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Home First Finance (Home First) is a Bengaluru based technology driven affordable housing financier that targets customers in low and middleincome group. Loans for purchase or construction of homes comprises 92.1% of gross loan assets, as of September 30, 2020. Salaried customers account for 73.1% and self- employed customers account for 25% of gross loan assets.

The company also offer other types of loans comprising loans against property, developer finance loans and loans for purchase of commercial property. Gross loan assets have grown at a CAGR of 63.4% in FY18-20 to ₹3,618 crores and ₹3730 crore, as of 30 September 2020.

As of September 30, 2020, the company had ~675 employees and a network of 70 branches covering over 60 districts in 11 states and a union territory in India, with a significant presence in urbanized regions in the states of Gujarat, Maharashtra, Karnataka and Tamil Nadu. Active customer base stands at 44,796 and ticket size at ~₹ 10.1 lakh.

Scalable operating model

Home First has built a scalable operating model, which enables them to expand their operations and drive growth in revenue with lower incremental costs. The company is able to digitally capture over 100 data points of a customer in addition to credit bureau data. The Company’s information technology systems allow them to improve productivity and reduce turnaround times to average of 48 hours. Gross loan assets have grown at 63.4% CAGR in FY18-20 to ₹3730 crore as of September 30, 2020. The company has further entered with Homelane, Paisa Bazaar, Quikr India, Credit Mantri and Aapka Painter for lead generation ahead.

Centralized, data science backed underwriting process

The company serves salaried customers in low and middle-income groups which account for 73.1% of their gross loan assets, and self- employed customers account for 25%, as of September 30, 2020. All their financed properties are geo-tagged and they use a machine learning backed property price predictor, which has helped them reduce their turnaround time for approving loans, as well as achieve a higher accuracy in determining the loan-to-value ratio and keep asset quality stable. Stage 3 GNPA stands at 0.74% of gross loan assets as of September 30, 2020.

Key risks and concerns

* Concentration of business operation possess risk

* Extended impact of pandemic could impact financial performance

Priced at P/BV of 3.6x H1FY21 (post issue) on upper band

Home First is a fast growing home financier. Utilizing technology, the company focusses to enhance operational efficiency, return ratios (11%) and asset quality (0.74%). At the higher end of the price band of | 518 per share, the stock is available at a P/B of ~3.6x on H1FY21 BV (post issue).

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