HOMEFIRST - Home First Finance Company India Limited Share Price

In the Q1 FY26 earnings call for Home First Finance Company, management provided a positive outlook supported by recent achievements and strategies. They raised Rs.1,250 crore through their first Qualified Institutional Placement (QIP), enhancing their capital base. The credit rating was upgraded to AA (Stable) by ICRA, India Ratings, and CARE, thus improving their financial standing.

Key forward-looking points include:

• AUM growth of 28.6% y-o-y and 6% q-o-q, reaching Rs.13,479 crore.
• Disbursements hit Rs.1,243 crore, marking the second-highest in the company's history, with guidance for FY26 target set between Rs.5,600-Rs.5,800 crore, expecting recovery of a Rs. 50 crore shortfall from April in H2.
• Robust performance in Madhya Pradesh, Maharashtra, and Gujarat, with expectations of improvement in Tamil Nadu and Telangana.
• Branch expansion strategy includes adding six branches in Q2, increasing total branches to 158.
• Origination market share in the Rs.5-25 lakh ticket size grew from 1.5% in FY22 to 2.3% in FY25; origination yield remained strong at 13.4%.
• Addressed asset quality concerns with 1+ DPD at 5.4% and 30+ DPD at 3.5%, noting potential normalization over the next quarters.
• Technology integration, including the launch of the "Pulse" AI platform, is aimed at improving operational efficiency.
• Continued commitment to ESG, with 70 additional Green Homes certified and reaffirmed low-risk ESG ratings.

The management anticipates strong demand for housing finance, reflecting confidence in their unique business model to capitalize on long-term growth opportunities driven by favorable market conditions and government initiatives.

Major Questions and Answers from the Earnings Transcript

1. Question by Suraj Das: "What are the challenges related to disbursements and how do you plan to overcome them, especially considering the performances in various geographies?"

   Answer by Manoj Viswanathan: Disbursement slowed mainly in April, which is typical for Q1. By May, we aligned with our expectations. We anticipate disbursal guidance for FY26 between Rs. 5,600-5,800 crores. Historically, Q1 has low disbursements, but we expect growth to rebound in Tamil Nadu and Telangana. Structurally, we see no ongoing challenges; recent performance reflects seasonal trends.

2. Question by Renish: "What gives you confidence that we can recover disbursement losses from April?"

   Answer by Manoj Viswanathan: Our recovery in May and June was significant, indicating a temporary blip in April. If disbursal hadn't dropped in April, this discussion wouldn't arise. Compared to industry trends, our drop was less severe. We are on track to meet annual numbers based on current trends.

3. Question by Abhijit Tibrewal: "Was the slippage in asset quality more pronounced in April, and have conditions improved since?"

   Answer by Manoj Viswanathan: Yes, slippage was higher in April, and while there was some in June, July showed marked improvement. The challenges were largely due to seasonal issues in collection efficiency. We don't anticipate structural problems, and recovery is evident in July metrics.

4. Question by Kunal Shah: "Is the increased 1+ DPD in Surat indicative of economic issues or internal operational challenges?"

   Answer by Manoj Viswanathan: The 1+ DPD increase stems from a combination of seasonal effects and collection intensity issues. Customers being unavailable for collections during vacations contributed. The underlying customer base remains stable, demonstrating recovery in July.

5. Question by Dixit Shah: "What is the AUM for Uttar Pradesh specifically within the total AUM?"

   Answer by Manoj Viswanathan: Our total AUM for Uttar Pradesh is Rs. 450 crores, which includes significant contributions from Ghaziabad, integrated into our overall metrics due to its geographic proximity to the NCR.

6. Question by Anand Bhavnani: "What percentage of disbursements over the last year relates to under-construction properties?"

   Answer by Manoj Viswanathan: Approximately 13% of our AUM is tied to under-construction properties, as noted in our internal data reflecting our portfolio distribution between pre-EMI and fully disbursed loans.

7. Question by Amit Ganatra: "When should we expect benefits from the recent credit rating upgrade on our borrowing costs?"

   Answer by Nutan Gaba Patwari: Our cost of borrowing should decrease by about 20 bps in Q2. We anticipate costs to dip below 8% by December, subject to MCLR adjustments, which are taking time to reflect.

8. Question by Pranav Gundlapalle: "What factors limit your ticket size growth in the affordable housing segment?"

   Answer by Manoj Viswanathan: We maintain a risk filter and viability angle, limiting ticket sizes under Rs. 5 lakhs. Small ticket sizes necessitate higher rates that are unsustainable for us, hence we focus on the Rs.5-25 lakh range for optimal growth.