HomeFirst Finance reported a 29% profit rise to Rs 170.2 crore for the second quarter, driven by strong loan demand. The lender aims to hit Rs 20,000 crore in assets under management by March 2027. Investors are closely tracking how the company balances growth with margin compression amidst rising competition.
HomeFirst Finance, a specialist in the affordable housing segment, has set an aggressive target to reach Rs 20,000 crore in assets under management (AUM) by the end of the current fiscal year in March 2027. The company ended the September quarter with its AUM already exceeding Rs 18,000 crore, marking a 27% increase compared to the same period last year. This growth is primarily driven by strong demand for home loans, particularly from first-time homebuyers who form the majority of the company's loan book.
The company’s financial performance for the second quarter showed a 29% jump in profit after tax to Rs 170.2 crore, supported by a 32% rise in total loan disbursements. Operational efficiency also showed progress, with the cost-to-income ratio dropping to 30.8% from 32% in the previous quarter. This improvement in operational efficiency is a key focus for management as they work to maintain profit margins while expanding the business.
Shareholders should note the impact of recent capital raising on the company’s return on equity (RoE). In April, HomeFirst raised Rs 1,250 crore through a qualified institutional placement (QIP), which brought in capital from global investors including the International Finance Corporation and Goldman Sachs. While this capital strengthens the balance sheet, it also diluted the existing shareholding. As a result, the management is focused on stabilizing the RoE at 15% for the current fiscal year, with plans to improve this metric to 16% by the end of the next fiscal cycle.
While growth remains strong, the company is experiencing pressure on its spreads. The spread—the difference between the interest earned from borrowers and the interest paid to lenders—moderated by 10 basis points to 5.2% during the second quarter. Management has attributed this dip to intensifying price competition within the affordable housing finance sector. To protect its profitability, the company is actively reviewing its funding costs and loan pricing strategies.
Looking forward, HomeFirst is exploring new funding channels, including the potential issuance of green bonds. These bonds are intended to support the company’s 'Green Homes' program, which finances environmentally friendly residential projects. The company has already completed approximately 650 such transactions and is nearing its target of 1,000 financed units. For investors, the key monitorable will be whether the company can maintain its 25% annual growth rate while managing market competition and successfully executing its funding strategies to keep margins stable.