Home First Finance Company India Limited ($HOMEFIRST)

Ladies and gentlemen, good day, and welcome to Home First Finance Company India Limited Q4 and FY '26 Earnings Conference Call. [Operator Instructions] 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 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 '26 has been a year of resilience and disciplined execution for Home First. We ended the year with healthy growth, record disbursements in quarter 4, 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 continue to grow well. Our assets under management stood at INR 15,878 crores as of March '26, up 24.9% year-on-year and 6.4% sequentially. Disbursement in quarter 4 was the highest ever at INR 1,572 crores, up 23.5% year-on-year and 19.3% Q-o-Q. For FY'26, the disbursement stood at INR 5,424 crores, a growth of 12.9% over FY'25. The strong exit run rate in quarter 4 gives us confidence as we enter FY'27. Profitability remained robust. For FY '26, PAT stood at INR 540 crores, up 41.4% year-on-year. Reported return on equity for FY '26 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 in the next phase of growth. During the quarter, we added 6 new branches and 5 touch points, increasing the network to 171 branches and 373 touch points. During 2026, we also added 221 employees, largely customer-facing goals, 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 bucket collection discipline and resolution intensity. We are pleased with the pronounced improvement visible this quarter. Our 1 plus DPD is at 4.7%, down 60 basis points sequentially. 30-plus 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. Press 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 the robust AUM trajectory. All the southern states are on track for strong growth in this financial year, including Tamil Nadu and Karnataka. Also, the ECA issue is mostly behind us. In UP, the team is being built, and we are preparing a strong base for FY '28. 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 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 1 of the company, providing the high-quality training ground that modern AI systems demand. Our AI strategy is anchored on 3 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 evaluation, and bureau analysis are currently in pilot and will progressively move to production as we scale our intelligent underwriting stack. 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 '27 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-on-year AUM growth. Our focus remains clear: grow with disciplined product portfolio quality, improve productivity, 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 crores, up by 21.3% Y-o-Y and 4.4% quarter-on-quarter. Specifically, the interest on term loans went up from INR 406 crores in quarter 3 to INR 412 crores in quarter 4, presenting 1.6% quarter-on-quarter increase, as against an average principal outstanding growth of 5.5% on a quarter-on-quarter basis in the interest income on term loans 2 lesser days in the quarter. That is quarter 4 versus quarter 3 was impacted by 2.2%, a 10-basis-point PLR cut impacted by 80 basis points, and origination yields had an impact of another 80 basis points. So that wraps up the interest on term loans. Portfolio yields, excluding co-lending, stood at 13.2%, while disbursal 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 favorable 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% to 5.25%. Net interest margin for quarter 4 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 '26, NIM stood around 5.7%. Moving to operating efficiency. It remains strong. Cost-to-income for quarter 4 was 32%, improving 10 basis points sequentially. For FY '26, the cost-to-income ratio 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 crores recorded earlier in quarter 3, arising from the implementation of the new labor 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% to 2.7%. Pre-provision operating profit in quarter 4 stood at INR 212 crores, up by 44.9% Y-o-Y. This reflects the operating leverage inherent in the franchise as the book continues to scale. Profit after tax for quarter 4 stood at INR 149 crores, up by 42.7% Y-o-Y and 6.6% Q-o-Q. For FY '26, profit after tax stood at INR 540 crores, representing 41.4% Y-o-Y growth. Return on assets of 3.9% and return on equity of 15.7%. Following the INR 1,250 crores QIP completed earlier in April, our balance sheet remains very well capitalized. On a pre-money basis, adjusted ROE for FY '26 stood at 16.8%. Moving on to provisions and asset quality. Credit cost for quarter 4 and the year stood at 40 basis points. Provision on Stage 3 assets was increased to 24% as of March '26 from 22% in December '25. We continue to follow a conservative provisioning approach and maintain overlays above ECL requirements. As of March 26, 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, and the balance from NCDs, ECBs, and NBFCs. During quarter 4, we executed a direct assignment transaction of INR 264 crores. In co-lending disbursement for FY '26 doubled, rising from INR 153 crores in FY '25 to INR 307 crores in FY '26. The co-lending book grew to INR 593 crores and now represents 3.7% of AUM. In FY '27, 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 1 at 43.8%. As of March 25, prior to April QIP, our capital adequacy stood at 32.8% with Tier 1 at 32.5%. Our net worth stood at INR 4,357 crores, and the book value per share is INR 418 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.

