HOMEFIRST - Home First Finance Company India Limited Share Price

Management provided a positive outlook for FY27, projecting a healthy growth momentum supported by various factors. Key points highlighted include:

1. AUM Growth: The company targets approximately 25% year-on-year AUM growth, driven by a robust pipeline and the confidence gained from strong disbursement performance in Q4.

2. Financial Performance: INR 5,424 crores in disbursements for FY26 reflects a 12.9% growth year-on-year. The company recorded INR 540 crores in profit after tax, a significant 41.4% increase year-on-year.

3. Asset Quality Improvement: The management reported an improvement in asset quality, with 1+ DPD at 4.7% and 30+ DPD at 3.2%, both showing sequential decreases. Recommendations for continued improvement in collections were noted.

4. Branch Expansion: Six new branches and five additional touch points were opened in Q4, expanding the network to 171 branches and 373 touch points, with plans to add 30-40 branches annually to enhance reach and distribution.

5. Technology Investments: The company is focusing on technology as a differentiator, emphasizing AI adoption for enhancing customer experience and improving operational efficiency.

6. Market Insights: The management expressed confidence in stable performance despite macroeconomic challenges, citing no significant impact from geopolitical tensions in the Middle East and indicating a resilient demand trajectory.

7. Workforce: The company has made significant investments in human capital, with 221 new employees added in FY26, facilitating efforts to improve customer service and operations.

The overall sentiment reflects confidence in sustaining growth and maintaining operational excellence as the company positions itself for future opportunities.

Here's a summary of the major questions and corresponding answers from the Q&A section of the earnings transcript:

1. Question: What caused the weakness in demand and asset quality in the first half of FY26, and how are these trends evolving currently?
   Answer: The weakness was due to elevated delinquencies, sluggish demand, and internal staffing issues. As we progressed, external factors improved, and we filled our teams. By Q4, demand and collections had significantly improved, allowing us to deliver strong results.

2. Question: What gives you confidence in sustaining AUM growth of 25% in FY27?
   Answer: The completion of our team rebuild, improved value proposition for distribution channels, and success in markets like Mumbai and Pune give us confidence. Our understanding of market needs and product offerings positions us well for maintaining this growth trajectory.

3. Question: How did your market share in southern states change, and what competition do you face?
   Answer: In Tamil Nadu, our market share was weak but should improve with our new strategies. In Karnataka, we maintained steady growth despite minor disruptions. There aren't significant new competitors emerging in these regions, just seasonal players.

4. Question: What are the risk-adjusted yields on your loans compared to peers?
   Answer: Our yields range from 12% to 14%, with LAP yielding slightly higher. Credit costs remain stable, and we focus on maintaining spreads of 5% to 5.25% across different products, balancing risk and yield effectively.

5. Question: Will you adjust the PLR in response to potential rate hikes?
   Answer: We'll assess the market and banks' repricing before making adjustments. Currently, we are not expecting immediate changes and plan to maintain the cost of borrowing around previous levels for Q1 FY27.

6. Question: How does branch expansion fit into your growth strategy, especially with productivity concerns?
   Answer: We aim to add 30-40 branches annually based on potential. We rely on technology to reduce manual tasks, allowing front-line employees to focus on customer-facing activities, enhancing productivity within existing structures.

7. Question: What is the outlook for co-lending, and when will it return to prior run rates?
   Answer: We expect co-lending to normalize by June 2026, following regulatory adjustments. We anticipate a return to previous run rates, maintaining a focus on productivity and customer origination.

8. Question: How significant is the PMAY impact, and is the program more stringent than before?
   Answer: PMAY 2.0 is more elaborate but we expect it to gradually help more customers. We're not seeing an immediate demand impact, but as issues are addressed, it should pull in more customers over time.

9. Question: What proportion of your growth forecast comes from home loans vs. LAP?
   Answer: We forecast maintaining an 80%-20% ratio between home loans and LAP. Current demand isn't impacted negatively by external crises, and we expect LAP contributions to remain stable.

10. Question: How much is your bad debt write-off, and how does it relate to business scale?

Answer: We wrote off INR36 crores this year, a figure aligned with our business growth rate. We auctioned around 1,000 units, maintaining a consistent approach to asset quality management as the business scales.

These responses encapsulate the company's strategies, market conditions, and performance metrics, providing a comprehensive overview of Home First Finance's current situation and outlook.