Ladies and gentlemen, good day and welcome to Home First Finance Company India Limited Q4 and FY 2026 earnings conference call. As a reminder, all participants will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need any assistance during this conference, please signal an operator by pressing star and then zero on your touchtone telephone. Please note, that this conference is being recorded. I now hand the conference over to Mr. Sunil Anjana, Head of Treasury and Investor Relations of Home First Finance Company India Limited. Thank you, and over to you, sir.
Thank you, Farah. Good afternoon, ladies and gentlemen, and welcome to Home First Finance Company's earnings conference call to discuss the financial results for the quarter and financial year ended March 31, 2026. We hope you have had the chance to review our investor presentation and press release, both of which are available on our website and stock exchanges. As per our practice, we have also uploaded an Excel fact sheet containing historical data on our website for your easy reference. From the management, we have with us today Mr. Manoj Viswanathan, MD and CEO, Ms. Nutan Gaba Patwari, CFO. With that, I now invite Mr. Viswanathan to share his insights on overall performance and outlook. Over to you, sir.
Thank you, Sunil. Good afternoon, everyone, and thank you for joining us today. FY 2026 has been a year of resilience and disciplined execution for Home First. We ended the year with healthy growth, record disbursements in quarter four, over 41.4% profit growth for the full year, improving asset quality and a balance sheet that remains very well capitalized. What is important to us is not any one of these metrics in isolation, but the fact that all of them moved in the right direction together. We continued to grow well. Our assets under management stood at INR 15,878 crore as of March 2026, up 24.9% year-on-year and 6.4% sequentially.
Disbursement in quarter four was the highest ever at INR 1,572 crore, up 23.5% year-on-year and 19.3% QOQ. For FY 2026, the disbursement stood at INR 5,424 crore, a growth of 12.9% over FY 2025. The strong exit run rate in quarter four gives us confidence as we enter FY 2027. Profitability remained robust for FY 2026. PAT stood at INR 540 crore, up 41.4% year-on-year. Reported return on equity for FY 2026 was 15.7%, and on a pre-money basis, adjusted ROE stood at 16.8%. Even as we delivered this performance, we continue to invest for the next phase of growth. During the quarter, we added six new branches and five touchpoints, increasing the network to 171 branches and 373 touchpoints.
During 2026, we also added 221 employees in largely customer-facing roles, taking our total headcount to 1,855. Our origination yield continues to be healthy at 13% with an 83% share of individual housing loans. That consistency in mix is important because it reflects both the strength of our core franchise and the granularity of our portfolio. Now, coming to asset quality, one of our key priorities over the last few quarters has been to strengthen the portfolio quality from the front end by tightening our focus on early buckets, collection discipline and resolution intensity. We are pleased with the pronounced improvement visible this quarter. Our 1+ DPD is at 4.7%, down 60 basis points sequentially. 3+ DPD improved to 3.2%, down by 50 basis points sequentially.
Stage 2 was reduced by 30 basis points to 1.4%. Gross Stage 3 improved to 1.8%, down by 20 basis points quarter-on-quarter. Early indicators from April demonstrate good collection outcomes compared to the same months in previous years. Fresh slippage percentage is lower than what was seen in April 2025 as well as April 2024. We have not yet observed any significant impact from the ongoing war in the Middle East. Let me now touch upon state-wise trends. To start with, all senior leadership positions in the branch network have been filled across all states and are now fully focused on delivering strong results in this financial year. Gujarat, MP and Rajasthan are showing healthy growth and stable asset quality. Maharashtra has regained strong momentum, particularly in Mumbai and Pune, reflected in a robust AUM trajectory.
All the southern states are on track for strong growth in this financial year, including Tamil Nadu and Karnataka. Also, the e-Khata issue is mostly behind us. In UP, the team is being built, and we are preparing a strong base for FY 2028. Technology remains one of the key differentiators of Home First. It is central to how we source, underwrite, service and scale the business. Home First's deep-rooted digital DNA, built consistently since inception, has created a strong foundation for accelerated AI adoption across the value chain. This digital-first approach has also given us clean, structured data assets stretching back to day one of the company, providing the high- quality training ground that modern AI systems demand. Our AI strategy is anchored on three outcomes. Elevating customer experience, enhancing employee productivity and driving structural cost efficiencies.
In line with this framework, we have already operationalized proprietary AI agents for income assessment and contextual bank statement analysis. Parallelly, AI-led interventions in lead qualification, legal and technical valuation and bureau analysis are currently in pilot and will progressively move to production as we scale our intelligent underwriting stacks. On sustainability, our Green Homes initiative continues to make progress. We certified 140 additional homes during the quarter, taking the cumulative total to 450 as of March 2026. As we look ahead, we are entering FY 2027 from a position of strength. Growth momentum is healthy. Asset quality is improving. Margins remain robust. The balance sheet is strong, and the investments we are making in distribution, people and technology are intended to support durable growth, not just near-term growth.
Based on where we are today, we are positioned to deliver around 25% year-over-year AUM growth. Our focus remains clear. Grow with discipline, protect portfolio quality, improve productivity and deepen our customer franchise and continue delivering strong and sustainable profitability. With that, I now hand it over to Nutan to take you through the financial performance in more detail. Over to you, Nutan.
Thank you, Manoj, and good afternoon, everyone. I will take you through the key financial highlights for the quarter and the full year.
Let us start with the income statement. Total income for the quarter stood at INR 505 crore, up by 21.3% YOY and 4.4% quarter- on- quarter. Specifically, on the interest on term loans went up from INR 406 crore in quarter three to INR 412 crore in quarter four, presenting 1.6% quarter on quarter increase. As against the average principal outstanding growth of 5.5% on a quarter-on-quarter basis. In the interest income on term loans, two lesser days in the quarter, that is, quarter four versus quarter three, impacted by 2.2%, 10 basis points PLR cut impacted by 80 basis points, and origination yields had an impact of another 80 basis points. That wraps up the interest on term loans.