[Operator Instructions] The first question is from the line of Abhijit Tibrewal from Motilal Oswal.

2 questions. One is, maybe near term, what we have seen over the last 1 year? And then maybe I'll move to the second question. But the first question is more around, if you look at this financial year, which we just ended, 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. And then when we move to the third quarter, we saw some semblance of stability coming in. And then in the fourth quarter, obviously, we 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. So, just trying to understand the first half weakness, which was there, that was more demand-led? And are you seeing demand improve now as you've exited 4Q? That is the first part of the question. And the other thing is, you'll remember first half of this fiscal year, we also spoke about weakness in asset quality, predominantly part of it coming from some impact of U.S. tariffs. How credit is trending now is something I wanted to understand. I remember you saying in your opening remarks that April '26 was better than April '25 and '24. But just trying to understand how these 2 things, demand and credit trending right now?

Yes. So, looking at the first half, I mean, first the discussion on the first half. So there were 2 or 3 things that were happening simultaneously. One was that we were just coming out of the whole overhang of the credit issue. So there were delinquencies that were elevated, and collection was a bit difficult. So also impacted by tariffs, et cetera. There was a bit of sluggishness in demand as well at that point in time. And we were also internally going through some issues. Some of the locations and regions were not staffed properly. There was some attrition and so on. So, all of these things were happening simultaneously at that point, and hence, a little bit of weakness or sluggishness. As the year progressed, some of the external factors got resolved, and then the internal factors also got resolved. We started filling up all the positions. We rebuilt the teams. And simultaneously, the external factors got resolved to some extent. So the credit weakness started coming down, and collections started improving. The tariff issue was also put to rest at some point. And the demand also started from October onwards, and it started improving. So all these things kind of came together in the last 2 quarters and then helped us deliver these good results.

And then the last question that I had was a little bit, I would say, your medium-term strategy. I remember you saying in your opening remarks that we are entering FY'27 from a position of strength. You also acknowledged that there were some internal challenges as well last year in terms of staffing, which you acknowledge has now been resolved. So, if you could just articulate how we should look at maybe the next 2 to 3 years? You did mention that we'll be looking to grow our AUM at 25% this year. So, what changes have you made this year that are giving us confidence that we'll be able to sustain that 25% growth? And then, if you could also talk about how you are looking at your distribution, your expansion into newer states, or rather, deepening into newer states? Just those 2, 3 points, if you can cover.

Yes. So one is the teams being rebuilt, and all senior leadership positions being filled across the country. I think that is the big positive with which we are entering this year. So we now have the teams on the ground fully focused on delivering the results for the year. So we are not distracted with any positions to be filled or any attrition, and so on and so forth. So that is the big positive starting point. Second is that we have further improved our value proposition to the distribution channels in terms of turnaround times and in terms of the wide bouquet of products that we are able to offer. So there, the co-lending also comes into play, so if we are going to a connector or to any distribution channel, we are able to offer them a larger bouquet of products where they can address a larger number of customers. It's a wider target market that they can address. That is being well recognized by the channels, you would see there's a big jump in the number of connectors as well, last quarter. So that is another big positive that we are entering with. The other, you can say, important development is the huge success that we have had in places like Bombay and Pune, which were traditionally seen as formal markets and where only the banks could operate, et cetera. So we have really turned around and created a huge success there. So all of these things give us the confidence that over the next 2 to 3 years, we are on a very strong growth trajectory. We have understood the kind of value proposition the market wants. We are able to deliver that and exceed the expectations of the channels. So that's what gives us the confidence that this year, definitely 25% AUM growth we can deliver. And everything goes well, we should be able to continue that trend over the next couple of years as well.

