Whalesbook
Promoter Exit Sparks Caution
The sell-off was primarily triggered by the exit of key investors. True North Fund and Aether (Mauritius) divested a combined 5.4% stake in Home First Finance Company for ₹663 crore via a block deal on February 26, 2026. This transaction, priced at a 5.7% discount to the prevailing market rate, has led to a sharp correction of over 10% in the stock over the past week.
Resilient Business Model and Tech Edge
Home First has navigated transitory headwinds, underpinned by a resilient business model, superior execution, and higher productivity than peers. The company's conviction in its stock is reinforced by strong earnings visibility and a return on assets (RoA) exceeding 3.5 percent. Technological investments are a key differentiator, enabling best-in-class turnaround times (TAT) where 90 percent of loans are approved within 48 hours. This has driven monthly disbursements past ₹500 crore for the first time in Q3FY26.
Asset Under Management Growth
Affordable housing finance companies (AHFCs) are projected to grow between 20-21 percent in FY25-26, according to CRISIL ratings, bolstered by government initiatives. Home First, with Assets Under Management (AUM) of ₹14,925 crore as of December 2025, is positioned to grow ahead of the industry. This growth will be supported by distribution expansion, productivity improvements, and cost optimization.
Co-Lending and Geographic Expansion
Strategic initiatives include expanding into new markets and deepening presence in existing ones. The company is focusing on a co-lending strategy, which offers higher Net Interest Margins (NIMs) and lower risk, with a target to reach around 10 percent of AUM. Calibrated expansion into geographies like Uttar Pradesh, coupled with an increasing mix of higher ticket size loans, is expected to fuel growth. Home First plans to add 25-30 branches by FY27 to achieve its target AUM growth of 25 percent.
Asset Quality and Credit Cost
The company maintains a safer asset mix, with housing mortgages comprising 83 percent of its AUM, primarily serving salaried customers (68 percent of AUM). Strong underwriting and prudent risk management have enabled industry-leading growth. Despite a sequential dip in asset quality in Q3FY26, early delinquencies have improved, and the management expects non-performing assets (NPAs) to moderate. Credit costs are guided between 30-40 basis points in a steady state.
Outlook and Valuation Opportunity
Growth momentum is anticipated to improve as stress normalizes. A stable asset quality outlook and an improving operating expense to AUM ratio are expected drivers of RoA expansion. Home First is well-positioned to capitalize on the significant growth opportunity in the AHF market. Trading at 1.9 times FY28 estimated book value, lower than its historical valuation, the stock's recent correction of approximately 17 percent over six months presents an accumulation opportunity for long-term investors.