Portfolio yields excluding co-lending stood at 13.2%, while disbursement yields for the quarter stood at 13%, reflecting continued pricing discipline and healthy customer acquisition quality. On the liability side, through proactive borrowing mix management, we were able to contract our cost of borrowing, excluding co-lending by 10 basis points to 7.9%. Incremental borrowing costs during the quarter remained favourable at around 7.6%, which gives us confidence in the resilience of our spread profile. As a result, our spread excluding co-lending remained healthy at 5.3%. Yields have to be looked at a portfolio level, and we run a 100% floating asset book, allowing us the ability to reprice as the cost of borrowing moves. This is an essential element of our financial strategy to not carry any interest rate risk on our balance sheet.
Our aim remains to deliver a spread at a portfolio level in our guided range of 5%-5.25%. Net interest margin for quarter four stood at 5.9%. While there was a modest sequential compression of 10 basis points, NIM remains robust and continues to reflect the strength of our business model. For FY 2026, NIM stood around 5.7%. Moving to operating efficiency, it remains strong. Cost-to-income for quarter four was 32%, improving 10 basis points sequentially. For FY 2026, the cost-to-income stood at 32.5%, an improvement of 330 basis points. This is particularly encouraging because it comes alongside continued investments in distribution, headcount, and technology.
As a reminder, the full- year OpEx includes a one-time gratuity provision of INR 3.3 crore recorded earlier in quarter three, arising from the implementation of the new labour code. Operating cost to assets was 2.7% for the quarter as well as for the full year. As we continue to invest for growth, we expect this ratio to remain broadly range- bound within 2.6%-2.7%. Pre-provision operating profit in quarter four stood at INR 212 crore, up by 44.9% YOY. This reflects the operating leverage inherent in the franchise as the book continues to scale. Profit after tax for quarter four stood at INR 149 crore, up by 42.7% YOY and 6.6% QOQ.
For FY 2026, profit after tax stood at INR 540 crore, representing 41.4% YOY growth. Return on assets of 3.9% and return on equity of 15.7%. Following the INR 1,250 crore QIP completed earlier in April, our balance sheet remains very well capitalized. On a pre-money basis, adjusted ROE for FY 2026 stood at 16.8%. Moving on to provisions and asset quality, credit cost for quarter four and the year stood at 40 basis points. Provisions on stage 3 assets was increased to 24% as of March 2026 from 22% in December 2025. We continue to follow a conservative provisioning approach and maintain overlays above ECL requirements. As of March 2026, our total provision coverage ratio stood at 44.9%.
We believe this reflects the prudence with which we manage the balance sheet while preserving adequate flexibility for growth. Now, coming to borrowings and liability profile. Our funding profile continues to be well-diversified and cost-effective. As of March 26, 59% of funding came from private and public banks, 15% from NHB, 20% from assignment and co-lending, the balance from NCDs, ECBs and NBFCs. During Q4, we executed a direct assignment transaction of INR 264 crore. In co-lending, disbursement for FY 2026 doubled, rising from INR 153 crore in FY 2025 to INR 307 crore in FY 2026. The co-lending book grew to INR 593 crore and now represents 3.7% of AUM. In FY 2027, we will continue to scale the co-lending business by further strengthening the enabling infrastructure.
This product line provides an opportunity to serve a wider customer base while driving enhanced productivity and returns. Finally, on capital adequacy and liquidity. As of March 26, our capital-to-risk-weighted asset ratio stood at 44.1% with Tier I at 43.8%. As of March 25, prior to April QIP, our capital adequacy stood at 32.8% with Tier I at 32.5%. Our net worth stood at INR 4,357 crore, and book value per share is INR 480 crore as of March 26. This positions us well to continue investing in growth while maintaining a disciplined risk framework. With that, we conclude our opening remarks and are now happy to take your questions.
Thank you very much. Ladies and gentlemen, we will now begin the question- and- answer session. Anyone who wishes to ask a question may enter star and one on the touchtone telephones. If you wish to remove yourself from the question queue, you may enter star and two . Participants are requested to please use only handsets while asking a question. We will wait for a moment while the question queue assembles. The first question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead.
Yeah. Thank you for taking my question. Am I audible?
Yes.
Yes, sir.
Thank you, Manoj. There are two questions. One is, maybe near- term, what we have seen over the last one year, and then maybe I'll move to the second question. The first question is more around if you look at this financial year, which is just ending, the first part of the year was a little bit about weakness both in terms of demand as well as, I would say, asset quality. When we moved to the third quarter, we saw some semblance of stability coming in, and in the fourth quarter, obviously, we have ended on a high note. Whether we look at the disbursement momentum, whether we look at the improvement in asset quality that we have reported.
Just trying to understand the first half weakness, which was there, that was more of demand-led, and are you seeing demand improve now as you've exited 4 Q? That is the first part of the question. The other thing is, you'll remember first half of this fiscal year, you also spoke about weakness in asset quality, predominantly part of it coming from some impact of U.S. tariffs. How is credit trending now? Is something I wanted to understand. I remember you saying in your opening remark that April 26 was better than April 25 and 24. Just trying to understand how are these two things, demand and credit trending right now.
Yes. I mean, looking at the first half, I mean, first, discussion on the first half. There were two or three things which were happening simultaneously. One was that we were just coming out of the whole overhang of the, you know, credit issue. There, you know, there were delinquencies were elevated. Collection was a bit difficult. Also impacted by tariffs, et cetera. There was a bit of sluggishness in demand as well at that point of time. We were also internally going through some issues, you know, some of the locations, you know, regions were not staffed properly, there was some attrition and so on, right?
All of these things were happening simultaneously at that point, and hence, you know, a little bit of weakness or sluggishness. As the year progressed, you know, some of the external factors got resolved, and then the internal factors also got resolved. We started filling up all the positions. You know, we rebuilt the teams. Simultaneously, the external factors got resolved to some extent. The credit weakness started coming down. You know, collections started improving. The tariff issue was also kind of put to rest at some point. The demand also started from October onwards, the demand also started improving. All these things kind of came together in the last two quarters and then helped us deliver these good results.
