Company Update : HomeFirst Finance Ltd By Motilal Oswal Financial Services Ltd
Healthy AUM growth; reported NIMs up ~20bp QoQ
Asset quality stable; NIM expansion primarily driven by lower surplus liquidity
* HomeFirst’s 4QFY25 PAT grew 25% YoY to INR1.05b (in line). FY25 PAT grew ~25% YoY to INR3.8b.
* 4Q NII grew 26% YoY to INR1.7b (in line). Other income jumped 52% YoY to INR533m (~7% below est.), aided by higher assignment income of INR300m (PY: ~INR150).
* Opex grew 38% YoY to INR803m (in line). PPoP rose ~28% YoY to INR1.46b (in line). Credit costs stood at INR77m (in line) and translated into annualized credit costs of ~25bp (PQ: ~34bp and PY: ~12bp).
* The board declared a final dividend of INR3.7/share.
* In Apr’25, HomeFirst successfully raised equity capital of INR12.5b via a QIP. After the capital raise, the proforma net worth stood at INR37.5b.
Healthy AUM growth of ~31% YoY; BT-OUT rate inches up
* Disbursements grew 16% YoY to ~INR12.7b (+7% QoQ), leading to AUM growth of 31% YoY to ~INR127b.
* BT-OUT rate (annualized) in 4Q rose to 7.5% (PQ: ~7.3% and PY: ~8.3%) as competitive intensity tends to be higher in 4Q than in other quarters.
NIM up ~20bp QoQ; minor spread compression
* Reported yield declined ~10bp QoQ to 13.5% and reported CoF was stable QoQ at 8.4%. Reported spreads (excl. co-lending) fell ~10bp QoQ to 5.1%.
* Reported NIM rose ~20bp QoQ to 5.1%, driven by lower surplus liquidity on the balance sheet. Incremental CoF and origination yield in 4Q stood at 8.6% and 13.3%, respectively.
Improvement in 1+dpd and 30+dpd; minor increase in bounce rates
* GS3 and NS3 remained largely stable QoQ at 1.7% and 1.3%, respectively. PCR was stable at ~25%.
* 1+dpd declined ~30bp QoQ to 4.5%. Bounce rates rose ~40bp QoQ to ~16.4% in 4QFY25 (vs. ~16% in 3QFY25). In Apr’25, bounce rates declined to 16.2%.
* Capital adequacy stood at 33.2% (Tier 1: 32.8%).
Valuation and View
* HomeFirst delivered a healthy performance in 4Q, aided by robust AUM growth and stable asset quality, leading to benign credit costs. Even as spreads saw minor compression, the company reported an improvement in NIMs, driven by lower surplus liquidity on the balance sheet.
* HomeFirst has made strategic investments to effectively capitalize on the strong growth potential in affordable housing finance. It continues to expand its distribution network across Tier I, II, and III cities within its existing states. We expect cost efficiencies to kick in and drive stable improvement in its operating cost ratios in the medium term. Despite a tough macro environment, HomeFirst has managed to keep its asset quality stable with improvements across 1+dpd and 30+dpd. We expect credit costs to remain benign at ~25-30bp in the foreseeable future. We might revise our estimates after the earnings call on 2nd May’25.
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