HOMEFIRST Q2 FY27 Earnings Call: Reiterates 25% AUM Growth Target, Eyes 16% ROE By FY28

HOMEFIRST held its Q2 FY27 earnings call on October 27, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Strong Quarter Across Growth, Profitability and Asset Quality

• AUM at Rs.18,010 Cr — up 27% YoY and 6.3% QoQ in Q2 FY 2026-2027; disbursements at Rs.1,705 Cr, up 32.2% YoY and 4.7% QoQ.
• PAT of Rs.170 Cr — up 29.1% YoY and 6.5% QoQ, supported by 31.9% YoY NII growth; total income at Rs.567 Cr (up 18.4% YoY).
• ROA at 4.2%, ROE improved 40 bps to 14.9% — PPOP at Rs.238 Cr, up 26.1% YoY.
• Yield and spread intact — portfolio yield (ex co-lending) and disbursement yield both at 13%; spread ex co-lending at 5.2%; NIM at 6%; cost of borrowing ~7.8% with incremental borrowing at 7.5%.
• Efficiency improved — cost-to-income at 30.8% (vs 32.7% in Q1 FY 2026-2027); opex-to-assets at 2.6% (vs 2.8% QoQ).
• Asset quality stable — 1+ DPD at 4.7% and 30+ DPD at 3.2%, both unchanged sequentially; gross Stage 3 improved 10 bps QoQ to 1.7%; credit cost at 40 bps; Stage 3 provision coverage at 23.6% (46.4% including management overlays).
• Capital and book value — CRAR at 39.8% with Tier 1 at 39.4% as of September 2026 (vs 42.6%/42.2% at end-June 2026); net worth Rs.4,665 Cr; BVPS Rs.446.

Broad-Based Momentum, South Lagging on Market Structure

• Ex-South states each grew above 25% YoY — while southern markets (Tamil Nadu, Andhra Pradesh, Telangana) grew at sub-teens in Q2 FY 2026-2027, with Tamil Nadu in single digits; Karnataka the only southern exception.
• Management attributed the southern lag to market structure — southern markets are largely self-construction driven, where staged construction and disbursal build momentum slowly; a turnaround takes "a couple of quarters" to deliver growth benefit.
• Tamil Nadu returned to growth with a 12% increase in Q2 FY 2026-2027 — after a marginal YoY decline in H1; leadership gaps in a couple of regions have been filled, and a reversal of the lagging trend is expected over Q3-Q4 FY 2026-2027.
• Maharashtra, Gujarat and Madhya Pradesh delivered strong H1 FY 2026-2027 growth — individual housing loans at 84% of portfolio; apartments (incl. developer-led row houses) ~30%, self-construction ~30%, only-plots 1-2%.
• 6 branches added in Q2 FY 2026-2027 — taking the network to 181 branches and 379 touch points; ~10 branches added so far in FY 2026-2027 with 10-15 more planned over Q3-Q4 FY 2026-2027, in line with the normal run rate of 20-25 a year.
• UP scale-up on track for FY 2027-2028 — management is strengthening the Uttar Pradesh team to take the state to the next level of growth in FY 2027-2028; active collectors at ~4,400 in Q2 FY 2026-2027.
• Growth attributed to team stability — CEO Manoj Vishwanathan said measures over the past 12-18 months are bearing fruit, aided by slightly lower attrition; branch closures in Rajasthan and one district exit characterized as business-as-usual (one or two closures a year is typical).

Spread Guardrails Held; PLR Moves Hinge on Borrowing Cost

• Spread guidance of 5-5.25% — management committed to maintaining 5-5.25% margin spreads on each loan for FY 2026-2027; 5.5%+ spreads occurred only in a short post-COVID phase and were flagged as unsustainable, with the sustainable level closer to 5-5.25%.
• No PLR increase taken yet in FY 2026-2027 — borrowing costs have not moved post the RBI repo rate change; borrowing cost was flat between Q1 and Q2 FY 2026-2027, and a single repo hike does not fully warrant a PLR increase.
• Transmission math guided — ~20-30% of the book (Q2 FY 2026-2027) has direct external-benchmark-linked exposure; a 25 bps RBI hike translates to ~10 bps of borrowing cost movement, and a cumulative 50 bps (scenario including a further 25 bps hike in December 2026) would transmit ~20 bps over a 3-6 month period in FY 2026-2027.
• PLR trigger threshold — a 10-15 bps movement in borrowing cost would prompt a PLR change decision; small 2-5 bps moves are logistically not feasible to reprice; management will broadly follow RBI's new draft guidelines benchmarking the final customer rate to borrowing cost.
• Insurance circular impact estimated at ~35 bps on PAT/ROA for FY 2026-2027 — management is hopeful ~10 bps will come back as a concession from the insurance authorities, leaving ~20 bps to be made up via higher loan-against-property share, more assignment income, and pricing/fee changes; management stated it should not be difficult to make up the 20 bps.
• OpEx glide path on track — committed to reducing OpEx-to-assets by 10 bps every year, on track for FY 2026-2027; employee costs fell 7% QoQ while disbursements rose 5% QoQ, reflecting the campus hiring cycle (large batch joins in Q1, next in Q4 and Q1).
• LAP held as reserve lever — LAP at ~15% of AUM within the 80% housing / 20% other guardrail; could rise another 5% of AUM, potentially adding ~6-7 bps to spreads (period unspecified), but headroom is being kept for later given strong housing originations.