Got it, Manoj. The last question that I had was a little bit, I would say a medium-term strategy. I remember you saying in your opening remarks that we are entering FY 2027 from a position of strength. You also acknowledged that there were some internal challenges as well last year in terms of staffing, which you acknowledged has now been resolved. If you could just articulate, how should we look at maybe the next two to three years? You did mention that we'll be looking to grow our AUM at a 25% this year. A, what all changes have you done this year which is giving us confidence that we'll be able to sustain that 25% growth?
If you could also talk about how are you looking at your distribution, your expansion into newer states or rather deepening into newer states? Just those 2 points, 3 points, if you can cover.
Yes. One is, you know, the, you know, teams being rebuilt and, you know, all senior leadership positions being filled across the country. I think that is a big positive with which we are entering this year. We now have the teams on the ground, you know, fully focused on delivering the results for the year. We are not distracted with any positions to be filled or any attrition and so on and so forth. That is a big, big, you know, positive starting point. Second is that, you know, we have further improved our value proposition to the, you know, distribution channels in terms of turnaround times, in terms of the, you know, wide bouquet of products that we are able to offer.
There, you know, the co-lending also comes into play. Where we are, you know, if we are going to a connector or to any distribution channel, we are able to offer them, you know, a larger bouquet of products, where they can, you know, address more number of customers. It's a wider target market that they can address. That is also. That is being well-recognized by the channels. You know, with you, would see there's a big jump in the number of connectors as well, last quarter. That is another big positive that we are entering with.
All of this and, you know, the other, you can say important development is our, you know, huge success that we have got in places like Bombay and Pune, which were traditionally seen as, you know, formal markets and where only the banks could operate, et cetera. We have really turned around and, you know, created a huge success there. All of these things give us the confidence that, you know, as for the next two to three years, we are on a very strong growth trajectory. We have understood, you know, the kind of, value proposition the market wants. We are able to deliver that and exceed the expectations of the channels.
That's what gives us the confidence that, you know, this year, definitely 25% AUM growth we can deliver, and, you know, everything goes well, we should be able to kind of continue that trend over the next couple of years as well.
Got it. Thank you so much for answering my questions, and I wish you and your team the very best.
Thank you. The next question is from the line of Prashant Kothari from Pictet. Please go ahead. Mr. Kothari-
Hello.
Your line is unmuted. Yes. Please go ahead, sir.
Hello. Two quick questions from my end. The first one would be that, you know, you mentioned that you're on track for growth in the southern states in FY 2027. I just wanted to check how did our market shares move in, say, Karnataka and Tamil Nadu, in FY 2026? Are there any specific competitors growing aggressively in these regions? That will be my first question. I'll come back to the second.
Sure. Our market shares in Tamil Nadu, you know, Tamil Nadu is was not very strong to start with. It would have further dropped a little bit in this last year because, you know, the growth was very muted in Tamil Nadu. We will hopefully be able to make it up in the, in the coming couple of years because now the kind of base is ready and, you know, the teams are there. We should be able to catch up as far as the TN is concerned. In Karnataka, it has been a fairly steady growth, except for a minor blip we had for one or two quarters because of the e-KYC issue.
Otherwise, you know, we would have sustained our market share in Karnataka.
Got it. Got it. Any specific competitors that you're sort of looking out for there, or are growing aggressively in the southern states?
No new names as such. You know, the, you know, set of existing players, you know. Depending on the season, depending on the year, there are, you know, some players who are more active. Nothing significant to report in terms of new competition.
Got it. Got it. Maybe, then the next sort of question. You know, how do we think about risk-adjusted yields when, say, compared to other pure play, affordable housing, finance players? Do we look at that? If so, what's our thinking there?
On yields, our thinking is that you know, we are offering a wide bouquet of products. Starting from INR 5 lakh ticket size to an INR 40 lakh ticket size. We also do loans against property. The idea is to provide a blended yield, or rather, you know, to deliver a spread of around 5%-5.20%. If the borrowing cost drops, you know, further from here, then, you know, there will be a corresponding decline in the yields. Overall, we are looking to maintain a spread of 5%-5.20%. That is what we are looking to do. We will do that, you know, by using this whole blend of products.
There will be a LAP on one side, maybe to the extent of 20%. There is a smaller ticket loans which will deliver slightly higher yields. We have the, you know, larger ticket loans and then, anyway, co-lending is there, which is yield agnostic because we are anyway getting an effective yield of about an effective spread of about 5.5% in the co-lending product. The idea is to deliver the, you know, I mean, sustain the profit and deliver the respectable or the promised ROE that we have, you know, we have committed to.
You know, helpful. I was thinking more around a sort of risk-adjusted yield. If we look at, say, the yield, and take out the credit costs, how do we think about that on a portfolio basis on different segments, say, different states? Then how does it compare to our peers?
It would be, you know, see, in certain segments it would be similar to peers. It also depends upon the kind of markets, et cetera, we are comparing. Some of our peers operate in more rural or, you know, semi-rural markets, where the yields would probably be higher. Also, in some cases, they operate in the, you know, LAP and, you know, they have a higher proportion of LAP and micro LAP segment, where the yields are again higher.
In comparable products, the yields will be largely comparable. It's not going to be very different. Just to give you a range, we operate in a yield range of between, say, 12% to about 14%. Ticket size is one axis, and the other is the nature of the product, which is whether it's a LAP or a housing loan. 1 3.5%- 14% is generally the range in which we operate. It doesn't vary beyond that.
Got it. Just on that, on the LAP segment, say compared to the home loan segment, the LAP segment are the, you know, yields higher and then the credit cost comparable or, let's say, it'll be different?