The next question is from the line of Prashant Kothari from [indiscernible]

Two quick questions from my end. The first one would be that you mentioned that you're on track for growth in the Southern states in FY '27. I just wanted to check how did our market shares move in, say, Karnataka and Tamil Nadu in FY '26? And are there any specific competitors growing aggressively in these regions? That would be my first question. I'll come back with the second.

Sure. So, market shares in Tamil Nadu were not very strong to start with. And it would have further dropped a little bit in this last year because the growth was very muted in Tamil Nadu. But we will hopefully be able to make it up in the coming couple of years because now the base is ready and the teams are there. So we should be able to catch up as far as is concerned. In Karnataka, it has been a fairly steady growth, except for a minor blip we had for 1 or 2 quarters because of the ECASA issue. Otherwise, we would have sustained our market share in Karnataka.

And any specific competitors that you are sort of looking out for there or growing aggressively in the states?

No new names as such. The set of existing players, so depending on the season, depending on the year, there are some players who are more active. So nothing significant to report in terms of new competition.

Maybe next sort of question, how do we think about risk-adjusted yields when, say, compared to other pure play affordable housing finance players? Do we look at that? And then if so, what's the thinking there?

So on yields, thinking we are offering a wide bouquet of products. So starting from an INR 5 lakh ticket size to an INR 40 lakh ticket size. And we also do loans against property. So the idea is to provide a blended yield, or rather to deliver a spread of around 5 to 520. So if the borrowing cost drops further from here, then there will be a corresponding decline in the yields. But overall, we are looking to maintain a spread of 505 to 520. That is what we are looking to do. So we will do that by using this whole blend of products. So there will be LAP on one side, maybe to the extent of 20%. There are smaller ticket loans, which will deliver slightly higher yields. Then we have the larger ticket loans. And then, anyway, co-lending is there, which is yield agnostic because we are getting an effective spread of about 5%, 5.5% in the co-lending product. So the idea is to sustain the profit and deliver a respectable or the promised ROE that we have committed to.

I was seeing more around risk-adjusted. So if we look at, say, the yield and take out the credit cost, how do we think about that on a portfolio basis on different segments, different states? And then how does it compare to our peers?

In certain segments, it will be similar to peers. It also depends upon the kind of markets, et cetera, we are comparing. So some of our peers operate in more rural or semi-rural markets where the yields would probably be higher. Also, in some cases, they operate in the LAP, and they have a higher proportion of LAP and micro LAP segments, so 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%. So the 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. So, 12% to 13.5%, 14% is generally the range in which we operate. It doesn't vary beyond that.

And then just on that, on the LAP segment compared to the home loan segment, the LAP segment, are the yields higher, and then the credit cost comparable, or let's say, it will be different?

Credit costs also don't fluctuate a lot. So I mean, we are talking about the overall credit cost of 40 basis points for the year. I mean the range will be between 20 basis points and 60 basis points. So we are not operating a product where the credit cost is substantially higher and deliver a higher yield because that is not our strategy.

For LAP, also, it will be in the same range, right?

LAP also will be in the same range, correct.

But the yield will be higher. Is that correct?

Yes. The yield is higher. So again, we are not operating in the very high-yielding LAP category. Our LAP yields are also in the, say, 14%, 14.5% range.

Our next question is from the line of Shreepal Doshi from Equirus.

My question pertains to PR. So we have taken a 10 basis point 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 the pricing strategy that we have as of today?

We will wait for the repo hike, if at all, they were to happen in the latter part of the year. We will also have to watch out for how banks are repricing from the MCLR line. And only if we need to, we will make the decision to hike. As I explained in my call, we have a fully floating book. And our history also has indicated that we have the capability to increase rates as well as reduce rates. And so we will take a call based on as and when the hike comes through. In the next 1 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 1 at around the levels of last quarter.

My second question was on branch expansion. So I was looking at the disbursement upon branch number, and it's already close to INR 30 crores per branch. And this is at a peak level. So incrementally, when you say we'll be doing at 25% loan growth. And so what is our branch expansion strategy? Where do you see the disbursement per branch as a run rate? I also wanted to understand which locations we would add branches to? And what is the number of branches or percentage of branches with disbursement per branch below INR 10 crores?