Macro Stability, Not Collection Changes, Behind Improvement

• Asset quality improved marginally over the past 3-4 quarters — management attributed this to prolonged macro stability (rise in oil prices not fully transmitted to the Indian market) rather than changes in collection efforts or borrowing profile.
• Slower incremental slippages driving improvement — new customers are entering delinquency at a slower pace, contributing to lower delinquency in Q2 FY 2026-2027.
• Cross-borrowing concern addressed — on analyst-raised concerns about customers using gold/personal loans to become current, periodic portfolio scrubs over the last three years show the ratio of customers taking other products has remained static, both at origination and subsequently; management stated the cross-borrowing-to-repay discussion mostly pertains to a personal-loan-dependent cohort, not home loan customers.
• Stage three provision stable at ~23% — hovered around 23% over the past three quarters through Q2 FY 2026-2027; slight ECL coverage uptick attributed to routine quarterly updates in PD and ECL assumptions, not a structural change.
• Drought exposure minimal — customers are in manufacturing/service livelihoods in larger cities with minimal agri dependence; asset quality in Madhya Pradesh and Gujarat fairly consistent and very good versus national numbers; no tightening of credit filters planned, underwriting remains an individualized call per customer.
• October 2026 bounce rate uptick a non-issue — attributed to day-of-month effects (4th falling on a weekend); last October (Q3 FY 2025-2026) was actually higher, and management is "not anxious" as the current trend seems better than last year's.
• ACL assumptions now recalibrated every quarter — current practice as of Q2 FY 2026-2027.

Four AI Capabilities Live; Platform Consolidation Over 18 Months

• Four in-house AI capabilities live — Q analyzes 95% of customer calls; Clarify prepares case pages for 100% of loan files; Bank Lens converts bank statements to cash flow views in ~1 minute; DocIQ reads underwriting documents.
• 18-month platform roadmap — over the next 18 months, management plans to consolidate the four capabilities into one shared data and decision platform and extend AI into sourcing, collections and servicing in phases.
• AI upside to OpEx target is conditional — management is working towards a 10 bps YoY reduction in the OpEx-to-asset ratio for FY 2026-2027; if AI delivers on its promise and is leveraged more effectively, there can be some upside to that number — conditional upside, not a commitment.
• Funding mix as of September 2026 — banks 58%, NHB 14%, assignment/co-lending 20%, balance from NCBs, ECBs and NBFCs; direct assignment of Rs.281 Cr executed in Q2 FY 2026-2027; ECBs hedged via cross-currency swaps at a broadly 3-3.5% hedging cost.
• Co-lending dipped sharply on RBI guideline implementation — co-lending disbursements fell to Rs.1.8 Cr in Q2 FY 2026-2027 from Rs.46 Cr in Q1 FY 2026-2027 as implementing new RBI-issued co-lending guidelines with partners took longer than anticipated; co-lending portfolio at Rs.593 Cr (3.3% of AUM); management expects an uptick in Q3 FY 2026-2027 as implementation is almost complete.
• Green homes franchise building — 100 additional green homes certified in Q2 FY 2026-2027, taking the cumulative count to 650; company received the ESG and Financial Inclusion Award in the NBFC category; Rinku Somani joined as the new CFO.

FY 2026-2027 Targets Reiterated; ROE Path to FY 2027-2028

• 25% AUM growth target for FY 2026-2027 reiterated — requires hitting Rs.20,000 Cr AUM by March 2027; management has consistently conveyed 1-2% upside to the FY 2026-2027 target if tailwinds emerge; Q2's 27% YoY vs Q1's 25% reflects tailwinds, but the company is broadly working towards the 25% number.
• 15% exit ROE targeted for Q4 FY 2026-2027 — and a 16% exit ROE by March FY28 (FY 2027-2028); management said current momentum means it can probably exceed both targets, after a 40 bps ROE improvement in Q2 FY 2026-2027.
• Portfolio quality targets for FY 2026-2027 — gross NPA of 1.7% with credit cost around 40 bps; cost-to-assets of 2.6% in FY 2026-2027 with a committed 10 bps YoY reduction (FY 2026-2027 vs FY 2025-2026).
• Demand momentum expected to continue for a very good rest of FY 2026-2027 — ground-level demand positive "across the board"; the industry is seasonally slower in H1 with an uptick in Q3 and Q4, and H1 FY 2026-2027 was already strong.
• Earlier weak phase explained — tariff-related external issues hurt employers in key markets like Gujarat and Tamil Nadu until roughly three quarters back, changing around October 2025 (Q3 FY 2025-2026); internal leadership challenges in some markets were also addressed a few quarters back.
• CEO succession speculation categorically denied — Manoj Vishwanathan: "there is no such conversation going on anywhere" regarding a move to a board-level role; he reiterated his January 2026 statement that his term extends till July 2028 and he intends to remain available for reappointment beyond that, subject to the requisite approvals.
• BT outflows guided at 4-6% (period unspecified) — down from 5-6% to ~4.5%; management cautioned against reading too much into the marginal reduction; retention driven by a multi-step process (customer engagement, top-up pitching, rate breaks); top-ups at 2-3% of Q2 FY 2026-2027 disbursements; average ticket size at Rs.15-16 lakhs, expected to inch up gradually over time (no specific timeline given).