Credit costs also don't fluctuate a lot. I mean, if we are talking about the overall credit cost of 40 basis points for the year, I mean, the range will be between, say, 20 basis points to 60 basis points. We are not operating a product where, you know, the credit cost is substantially higher, and we're just delivering a higher yield because that is not our strategy.
Got it. Got it.
Special-
For LAP, also, it'll be in the same range, right?
LAP will also be in the same range. Correct.
Got it. Yields will be higher. Is that correct?
Yeah, yield is higher. Again, we are not operating.
Yeah.
In the very high, yielding LAP category. You know, our LAP yields are also in the, say, 14.5% range.
Got it. Got it. No, helpful. Thank you so much.
Thank you. Our next question is from the line of Shreepal Doshi from Equirus. Please go ahead.
Hi, sir. Thank you for giving me the opportunity. My question is pertaining to PLR. We have taken a 10-basis-point PLR cut last quarter. Now with rates likely to go up, systemic rates likely to go up, would we make any adjustment there, or would we continue with our pricing strategy that we have as of today?
Shreepal, we will wait for the repo hike, if at all they were to happen in the later part of the year. We will also have to watch out how banks are repricing from the MCLR line. Only if we need to, we will take the decision to hike. As I explained in my call, they have a fully floating book.
Right.
Our history has also indicated that we have the capability to increase rates as well as reduce rates. We will take a call based on as and when the hikes come through. In the next one quarter, we are not seeing that as a possibility. In fact, I would say, we should be able to maintain our cost of borrowing in quarter one in and around the levels of last quarter.
Got it. Got it. My second question was on branch expansion. I was looking at the disbursement upon the branch number, and it's already at close to INR 30 crore per branch. This is clearly at a peak level. Incrementally, when you say we'll be doing a 25% loan growth. What is our branch expansion strategy? Where do you see the disbursement per branch as a run rate? Also wanted to understand which locations we would add branches and what is the number of branches or percentage of branches with disbursement per branch below INR 10 crore?
Generally, our strategy to put up a branch is only if the branch has the potential to reach this, you know, average branch per, branch dispersal potential, which is, you know, INR 2 crore-INR 3 crore a month. So we would typically not put a branch where, you know, the potential is only INR 1 crore a month. So that we would just operate as a touch point or a satellite location. So the branch strategy is to add about 30-40 branches every year. So that is what we are planning. Productivity of the branch, obviously, the dispersal per branch, we should keep inching up, you know, as we scale up. That has always been the, you know, what do you call it? Principle under which we are operating.
Productivity of the branch and overall AUM per branch, dispersal per branch, and AUM per employee should keep on going up.
Okay. Sir, then where I'm coming from is that while we focus on business, our employees at the branch level is responsible for collections as well. In that case, you know, the AUM per employee continues to inch up. In that case, are we planning to create a bandwidth for buckets like, let's say, 31 to 60 and 60 to 90? Will there be additional bandwidth there?
No. How we facilitate this increase in productivity is only through technology and tools, which are made available to the employees. The idea is to take away the time they are spending in mundane tasks and just focus their attention more on customer-facing activities. Originating leads, closing the transaction with the customer and collecting from more difficult customers. These are the key front-facing or customer-facing activities that we want to spend the time of the front-end teams on. If they are spending time on any other activity like making receipts or, you know, updating records, things like that. Those we continue to, you know, keep observing and automating those activities.
Got it. Sir, just two follow-ups here. Which one was that, in terms of AUM per branch, if you could highlight the number of branches or percentage of branches with, let's say, AUM per branch having below INR 10 crore, sort of a number or also INR 10 crore-INR 50 crore sort of a number. The second question was where we would plan to add these 30 to 40 branches in incoming years? Thank you.
30-40 branches would be broad-based. It is not; we are not really targeting a specific state as such. We are looking at. It's a two-pronged strategy. There will be a few additions in new locations or new cities that we've identified across various states. A lot of additions will also be in existing cities where we are increasing the density of the branches. Larger cities where we have a few branches, we would be increasing the number of branches in the larger cities to improve our distribution and, you know, access to the customer. It's going to be a two-pronged strategy. Number of branches which are less than INR 10 crore would be very small.
It would be about, I don't know, about INR 10 crore, maybe INR 10 crore odd branches, which are less than INR 10 crore in AUM.
Yeah.
INR 10-INR 50 crore.
Less than INR 50 crore you're talking about?
Yeah, yeah, sir.
Less than INR 50 crore will be about 50 branches.
Got it. Thank you, sir. Thank you so much for answering my questions. Good luck for the next quarter.
Thank you. Participants, it's a request, please limit your questions to two questions per participant. Our next question is from the line of Kunal Shah from Citigroup. Please go ahead.
Yeah. Thanks for taking the question. Not sure if co- lending this quarter was addressed. This quarter it was low. How much time would it take to rectify this and again scale it up? I understand that the regulatory and all the guideline changes has led to this. Is it addressed to a larger extent, and when should we again start seeing a pickup in this?
It should get addressed this quarter. Some progress has been made in the first month in April and by end of May, hopefully all the issues should get addressed. I think June should be a normal month.
Okay. Thereafter, the run rate of co- lending would be similar or maybe better than what we saw last year.
That's right.
Okay. Secondly, in terms of the bounce rates, we have heard from many of them that bounce rates have been better in April than that of March. Okay. I hear you that you mentioned at least it's better than that of April of previous years. How has been it trending, and is it showing any sign of worry in any of the pockets because of the macroeconomic factors at this point in time?
No. As of now, there is absolutely no visible impact. I mean, there are sporadic, you know, anecdotal, you know, discussions going on. Really, nothing that we are seeing, you know, at a central level in terms of a visible impact of this whole Middle East issue.
Okay. Got it. Yeah. Thank you.
Thank you. The next question is from the line of Gaurav Khandelwal from JP Morgan. Please go ahead.
Hi. Good afternoon. Thanks for taking my questions. My first question is on the sourcing rates. Is the 13% number the average for the quarter, or is that the exit sourcing rate?