So generally, our strategy to put up a branch is only if the branch has the potential to reach this average branch disbursement potential, which is crores to INR 3 crores a month. So we would typically not put a branch where 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 to 40 branches every year. So that is what we are planning. Obviously, the productivity of the branch and the disbursal per branch should keep inching up as we scale up. That has always been the principle under which we are operating. So, productivity of the branch and overall AUM per branch, disbursal per branch, and AUM per employee should keep on going up.

But then, where I'm coming from is that while we focus on business, our employees at the branch level are responsible for collections as well. So in that case, as AUM per employee continues to inch up, are we planning to create additional bandwidth for buckets like 31 to 60 and 60 to 90 DPD?

No. So, how do we facilitate this increase in productivity is only through technology and tools that are made available to the employees. So the idea is to take away the time they are spending on mundane tasks and just focus their attention more on customer-facing activities, such as originating leads, closing the transaction with the customer, and collecting from more difficult customers. So these are the key customer-facing activities that we want the front-end teams to spend their time on. If they are spending time on any other activity, like making receipts or updating records and things like that, we continue to keep observing and automating those activities.

Sir, just two follow-ups here. 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 below INR 10 crores a number, and also INR 10 crores to INR 50 crores sort of a number? And the second question was where we would plan to add the 30 to 40 branches in the coming year?

So 30 to 40 branches would be broad-based. We are not really targeting a specific state as such. It's a two-pronged strategy. There will be a few additions in new locations or new cities that we have identified across various states. And a lot of additions will also be in existing cities where we are increasing the density of the branches. So, in larger cities where we already have a few branches, we would be increasing the number of branches to improve our distribution and access to the customer. So it's going to be a two-pronged strategy. The number of branches that are less than INR 10 crores would be very small, maybe about 10-odd branches. Less than INR 50 crores would be about 50 branches.

[Operator Instructions] Our next question is from the line of Kunal Shah from Citigroup.

So, not sure if the co-lending piece got 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 or guideline changes have led to this. But 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 of April. And by the end of May, hopefully, all the issues should be addressed. So I think June should be a normal month.

Okay. So thereafter, the run rate of co-lending would be similar or maybe better than what we saw last year?

That's right.

And secondly, in terms of the bounce rates, we have heard from many that the bounce rates have been better in April than those of March. But I hear you mentioned that at least it's better than April of the previous year. But how has it been 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. There are sporadic anecdotal discussions going on, but really nothing that we are seeing at a central level in terms of a visible impact from this whole Middle East issue.

The next question is from the line of Gaurav Khandelwal from JPMorgan Chase & Co.

My first question is on the sourcing rate. Is the 13% number the average for the quarter, or is that the exit rate?

Average for the quarter.

And where are we at quarter-end, the exit rates?

It's similar, Gaurav. It doesn't vary month-to-month. So, probably it will be 2 basis points plus or 2 basis points minus.

Pricing is largely centrally driven in our case. It's all algorithm-based. The loan applications get locked in, and there is a risk-adjusted rate that gets generated and communicated to the customer. There is a little bit of a cushion for bargaining that is left. So this is a process we have been following for several years. So generally, there will not be a month-to-month variation once we have fixed a certain rate.

My second question is, are you seeing more competition in your product segments and ticket sizes from the larger housing finance companies of late?

Competition is always high, but nothing new as such to report, frankly. It's always up and down depending on the month or season. But otherwise, there is nothing new or significant to report.

The place where I'm coming from is effectively all of these large HFCs are losing out to the big banks in terms of the prime loans. Hence, based on my discussions with some of these, they are trying to target some of the ZIP codes where you excel.

Yes. But there is nothing significant that we have seen or any new activity that we have seen as of now.

The next question is from the line of Jyoti Katri.

