Home First Finance: Navigating Growth with Digital Prowess Amidst Sector Headwinds

Home First Finance Company India Limited (HFFCIL) has delivered a robust performance in Q2 FY26, showcasing disciplined growth and strategic execution despite a subdued macroeconomic environment. The company's Assets Under Management (AUM) witnessed a significant increase, reaching ₹14,178 crore, marking a 26.3% year-on-year and 5.2% quarter-on-quarter growth. This expansion underscores HFFCIL's ability to scale its operations effectively, supported by a broadening distribution footprint that now spans 366 touchpoints and 163 branches across 13 states and 143 districts. Profitability remained strong, with Profit After Tax (PAT) surging by 43.0% year-on-year and 10.9% quarter-on-quarter, translating into a healthy Return on Assets (RoA) of 3.8% and a pre-money adjusted Return on Equity (RoE) of 16.7%. These figures highlight the company's operational efficiency and effective financial management in a dynamic market.

Operational Excellence and Strategic Initiatives

HFFCIL's operational strategy is deeply rooted in technology and digital adoption, which continues to be a key area of focus. The company reported that 83% of its approvals in Q2 were facilitated via the Account Aggregator framework, and over 80% of its loans were digitally fulfilled through e-agreements and e-NACH mandates. A remarkable 96% of its customers are now app-registered, with 87% of service requests raised in-app, demonstrating a strong commitment to paperless processes and enhanced customer experience. This digital-first approach not only boosts efficiency but also contributes to reducing the company's carbon footprint.

In terms of strategic initiatives, HFFCIL is actively pursuing its Green Homes program, having certified 50 additional homes in the quarter, bringing the cumulative count to 240. This commitment to sustainability was further validated by Morningstar Sustainalytics, which reaffirmed HFFCIL's 'Low ESG Risk' category with an improved score of 13.6. The company also saw increased traction in the PMAY 2.0 scheme, receiving over 3,500 customer applications, with 38 customers already receiving their first subsidy tranche. These initiatives reflect a holistic approach to business, integrating social and environmental responsibility with core financial objectives.

Asset Quality and Funding Profile

While HFFCIL demonstrated strong growth, asset quality metrics require careful monitoring. The company noted a slight increase in 1+ DPD (Days Past Due) to 5.5% and 30+ DPD to 3.7%, with Gross Stage 3 (GNPA) at 1.9%. Management attributed these upticks to industry-wide phenomena and specific regional impacts, particularly in the leather and textile industries around Chennai and Tirupur, which faced tariff-related challenges. Despite this, the company maintains a conservative approach to provisioning, with a total provision coverage of 40.8% as of September 2025, and credit costs remaining at 40 bps, in line with its guidance of 30-40 bps for the full year. Management indicated proactive measures, including restricting certain customer segments and geographies, to manage asset quality.

On the funding front, HFFCIL continues to maintain a diversified and cost-effective profile. The cost of borrowing, excluding co-lending, reduced by 30 bps to 8.1%, with a target to bring it under 8% by March. This improvement is driven by a downward shift in benchmark rates and recent credit rating upgrades. The company's strong balance sheet, with a Capital to Risk-Weighted Assets Ratio (CRAR) of 48.4% and Tier 1 at 48.0%, underscores its readiness to support future growth ambitions. HFFCIL's liquidity buffer stood at ₹42,802 crore as of September 2025, ensuring robust ALM (Asset Liability Management) and sufficient liquidity across all time buckets.

Outlook and Management Confidence

Looking ahead, HFFCIL's management remains optimistic about business momentum in H2 FY26, anticipating an improving macro environment, easing interest rate cycle, and benign inflation trajectory. The company aims to maintain its spread in the 5% to 5.25% range and expects Net Interest Margins (NIMs) to expand. Strategic initiatives, including further branch expansion and leveraging advanced technology like its in-house AI Conversational Platform, are expected to drive efficiency and productivity. The company's commitment to responsible growth, transparent governance, and customer-centricity positions it well to capitalize on market opportunities while effectively managing risks. The disciplined execution and strategic clarity demonstrated in Q2 FY26 instill confidence in HFFCIL's ability to sustain its growth trajectory and deliver long-term value to stakeholders.