HomeFirst Finance: Bernstein Forecast Hints at Strong Upside, Cautious Optimism for Shareholders

Brokerage firm Bernstein has reaffirmed an “Outperform” rating on HomeFirst Finance, one of the leaders in India’s affordable housing finance market. They see up to 38% upside potential, setting a price target of ₹1,650. Despite a modest second quarter and slower-than-expected loan growth, Bernstein remains optimistic, underpinned by HomeFirst’s resilient margins and a sharp rise in fee income—a structural positive that supports earnings. For Q2 FY26, HomeFirst reported net profit of ₹131.8 crore, up 43% year-on-year. Net interest margins improved to 5.4%, and net interest income rose 32%. While AUM grew 26% YoY to ₹14,178 crore, this fell short of the company’s long-term 30% target. Disbursement growth was subdued (up 10%), mainly due to a prolonged monsoon and tighter norms in some self-employed segments. Management, however, maintained its guidance of over 25% full-year growth, hoping for a better demand environment ahead. There are concerns: asset quality saw a slight setback. Gross NPA and net NPA edged up to 1.9% and 1.5% respectively, and credit cost increased due to a rise in early delinquencies. Bernstein suggests this uptick is manageable but must be closely watched, especially since HomeFirst’s NPA levels are already higher than some sector peers. Positively, fee income is expanding fast thanks to better processing fees and insurance cross-sell, while operational expenses are stable. The company’s return on assets jumped to 3.8%. For shareholders, these metrics point to good profitability and steady value creation, though near-term risks—competition, rising NPAs, and slower loan growth—need monitoring. Shareholders may benefit if the company continues its disciplined approach, but patience and vigilance on asset quality will be crucial in the coming quarters.