One was with respect to the ticket size of the loans. This quarter around, we are seeing higher growth coming in from the high-ticket-size loans, from INR 5 lakhs to INR 25 lakhs in ticket size. So what's the outlook there? If this trend continues, will it exert some pressure on the margin side, because I assume that even in the high-ticket-size loans, competition is relatively higher and therefore margin pressure too? So what is the outlook there?

As we have been saying for the last couple of years, the customer segment, the same customer who used to purchase a smaller house or a lower-ticket-size property earlier, is migrating upwards. But his or her challenges continue to remain the same in terms of difficulty in getting loans from the larger lenders. So 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 and price of houses have gone up. Which is why you're seeing an increase in ticket size, but you are not seeing such an impact on the yield. We are still reporting an origination yield of 13%, and that is largely also because of the drop in borrowing cost. So 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 for us to solve this problem. So, 5 years down the line, we will probably be talking about an INR 40 lakh ticket size. But the customer segment is going to remain the same. The challenges are going to remain the same. And obviously, then the yields will also be the same.

The second thing is that over the last 3 months, we have seen interest rates hardening. Do you foresee -- although your incremental cost of borrowing has come down and your guidance sustains 5% to 5.25% margins. Do you feel that this might continue in FY '27 as well, given that the interest rates have hardened in Q4, the fourth quarter?

So let me take it in 2 parts. Quarter 1, we have enough visibility to ensure that the cost of borrowing is, 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. So that decision is not available today. We are very confident of maintaining the spread above 5%, which is in our guidance range of 5% to 2025.

The next question is from the line of Kushan Parikh from Morgan Stanley.

Just wanted to understand how you are seeing asset quality on the ground in the month of April? I mean, what is your assessment for the year? And also, what is your guidance on the credit cost side? Lastly, one specific question around collections. I mean, peers have been highlighting some collection issues in the state of Karnataka. I just wanted to get your assessment. Those are my questions.

So asset quality-wise, as I mentioned, April experience has been good, and it's been better than the last 2 years. So, it gives us a lot of confidence in terms of how it's going to pan out the rest of the year, because if you remember last year, April was much worse than March. But this year, we have not seen that. I mean, it's been much better than the last 2 years. And overall, for the coming year, we feel that, I mean, if this is a kind of indicator, it should be good. The credit quality experience should be good for this year. Same for Karnataka, we are not here. We don't have any issues as far as Karnataka is concerned. Generally, our portfolio quality has been extremely good there, and we are not seeing anything on the ground.

The guidance for credit cost for the next year?

Credit cost is the same guidance, 30 to 40 basis points.

The next question is from the line of Meghna Luthra from InCred Equities. I'm sorry, your line is not audible.

I had one quick question about what has changed on the sourcing strategy from Pune and Mumbai specific have been hired in the city, plan to replicate in some of these [indiscernible]

Yes. So, we have Bombay and Pune, which are more formal apartment markets, where the sourcing largely comes from the developers who are building housing projects. So we have developed a good strategy to tap into that market and get leads from there. We already had a good, similar, you can say, sourcing structure in places like Ahmedabad, Surat, et cetera, which are large developer-led markets. So we've managed to replicate that well in places like Bombay and Pune, which used to be more of, you can say, the I mean, the banks used to be much stronger in these markets. So we have been able to penetrate that. So that is the main difference in the sourcing strategy.

Can we get some more color on how, I mean, has already been there in Bombay. Bombay has been performing as a good market since, I think, many quarters in recent quarters. So what is the that happened during the quarter? I mean, the crack that if you can give some color to that?

No, not specifically with respect to the previous quarter. I mean, so the Bombay-Pune, you can say transition has been taking place over the last almost 18 to 24 months. It's just that it's become much larger now. So we started this transformation about 24 months ago, and entered into the developer segment and sourced customers from there. It's just that it has become much larger now, and it's really taking off. So we had, I mean, last quarter, we had a good quarter. So that is the, I mean, it is not that it started last quarter. This transformation started some time ago.

In Bangalore, Delhi, Hyderabad?

Sorry, can you just repeat that?

Do we plan to replicate this in Bangalore, Delhi, and Hyderabad? Are we going to see higher flows from the bigger cities?