Average for the quarter.
Where are we at the quarter end, the exit rates?
It's similar, Gaurav. It doesn't vary, month to month. It probably will be +2 basis points , -2 basis points . That will be the range.
See the-
Got it. Thanks.
This is all. The pricing is largely centrally driven in our case. It's all algorithm-based. You know, the cases, the loans, loan applications get logged in, and there is a rate, you know, risk-adjusted rate which gets generated and communicated to the customer, and there is a little bit of a cushion for bargaining that is left. This is a process we are following for several years. There will not generally be a, you know, month-to-month variation once we have fixed, you know, once we have fixed a certain rate.
Got it. Thanks. That's very helpful. My second question, are you seeing more competition in your product segments, your ticket sizes by the larger housing finance companies of late? The competition is always high, any new incrementals there?
Nothing new as such to report, frankly. I mean, it's always up and down depending upon this, depending upon the month or season. Otherwise, there is nothing as such new or significant to report.
Got it. Okay. No, the place where I'm coming from is effectively all of these large HFCs are losing out to the big banks in terms of their prime loans, and hence, based on my discussions with some of these, they are trying to target some of the zip codes where you excel in, and hence the question.
Yeah, I mean, there's nothing significant that we have seen or, you know, any new activity that we have seen as of now.
Got it. No worries. Thank you so much.
Thank you. The next question is from the line of Jyoti Khatri from Ambit Wealth. Please go ahead.
Yeah. Thanks for taking my question. One was with respect to the ticket size of the loans. This quarter , we are now seeing higher growth coming in from the higher ticket size loans, from INR 15 lakhs-INR 20 lakhs and INR 20 lakhs-INR 25 lakhs ticket size. What's the outlook there? Assume that if this trend rate continues, will it exert some pressure on the margin side? I assume that even in the higher ticket size loans, competition is relatively higher, and so the margin pressure too. What is the outlook there?
You know, as we have been saying since last couple of years, we, you know, there's a customer segment, the same customer who used to purchase a smaller house or a, you know, lower ticket size property earlier, is migrating upwards. His or her challenges continue to remain the same in terms of the difficulty in getting loans from the larger lenders. We are not targeting a more premium customer as such. It's the same customer we are targeting. It's just that the requirements have gone up. The size of the houses, price of the houses have gone up.
This is why we are not seeing if you look at, you know, there has been an increase in the ticket size, but you are not seeing such an impact on the yield. We are still reporting origination yields of 13%, and that is largely also because of the drop in borrowing cost. Adjusted for borrowing cost, there is actually no decline in yields at all. The reason is that we are addressing the same customer, and the customer is willing to pay that premium to us to, for us to solve his problem. You know, if five years down the line, we will probably be talking about an INR 40 lakh ticket size.
You know, the customer segment is going to remain the same, their challenges are going to remain the same, and obviously, then the yields will also be the same.
Okay. Second thing is on the fact that over the last three months, we have seen interest rates hardening. Do you foresee, although your incremental cost of borrowing has come down, and your guidance sustains on 5%- 5.25% margins, do you feel that this might continue in FY 2027 as well, given the interest rates have hardened in this in Q4, fourth quarter?
Let me take it in two parts. Quarter one, we have enough visibility to ensure that the cost of borrowing is in by and large, in the same range. For the rest of the year, we will have to see how the actual pricing moves in the market, and based on that, we will have to reprice the customers or not reprice. That decision is not available today. We are very confident of maintaining the spread above 5%, which is in our guidance range of 5%- 5.25%.
Okay. Thank you. Thanks so much.
Thank you.
Thank you. The next question is from the line of Kushan Parikh from Morgan Stanley. Please go ahead.
Thanks for taking my question. Just wanted to understand how you are seeing asset quality on the ground in the month of April and, I mean, what is your assessment for the year? Also, what is your guidance on the credit cost side? Lastly, one specific question around the collections. I mean, peers have been highlighting some collection issues in the state of Karnataka. Just wanted to get your assessment of the same. Those are my questions.
Asset quality- wise, as I mentioned, you know, April experience has been good, and it's been better than the last two years, gives us a lot of, I mean, it's a, you know, gives a lot of confidence in terms of how it's gonna pan out rest of the year. Because if you remember last year, April, you know, was much worse than, you know, March. This year we have not seen that. I mean, it's been much better than the last two years. And, you know, overall, you know, for the coming year, we feel that, I mean, if this is a kind of indicator, it should be, it should be good. The credit quality experience should be good for this year.
Same for Karnataka. We don't have any issues on, you know, as far as Karnataka is concerned. Generally, our portfolio quality has been extremely good there, and we are not seeing anything on the ground.
Thanks for that. Just the guidance on credit costs for the next year.
Credit cost is the same, the same guidance, 30 basis points to 40 basis points.
Got it. Those are my questions. Thank you.
Thank you. The next question is from the line of Meghna Luthra from InCred Equities. Please go ahead.
Yeah. Thank you, sir, for the opportunity.
I'm sorry, ma'am. Your line is not audible.
Could you repeat?
Hello, hello.
Yes, ma'am. Please go ahead.
Am I audible now?
Yes, ma'am. Please go ahead.
Okay. Thank you for the opportunity for the call. I had one quick question around what has changed on the sourcing strategy from Pune and Mumbai specific that have been hired in the city. Plan to replicate in some of the other cities, like Mumbai, like Delhi, and Bangalore.
Yeah. Bombay, Pune are the, you know, more formal apartment markets, where the sourcing largely comes from the, you know, developers who are building housing projects. We have, you know, developed a good strategy to kind of tap into that, you know, tap into that market and get leads from there. We already had a good, similar, you know, similar sourcing structure in places like Ahmedabad, Surat, et cetera, which are large developer-led markets.
We've managed to replicate that well in places like Bombay and Pune , which used to be more of a, you can say, the, you know, I mean, the banks used to be much stronger in these markets. We have been able to kind of penetrate that. That is the main difference in the sourcing strategy.
