HOMEFIRST - Home First Finance Company India Limited Share Price

Management Outlook:
Home First Finance anticipates sustained growth, targeting over 30% AUM expansion and maintaining ROE around 16-17%. The company plans to raise INR 1,250 crore in equity to support its INR 20,000 crore AUM goal by March 2027. Asset quality remains a priority, with stable GNPA (1.7%) and credit costs (30 bps). Technology adoption (96% app penetration, 61% account aggregator usage) and deeper geographic penetration (149 branches, targeting 10 new branches in Q4) are key growth drivers. Borrowing costs (8.4%) and spreads (5.2%) are expected to remain controlled, with co-lending contributing ~10% of disbursals long-term.

Major Points:

1. Financial Performance: Q3 disbursements at INR 1,193 crore (up 20% YoY), PAT at INR 97 crore (+24% YoY). Liquidity and leverage adjustments led to NIM compression (24 bps QoQ to 4.9%).
2. Expansion: Added 69 branches in 11 quarters; 359 touchpoints across 141 districts. Employee count rose to 1,704 (vs. 1,249 in Mar'24).
3. Asset Quality: 1+ DPD at 4.8%, 30+ DPD at 3.1%. Overlay provisions exceed ECL requirements.
4. Capital & Funding: Capital adequacy at 33.1%; debt-to-equity at 3.8x. Diversified borrowings (59% banks, 17% NHB).
5. Strategic Moves: Ajay Khetan promoted to Deputy CEO; ESG score improved to 45 (from 34). Insurance commissions (INR 15"“18 crore/quarter) bolstered fee income.
6. Risks Mitigated: Karnataka e-khatas issue and credit filter tightening caused minor disbursement delays (resolved for Q4). Collections remain robust post-Q3 seasonal uptick.

Focus remains on disciplined growth, operational efficiency, and market share gains in affordable housing.

Question: Can you elaborate on the tightening of credit filters you spoke about? And shouldn't it have a more lasting impact on your approval volumes then? And which markets were more impacted by this tightening of underwriting?
Answer: Tightening involved product-specific filters (e.g., self-construction, resale, LTVs) to enhance scrutiny, causing a temporary ~INR 10"“15 crore quarterly disbursal dip. No specific markets were disproportionately affected, and volumes are expected to stabilize.

Question: What is the balance transfer (BT) percentage of disbursements, and what has been the trend?
Answer: BT accounts for <1% of disbursals, consistent with historical trends.

Question: How much of the delinquency flows in Q3 could reverse in Q4? Have collections improved in January?
Answer: Early delinquencies (30+ DPD) saw a minor seasonal uptick due to holidays/macro factors but are expected to reverse in Q4. January collections remain robust.

Question: What is the linkage of bank borrowings to benchmarks?
Answer: ~20% borrowings are linked to external benchmarks (repo/T-bill), while 80% follow MCLR (split evenly across 3-, 6-, 12-month tenors).

Question: Are newer states like MP/UP driving delinquency increases?
Answer: No state-specific delinquency trends observed. New markets like MP/UP perform better than older regions.

Question: Why has LAP growth outpaced home loans? Is there comfort in accelerating LAP growth?
Answer: LAP growth reflects a small base (15% of AUM). The company aims to increase LAP's share to 20% of AUM (~20% YoY growth) with stable asset quality.

Question: Why are sequential disbursements flat despite branch expansions?
Answer: Q3 saw a ~INR 25"“30 crore shortfall due to Karnataka e-khata delays/tighter filters. Growth is expected to rebound in Q4, aligning with 30% AUM guidance.

Question: Why haven't recent rate hikes improved asset yields?
Answer: A 35 bps rate hike in August impacted only ~40% of the portfolio. Yield stability reflects competitive dynamics and mix changes (e.g., higher LAP).

Question: How are newer states like UP/MP contributing to growth?
Answer: MP/UP/Rajasthan are focus markets due to rising affordability. MP has deeper penetration, while UP requires incremental investments to expand beyond 4 cities.

Question: Why has the employee-per-branch ratio risen?
Answer: Seasonal hiring batches caused temporary spikes, but the ratio normalizes annually. Focus remains on scaling frontline staff for growth.

Question: What is the co-lending slowdown reason, and when will it recover?
Answer: Policy shifts and partner changes caused delays. New partnerships are underway, with recovery expected in 2 quarters.

Question: How does LAP's lower LTV affect asset quality?
Answer: LAP's lower LTV (vs. home loans) reduces loss severity. Delinquencies are manageable, with no structural risks observed.

Question: What is the rationale for raising INR 1,250 crore equity?
Answer: To support growth (targeting INR 20,000 crore AUM by FY27) and maintain leverage (~6x). Capital will be raised over 6"“9 months to avoid dilution.

Question: How does co-lending margin compare to core business?
Answer: Co-lending yields ~1"“1.25% margin on the full loan (20% retained). Partners include PSUs/private banks, contributing ~10% of disbursements medium-term.

Question: What is the tax rate guidance?
Answer: Effective tax rate stabilized at ~24.5% as non-housing income (e.g., insurance) reduces NHB provision benefits.

Question: What drives Stage 3 ECL declines despite higher LTVs?
Answer: Improved product mix (higher LAP/self-construction) lowers loss severity. Overlays shifted to Stage 2/3 post-auditor adjustments.

Question: What are long-term growth plans post-FY27?
Answer: Targeting INR 35,000 crore AUM by 2030 via co-lending/LAP expansion, with ROE recovering to 17% post-capital raise.