Yes, to some extent. But if you look at Bombay and Pune, and compare them with, say, the other cities that you're talking about, those are more individual housing markets as far as affordable housing is concerned. But yes, some part of our Bombay strategy will be replicated in those markets.

And lastly, is it fair to assume that the co-lending and DA book is largely the large ticket, high ticket AUM that we have...

A large part of it is, yes. So, co-lending is largely INR 20 lakhs plus. INR 20 lakhs to INR 40 lakhs is where we do co-lending. So a large part of the higher ticket is co-lending.

[Operator Instructions]. The next question is from the line of Suraj Das from Sundaram Mutual Fund.

Two questions. First, if I look at the number of employees per branch, it has steadily increased, let us say, from 9 in FY '23 to almost 11 now. Do you believe furthering the manpower will probably lead to 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? So that is point one. Second question on this origination yield, I mean, looking beyond the quarterly movements, has taken a 35-basis-point PLR increase in FY '25, still the yields remain broadly flat on FY '25 versus FY '24, if I look at your presentation, despite a higher LAP. Now, over the past few quarters, the origination yields are coming down, and then you have also taken a PLR cut. So over the next couple of years, do you think yield could remain under pressure given the competitive intensity to sustain the group?

Okay. So, on the first question, as far as the number of employees per branch is concerned, there will be some fluctuation. So, for example, if we add another, let's say, 30 branches next year, that number can maybe come down for a couple of quarters and then again pick up. But broadly, it will be in that 9% to 10%, 11% range. It's not going to substantially jump up. It will only gradually move up as the company scales up. So maybe 2 to 3 years down the line, that number can be a higher number. But otherwise, broadly, it will range in that 9% to 12% number. As far as the yields are concerned, I want to just draw your attention to the spread. So we have been able to maintain the spread. So if you see the last 3, 4 quarters, 5.2%, 5.3% that we have been talking about, we have been able to maintain the spread. So that is the number that we are trying to anchor to. So if the borrowing cost reduces, then we will pass on some of that to customers, and the yield reduces, but we are still able to maintain the spread. Our increase in the LAP ratio is not very substantial. So we have always been in that 14%, 15% range. It's just maybe a 1% increase, which does not move the needle much. So broadly, we are operating in that 5% spread, 5% to 5.2% spread kind of a construct. So, depending upon whatever the borrowing cost is at that point in time, and we run a fully floating-rate book, we will ensure that we maintain that 5% to 5.2% spread. So we either pass on the benefit to the customer, or if there is an increase, then we pass that increase to the customer.

Suraj, just one additional point. You referred to FY '24 versus FY '25. 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 the price increase at that point in time, which led to a slightly higher spread. And even if you go back to that year, our guidance has always remained spread in 5% to 5.25%. We enjoyed a higher spread for a shorter period. And in our conversations, we've always been guided to this product mix that we are now, and we will stick to our spread guidance for some time to come.

The next question is from the line of Aravind Ravi Chandran from Sundaram.

Question on similar lines, need to PL at least in the short term if the borrowing rates are like, especially the incremental borrowing rates are broadly stable vis-a-vis the book?

Not at the moment. Ten basis points in January. So we will want to stay put for now.

And is it effective for the entire book, or does it happen over some more time, some more quarters to get transmitted to the entire quarters?

[indiscernible]

The next question is from the line of Nischint Chawathe from Kotak Institutional Equities.

If I look at the AUM growth trajectory, we've come down from around 30% to around 25-odd percent. What gives us conviction and confidence that you will sustain this trajectory? Are we actively going to shift into segments? Or is it the same segment that we pursue? Are the liability-side tailwinds? What is it that gives you this conviction that this 25% will kind of remain here and not further taper down?

