Medium
    Margin
    Spread (ex-colending)
    5% to 5.25%
    		High
    Profitability
    ROE
    15%+
    		Medium
    Other
    Credit Cost
    30 to 40 bps
    		High

    Risks & concerns

    4
    RiskSeverity

    Regulatory Change in Co-lending

    RBI draft guidelines omit 'Model 2' co-lending; switching to Model 1 would require simultaneous disbursal, making the process operationally tedious. — Management acknowledged

    medium

    Short-term ROE Dilution

    The ₹1,250 crore QIP will cause an 'optical reduction' in ROE, taking 6-7 quarters to return to the 15%+ target level. — Management acknowledged

    low

    Competitive Intensity from PSU Banks

    Management noted increased activity and aggressiveness from nationalized banks in the mortgage space during March. — Both acknowledged

    medium

    Areas of Evasion(1)

    • Slightly vague on the exact 'tediousness' of Model 1 co-lending beyond logistics.

    Q&A highlights

    3

    “Correct. 5% plus we should be able to maintain because it is a floating rate book. If we are going below 5%, we will transmit that difference to the customer.”

    Confirms management's ability to protect margins in a declining interest rate environment through pricing power.

    asked by Renish, ICICI Securities

    2 min read5 chapters

    Detailed Narrative

    01

    Strategic Capital Infusion via QIP

    In April 2025, Home First successfully raised ₹1,250 crores through a Qualified Institutional Placement (QIP), issuing 1.3 crore equity shares. This capital infusion significantly strengthens the balance sheet, bringing proforma net worth to ₹3,751 crores and reducing proforma leverage to 3.3x. While this provides a growth runway for approximately 4 years, it will temporarily dilute ROE, with management targeting a return to 15%+ within 6-7 quarters.

    02

    Asset Quality Resilience and Underwriting

    Asset quality showed sequential improvement, with 1+ DPD declining 30bps to 4.5% and 30+ DPD improving 10bps to 3.3%. Gross Stage 3 assets remained stable at 1.7%. Interestingly, the Loan Against Property (LAP) segment reported lower NPAs (1.2-1.3%) compared to the core home loan book (1.9%), which management attributes to highly selective underwriting in a segment that remains a small portion (15%) of total AUM.

    03

    Margin Sustainability in a Changing Rate Cycle

    Despite rising bank MCLR, Home First maintained a competitive cost of borrowing at 8.4%. Q4 NIM expanded to 5.1%, aided by better liquidity management. Management is confident in maintaining spreads between 5% and 5.25% over the medium term⏳, citing their fully floating rate book which allows for the transmission of rate changes to customers.

    04

    Network Expansion and Productivity

    The company expanded its reach to 361 touchpoints and 155 branches across 13 states. During FY25, they added 22 branches and 385 employees, bringing total headcount to 1,634. Management expects to continue expanding the branch network by 20-30% annually, with 75% of future growth coming from existing branches and 25% from new locations.

    05

    Regulatory Headwinds in Co-lending

    Management highlighted potential friction from new RBI draft guidelines that omit 'Model 2' co-lending. Home First currently operates under Model 2, and a forced shift to Model 1 would require simultaneous loan disbursal by both the HFC and the bank partner. While management views the guidelines as beneficial for expanding the addressable market, they noted the Model 1 process is operationally 'tedious' compared to their current workflow.

    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.