Yeah. Thank you. Can we have some more color on how with, I mean, builder market has already been there in Bombay, and Bombay has been performing as a good market since, I think, many quarters in the recent quarters, right? What is the shift that happened during the quarter is something that, I mean, the crack that, I mean, if you can give some more color on that?
No, not specifically with respect to the previous quarter. I mean, the Bombay, Pune, you can say transition has been taking place over the last, almost 18 to 24 months. It's just that, you know, it's, they've become much larger now. We started this transformation about 24 months ago and, you know, entering these, developer, entering to the developer segment and sourcing customers from there. It's just that it has become much larger now and, you know, it's really taking off, you know. We had, I mean, last quarter we had a good quarter. That is, that is the. It is not that it started last quarter. This transformation started some time ago.
Oh. Do we plan to replicate this in Bangalore, Delhi, and Hyderabad?
Sorry, can you just repeat that?
Do we plan to replicate this in Bangalore, Delhi, and Hyderabad? Are we gonna see higher flows from the bigger cities?
Yes, to some extent. If you look at, compare Bombay and Pune with, say, the other cities that you're talking about, those are more individual housing markets, as far as affordable housing is concerned. Yes, some part of our Bombay strategy will be replicated in those markets.
Okay. Lastly, is it fair to assume that the co-lending and DA book is largely the large ticket, high ticket AUM that we have?
Large part of it is, yes. Co-lending is largely INR 20 lakh plus. INR 20 lakh-INR 40 lakh is where we do co-lending. A large part of the higher ticket is co-lending.
Got it. Thank you so much.
Thank you. Participants, please limit your questions to two questions per participant. The next question is from the line of Suraj Das from Sundaram Mutual Fund. Please go ahead.
Yeah. Hi. Am I audible?
Yes, Suraj.
Yeah. Hi. Thanks. Thanks, ma'am. Two questions. First, if I look at the number of employees per branch, it has steadily increased, let us say from nine in FY 2023 to almost 11 now.
Right.
Do you believe further strengthening of the manpower will be required, given probably the higher attrition in the sector and also the competitive intensity in the sector? This number can go up further. What is your opinion on that? That is point one. Second question, ma'am, on this origination yield, I mean, looking beyond the quarterly movements, you had taken 35 basis point PLR increase in FY 2025. Yet, still the yields remain broadly flat on FY 2025 versus FY 2024 if I look at your presentation, despite a higher LAP mix.
Right.
Over the past few quarters, the origination yields are coming down, and then you have also taken a PLR cut. Over the, let us say, next couple of years, do you think, you know, yield could remain under pressure given the competitive and the intensity to sustain growth?
Okay. On the first question, as far as the number of employees per branch are concerned, there will be some fluctuation. You know, so for example, if we add another, let's say, 30 branches next year, you know, that number can, you know, will maybe come down for a couple of quarters and then again pick up. Broadly, it will be in that nine to 10, 11 for the 11th range. It's not gonna substantially jump up. It will only gradually move up as the company scales up. So maybe two to three years down the line, that number can be a higher number. Otherwise, broadly it will be range- bound in that nine to 10, nine to 12 number.
As far as the yields are concerned, you know, I want to just draw your attention to the spread. We have been able to maintain the spread. If you see the last three, four quarters, 5.2, 5.3 that we have been talking about, we have been able to maintain the spread. That is the number that we are trying to anchor to. If the borrowing cost reduces, then we will pass on some of that to customers, and, you know, the yield reduces. We are still able to maintain the spread. Our increase in, you know, the LAP ratio is not very substantial. We have always been in that 14%, 15% range. It's just maybe a 1% increase, you know, which does not move the needle much.
Broadly, we are operating in that 5% spread, 5%-5.2% spread, you know, kind of a construct. Depending upon whatever the borrowing cost is at that point of time. We run a fully floating rate book, so we will, you know, ensure that we maintain that 5%-5.2% spread. We either pass on the benefit to the customer, or if there is an increase then we kind of, you know, pass that increase to the customer.
Suraj, just one additional point. You referred to FY 2024 versus FY 2025. Now, what we had done essentially was we were looking forward to the cost of borrowing hike that was coming our way, and we had led with a price increase at that point of time, which led to a slightly higher spread. Even if we go back in that year, our guidance has always remained spread in 5%- 5.25%. We enjoyed a higher spread for a shorter period, and in our conversations, we've always been guiding to this product mix that we've broadly now, and we will stick to our spread guidance for some time to come.
Okay. Okay. Sure. Sure, ma'am. Thanks, sir. Yeah, that's it from my side.
Thank you, Suraj. Thank you. The next question is from the line of Arvind Ravichandran from Sundaram Alternatives. Please go ahead.
Actually, yeah, thank you so much for the opportunity. Like, my question was on similar lines of Suraj. Like, do we really see the need to, like, cut PLR further at least in the shorter term, you know, if the borrowing rates are , especially the incremental borrowing rates are, you know, broadly stable vis-a-vis the book?
Not at the moment.
Okay.
We've already done with the 10 basis, with effect of January, so we will want to stay put, for now.
This PLR cut, or like, is it effective for the entire book? Or like, you know, does it happen over some more time, some more quarters?
The PLR cut has to get transmitted to the entire book.
Yeah, yeah. Yeah. Okay. Okay. Sure. Thank you.
Thank you. The next question is from the line of Nischint Chawathe from Kotak Institutional Equities. Please go ahead.
Yeah. Hi. Thanks for taking my question. You know, if you look at the AUM growth trajectory, you know, we've come down from around 30% to around 25% odd. You know, what gives us conviction and confidence that, you know, you sustain this trajectory? What is it that, you know, are we kind of, you know, actively going to shift into segments, or is it the same segment that we pursue? Are there liability side tailwinds? What is it that gives you this conviction that this 25% will kind of, you know, remain here and not further taper down?