So one is the organizational distribution strength that we have built in terms of our connected network, 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. But now we have completed that process, and our delivery of the last 2 quarters gives us the confidence that yes, this is a good formula to kind of use or keep building on. And that is what gives us the confidence that we should be able to do this 25% growth. So as far as FY '27 is concerned, our exit momentum, our continued disbursal in April, that's what gives us the confidence to project that number for FY '27. And beyond that, hopefully, whatever good work we do this year in terms of building 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 in the last year and loan growth accretion, almost one-third of the incremental loan growth comes in from ticket sizes above INR 25 lakhs. I think you rightly mentioned that loans above INR 20 lakhs are largely co-lent. So is this kind of a strategy? How much is the funding cost differential between your balance sheet borrowings and co-lending, or basically on co-lending and yield differential above INR 25 lakhs? Is this really the way forward in terms of slowly reducing the gap between us and maybe the target segment of larger housing finance companies?

So co-lending is one way to bridge that gap. And we are using it more as a productivity enhancement tool. So when our distribution comes across a customer who is, let's say, a formal customer and who can get a loan from a bank, we push it through the co-lending channel. In the normal course, we are sourcing customers who are from the informal segment and that gets booked as a normal regular Home First customer. So it's just a way to increase the target market, offer a better proposition to our channels and increase the productivity of the team. So that is the strategy behind co-lending. But having said that, at the moment, it is only about 4% of our AUM and about maybe 10% of our originations. So a good part of the INR 20 lakh-plus is also coming as regular customers, which, as I said, is where there is an increase in ticket size. The same customer segment who are from the informal segment, but with a larger ticket size, also forms a part of the INR 20 lakh-plus cohort.

What is the difference in cost of funding between co-lending and balance sheet borrowings?

Very similar, Nischint. I mean, it depends on bank to bank, but the range will be less than 20 basis points.

And 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?

Cost of funding will be 40 basis points, at best 50, not more than that.

So just as these companies have a strategy of having a small affordable housing book, you can probably also have a strategy of having a small prime book.

No, I think I want to come in here and address it, it's not prime. The customer segment is the same. There is inflation, which is causing the ticket size to rise. There is lack of documentation in these borrower segments. Otherwise, they wouldn't have been able to deliver the yields. We are not targeting a prime book. I think it's very important to differentiate that.

The prime customer would see a rate in today's market in today's market, you would see a rate between 7.25% to 8%. He is not going to pay a penny above 8% to 8% today. So that is not the customer we are targeting. I mean, we cannot offer 8% even in co-lending. So what we are offering in co-lending is anywhere between 8% to 10%. So these are customers who are, like I said, the same, what do you call it, customers who are slightly more -- there are some formal sources of income, et cetera, but who are willing to pay us that premium. So that is the co-lending portion. And then we also have, in the same cohort, we have customers who are affordable housing customers who have informal incomes, et cetera, and who are willing to pay us the rate, which is, say, 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. 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 those of the prime segment, but just that the customer segment would be different looking at.

Yes. Absolutely right. So if you see Bombay and Pune, as I was mentioning, always the mainstay of large banks. So these are all projects, which are all RERA-approved projects. So most of the banks operate in these projects. So they would take away 90% of the customers who have formal incomes and documentation and so on. But there are always 10 customers who are left, who have informal income, who struggle to get loans from the banks. But they are purchasing properties in the same projects. And these are all from the deep suburbs. We are talking about Kalyan, Arna, Balapur, and Alar, these places.

[Operator Instructions] The next question is from the line of Shubhranshu Mishra from Phillip Capital.

So, just wanted to understand this growth that we are forecasting, what proportion would come from home loans, and what proportion would be from LAP? And how do we think of the demand with the West Asia crisis? Is it going to have a dip in terms of the down payment capabilities? Any kind of uptick that we are seeing in demand may be because of the PMAY, or is it a very stringent PMAY this time around? So I just wanted to pick your brains on these aspects.

Yes. So our mix is likely to remain the same. So we are looking at somewhere between 15% to 20% loan against property. We are somewhere in the middle of that 16% or 17%. So the ratio of housing to LAP will broadly remain in the same ballpark, which is about 80-20. So 80% housing and 20% loan against property. So that will be the mix. As far as the West Asia crisis is concerned, at the moment, we are not seeing any impact on the demand. So hopefully, it should be behind us soon, and things will move ahead. So as of now, we are not seeing any drop in demand. April has also been fairly good. I think the third question was.

Is it a more stringent policy than the previous one? Are we seeing any kind of throughput increase because of that?

Yes. So, I mean, it has a slightly more elaborate process. But I think some of the teasing issues are getting addressed, and we should see good traction this year in terms of transmitting the benefit to a larger number of customers. In terms of generating new demand, it probably does not have that kind of impact, but maybe gradually it will pick up. As more customers get the benefit of the scheme, it will kind of pull in more customers.

And 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 difference? 100 to 150 basis points.

And this would be the same on an API basis also?

Yes, yes. Because we are not coming for us more or less, the APR and the rate that we are charging, reducing balance rate that we are charging. So the APR is almost the same as the interest rate that is charged.

Because the APR calculation also takes into account the fee income. So sometimes the fee income will lap. Very minimal, right?

So those are very minimal. So that's why I said it doesn't move the needle that much. I mean, it would be a 10 basis points difference.

The next question is from the line of Ravi Kumar Naredi from Naredi Investments.

Sir, how much write-off bad debt from the profit and loss account this year, and how many units did we auction?

Total write-off has been about INR 36 crores.

Okay. So you think this amount is extraordinarily high?

It's the scale of the business is growing. So it's more or less in line with the growth in the business.

And how many units we auction?

We auctioned anywhere between 50 and 100 units a month. So for the year, it will be around 1,000 units.

And sir, the AUM growth we achieved between March '23 and March '26 is 30% CAGR. Can we expect the same growth from the next three years?

So we have guided to a 25% growth, sir.

I have listened. But it can be 30%, not possible in the current circumstances.

At this point, difficult to say, sir.

The next question is from the line of Mayank Mistry from Antique Stock Broking.

Sir, just one question on the connectors point. I think there are many players whose connector fees are increasing for them. And just wanted to know, has there been any higher demand from their side, even in your case? And if you can highlight how the connector fees have moved since the last few years, and maybe how they should trend going forward?

Yes. So, this is an ongoing negotiation with the connectors. So, any connector, whatever fee structure he is at, if you are going to ask him, he's going to always want a higher fee. So that is a constant negotiation with them. So, how we normally address that is by also addressing other issues that the connectors have, which are timely payouts, a wider bouquet of products, and faster turnaround. So, a faster turnaround to some extent compensates for the 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. So that is how we kind of address the commission issue. And if there are specific tactical moves that you can say, what you call it, tactical moves that we need to make in a particular market, we do that. So in a particular location, a particular connector, we need to increase the fees; we do that. But on an overall basis, I would say probably you would have seen a previous 10 to 15 basis points movement in the commissions.

So basically, it varies across the connectors and across the geographies.

Yes, varies across connectors and geographies, and we also plan it depending upon the connectors' throughput, the quality of files, and various other metrics that we track the connectors on.

[Operator Instructions] We have a question from the line of Aditya from MSA Capital Partners.

Great set of results and really commendable performance on the asset quality. Just wanted to quickly understand what the issue with Tamil Nadu and Telangana is. Is it just a human capital issue? Or is there something else that you're seeing on the ground?

No. As we had mentioned, it is, I think, largely to do with internal teams and building the team. But now those things are behind us, and we should have a good year as far as Tamil Nadu and Telangana are concerned.

And the other question is on strategy. So, in your opening remarks, you had said that you have successfully implemented Agent AI, and some piece of work has already been automated. So, how are we thinking? Will it increase our productivity in terms of growth? Or will it increase the productivity in terms of OpEx cost?

So as of now, we can more confidently predict the outcomes on the cost side. It is a little more difficult to predict what outcomes it will have on the origination side. But eventually, it should have origination outcomes as well. So, 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 the ability for us to capture loans, which may otherwise be declined on the ground, proactively. So that is something that is going on. If it is successful, of course, it should help us to improve organizations. But that is something that is difficult to predict at this point.

[Operator Instructions] 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 at [email protected]. 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.