One is that, you know, the, you can say the organizational distribution strength that we have built, in terms of our connector network, our branches, distribution, RMs, et cetera, that we have across the country. Last year, for a couple of quarters, we were still in the process of rebuilding that. Now, you know, we have completed that process, and, you know, our delivery of the last two quarters gives us the confidence that yes, this is, you know, a good formula to kind of, use or, you know, keep kind of, building on. That is what gives us the confidence that we should be able to, you know, do this 25% growth.
As far as FY 2027 is concerned, our, you know, exit momentum, our, let us say, continued dispersal in April. That's what gives us the confidence to, you know, kind of, project that number for FY 2027. Beyond that, you know, hopefully, whatever good work we do this year in terms of building a distribution and team, et cetera, should help us to keep going with the same momentum for the next couple of years.
Okay. Let me be a little more specific. See, if I look at your loan book growth, you know, in the last one year and loan growth accretion, almost a third of the, you know, incremental loan growth comes in from ticket size about INR 25 lakhs. You know, I believe you do get, you know, you rightly mentioned that, you know, loans about INR 20 lakhs are sort of largely, you know, kind of co-originated. You know, is this kind of a strategy? How much is the funding cost differential between, you know, your balance sheet borrowings and co-lending or basically, you know, co-lending on co-lending and yield differential about INR 25 lakhs?
Is this really the way forward, you know, in terms of we, kind of, you know, slowly, reducing the gap between us and maybe the target segment of larger housing finance companies?
This is why co-lending is one way to bridge that gap, and we are using it more as a productivity enhancement tool. You know, when our distribution, you know, comes across a customer who is, let's say a formal customer and who can get a loan from a bank, we, you know, push it through the co-lending channel. I mean, in the normal course, we are sourcing customers who are in, from the informal segment and, you know, that gets booked as a normal, regular Home First customer. It's just a, you know, way to kind of increase the target market, offer a better, you can say, better proposition to our channels, and increase the productivity of the team. That is the strategy behind co-lending.
Having said that, you know, we are at the moment, it is only about 4% of our AUM and about maybe 10% of our origination. A good part of the INR 20 lakh plus is also coming as regular customers, which are, like I said, where there is a, you can say, increase in ticket size. Same customer segment who are from the informal segment but who want a larger ticket size, that also forms a part of the, you know, INR 20 lakh plus cohort.
How much is the difference in cost of funding between sorry, co-lending and balance sheet borrowings?
Very similar, Nischint. I mean, it depends from bank to bank, but the range will be less than 20 basis points.
How much is the catch-up between you and let's say the larger housing finance, the AAA-rated housing finance companies, in cost of funding?
On the cost of funding will be 40 basis points. 40 basis points, at best 50 basis points, not more than that.
Just as these companies, you know, have a strategy of kind of having a small affordable housing book.
You can probably also have a strategy of, you know, having a small prime book.
No, I don't. I think I want to, you know, come in here and address. It's not prime. The customer segment is the same. There is inflation, which is causing the ticket size to rise. There is a lack of documentation in this borrower segment, otherwise we wouldn't have been able to deliver these yields. We are not targeting a prime book. I think it's very important to differentiate the segment.
The prime customer, Nischint, the prime customer would seek a rate in today's market, as you would seek a rate between 7%, 7.25% to 8%. Right? He's not going to pay a penny above 8% today. That is not the customer we are targeting. I mean, we cannot offer 8% even in co-lending. What we are offering in co-lending is anywhere between 8%-10%. These are customers who are, you know, like I said, you know, the same, you know, the what do you call it? Customers who are slightly more, you know, they have some formal source of income, et cetera, but who are willing to pay us that premium. That is the co-lending portion.
We also have in the same cohort, we have customers who are, you know, affordable housing customers who have informal incomes, et cetera, and who are willing to pay us the rate, which is, you know, let's say at 12.5 % or 13%. Earlier the ticket size used to be lower. I mean, they would have bought a smaller house, but now they are going for a larger house. Their incomes have gone up, You know, and hence they are looking to take a larger ticket housing loan. That's the only difference.
Just one last one. In markets like Mumbai and Delhi, the properties would be similar to that of the prime segment, but just that the customer segment would be different, or are we looking at a different set?
Yes.
Absolutely right. Absolutely right.
Yes.
Absolutely right. You know, if you see Bombay and Pune as I was mentioning, you know, always the mainstay of large banks. These are all projects which are all RERA- approved projects. Most of the banks operate in these in these projects. They would take away 90% of the customers who have formal incomes and, you know, documentation and so on. There's always 10 customers who are left, who are, you know, who have informal incomes, who struggle to get loans from the banks. They are purchasing properties in the same project. These are all from the deep suburbs, right? We are talking about Kalyan, Ambernath, Badlapur, Palghar, these kinds of places.
Got it. Thank you. Thank you very much for answering all the questions, and all the best.
Thank you.
Thank you. Participants, kindly limit your questions to two questions, please. The next question is from the line of Shubhranshu Mishra from PhillipCapital. Please go ahead.
Hi, good evening. Thank you for the opportunity. Just wanted to understand, this growth that we are forecasting, what proportion would come from home loans and what proportion would be from a LAP? How do we think of the demand with the West Asia crisis? Is it gonna have a dip in terms of the down payment capabilities? Any kind of uptick that we are seeing in demand may be for because of the PMAY, or is it a very stringent PMAY this time around? Just wanted to pick your brains on these aspects. Thanks.
Our mix is likely to remain the same. We are looking at somewhere between 15%-20% loan against property. We are somewhere in the middle of that, say 16% or 17%. The ratio of housing to LAPs will broadly remain in the same ballpark, which is about 80/20. 80% housing and 20% loan against property. That will be the mix. As far as the, you know, West Asia crisis is concerned, at the moment, we are not seeing any impact on the demand. Hopefully it's, you know, it should be behind us soon and, you know, things will move ahead. As of now, we are not seeing any drop in demand. April has also been fairly good.
I think the third question was on.
Regarding CLSS 2, is it a more stringent policy than the previous one? Are we seeing any kind of throughput increase because of that?
Yes, it has a slightly more elaborate process. I think some of the teething issues are getting addressed, and we should see good traction this year in terms of transmitting the benefit to more number of customers. In terms of generating new demand, it does not have that kind of impact, but maybe gradually it will pick up.
Right.
As more customers get the benefit.
Yeah.
Yeah. As more customers get the benefit of this scheme, you know, it will kind of pull in more customers.
Got it. Just one last question in terms of data keeping. What is the difference between the home loan and the LAP product at the blended level?
The yield difference.
Yield, yield differential.
100-250 basis points.
This would be the same on an, on an APR basis also?
Yes, yes. We are not I mean, for us, you know, more or less the APR and the rate that we are charging. It's a reducing balance rate that we are charging. The APR is almost same as the same as the rate interest rate which is charged.
Because the APR calculation also takes into account the fee income. Sometimes the fee income and LAP is slightly more than.
Yeah, yeah. Very minimal, right? Those are very minimal. That's why I said it doesn't move the needle that much. I mean, it would be a 10 basis points difference.
Oh, okay. Okay. Done. Thank you so much. These are my questions. Thanks.
Thank you. The next question is from the line of Ravi Kumar Naredi from Naredi Investments. Please go ahead.
Thank you for giving me the opportunity. Sir, how much write-off of bad debts from the profit and loss account this year, and how many units did we auction?
27,000.
The total write-offs has been about this year has been about INR 36 crore.
Okay. You think this amount is extraordinarily high?
It's per, you know, the scale of the business is growing, so it's more or less in line with the growth in the business.
How many units did we auction?
Sir, we auction about, between anywhere between 50- 100 units a month. For the year, it will be around 1,000 units.
Okay. Sir, AUM growth we achieved between March 2023 to March 2026 is 30% CAGR. Can we expect the same growth from next year?
We have guided to a 25% growth, sir.
That I have listened. It can be 30% not possible in current circumstances?
At this point, difficult to say, sir.
Okay. Okay. Thank you very much and all the best.
Thank you.
Thank you. The next question is from the line of Mayank Mistry from Antique Stock Broking. Please go ahead.
Yeah. Hi, sir. Hi, sir. Sir, just one question from, you know, on the connectors point. I think there are many, you know, players saying that the connector fees is increasing for them. Just wanted to know, have there been any higher demands from their side, even in your case? If you can highlight how the connector fees have moved since last, you know, few years and maybe how it should trend going forward.
Yeah. This is a ongoing, you know, negotiation with the connectors. Any connector, whatever fee structure he's at, if you are going to ask him, he's going to always want to want a higher fee. That is our constant negotiation with them. How we normally address that is by also addressing other issues which the connectors have, which is, you know, timely payouts, you know, a wider bouquet of products, faster turnaround. Faster turnaround in to some extent, compensates for, you know, the, you know, higher fees. Because if they're able to turn around one more case or two more loans in a particular month, that more than compensates for the higher commission that they would probably be earning with somebody else.
That is how we kind of address the commission issue. If there are, you know, specific tactical moves that we need to make in a particular market, we do that. In a particular location, a particular connector, we need to increase the fees; we do that. On an overall basis, I would say probably you would have seen a premium 10 basis points movement in the 10-15 basis points movement in the commissions.
Okay, sir. Basically, it varies across the connectors and across the geographies.
Yes. Varies across connectors and geographies and, and you know, we also kind of plan it depending upon the connectors' throughput, the quality of files and, you know, various other metrics that we track the connectors on.
Okay, sir. Thank you. Thank you. That was my only question.
Thank you. Participants, if you have any questions at this time, you may enter star followed by one on your handsets. We have a question from the line of Aditya Pal from MSA Capital Partners. Please go ahead.
Hello. Am I audible?
Yes, Aditya.
Yeah. Thank you so much for the opportunity. Great set of results and really commendable performance on the asset quality. Just wanted to quickly understand what is the issue with Tamil Nadu and Telangana. Is it just a human capital issue, or is it something else that you're seeing on the ground?
No. As we had mentioned, you know, it is, I think, largely to do with internal teams and building the teams. Now those things are behind us, and we should have a good year as far as Tamil Nadu and Telangana are concerned.
Understood. The other question is on strategy. In your opening remark, you had said that, you all have successfully implemented agentic AI, and some piece of work has already been automated. How are we thinking of will it increase our productivity in terms of growth, or will it increase our productivity in terms of OpEx cost?
As of now the, you know, the prediction I mean, we can more completely predict the outcomes on the cost side. It is a little more difficult to predict, you know, what kind of outcomes it will have on the origination side. But eventually it should have outcome, it should have origination outcomes as well. On the cost side, definitely, yes, there will be a strong outcome because of the implementation of AI, because of higher productivity. As far as new originations, et cetera, are concerned, there are some pilots going on. It could be a more gradual impact over there.
I mean, the outcome that we are looking for there is, you know, the ability for us to capture loans which may be otherwise getting declined on the ground, you know, proactively. That is something that is that is going on. If it is successful, of course, it should help us to improve originations. That is something that we will, it's difficult to predict at this point.
Understood. Understood. That's all from my side. Wishing you and the entire team all the very best. Thank you.
Thank you, Aditya.
Thank you.
Thank you. Participants with questions at this time, you may enter star and one. As there are no further questions from the participants, I now hand the conference over to Mr. Manoj Viswanathan for closing comments. Over to you, sir.
Thank you, everyone, for joining us today and for your continued interest in Home First. We hope we were able to address your questions satisfactorily. For any further queries, please feel free to reach out to Sunil Anjana or write to us on investor.relations@homefirstindia.com. Thank you.
Thank you. On behalf of Home First Finance Company India Limited, that concludes this conference call. Thank you all for joining us, and you may now disconnect your lines. Thank you.