Note: This is a preliminary transcript and may contain inaccuracies. It will be updated with a final, fully-reviewed version soon.
Home First Finance Company India Ltd (NSE: HOMEFIRST) Q4 2026 Earnings Call dated May. 07, 2026
Corporate Participants:
Sunil Anjana — Head Treasury and Investor Relations
Manoj Viswanathan — Managing Director and Chief Executive Officer
Nutan Gaba Patwari — Chief Financial Officer
Analysts:
Abhijit Tibrewal — Analyst
Unidentified Participant
Kunal Shah — Analyst
Nischint Chawathe — Analyst
Unidentified Participant
Unidentified Participant
Suraj Das — Analyst
Unidentified Participant
Shubhranshu Mishra — Analyst
Unidentified Participant
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Home First Finance Co. India Ltd. Q4 and FY26 earnings conference call. As a reminder, all participant lines will be in the listen only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need any assistance during this conference please signal an operator by pressing star and then zero on your touchstone telephone. Please note that this conference is being recorded. I now hand the conference over to Mr.
Sunil Anjana head treasury and Investor Relations of Home First Finance Co. India Ltd. Thank you. And over to you sir.
Sunil Anjana — Head Treasury and Investor Relations
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 Vishwanathan MD and CEO Ms. Nutan Gaba Bhattwari, CFO. With that I now invite Mr. Vishwanathan to share his insights on overall performance and outlook. Over to you sir.
Manoj Viswanathan — Managing Director and Chief Executive Officer
Thank you Sunil. Good afternoon everyone and thank you for joining us today. FY26 has been a year of resilience and disciplined execution for Home First. We ended the year with healthy growth. Record disbursements in quarter four 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 asset under Management stood at Rupees 15,878 crores as of March 26. Up 24.9% year on year and 6.4% sequentially. Disbursement in quarter four was the highest ever at 1,572 crores up 23.5% year on year and 19.3%. QoQ for FY26 the disbursement stood at 5,424 crores. A growth of 12.9% over FY25. The strong exit run rate in quarter four gives us confidence as we enter FY27. Profitability remained robust for FY26. PAT stood at 540 crores up 41.4% year on year, reported return on equity for FY26 was 15.7% and on a pre money basis adjusted rov stood at 16.8%.
Even as we delivered this performance, we continue to invest for the next phase of growth. During the quarter we added six new branches and five touch points, increasing the network to 171 branches and 373 touchpoints. During 2026 we also added 221 employees, largely customer facing roles, 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 buckets collection discipline and resolution intensity. We are pleased with the pronounced improvement visible this quarter. Our 1 DPD is at 4.7% down 60 basis points sequentially. 30 plus BPD improved to 3.2% down by 50 basis points sequentially. Stage 2 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.
FRISP 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 statewide 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 a robust AUM trajectory.
All the southern states are on track for strong growth in this financial year including Tamil Nadu and Karnataka. Also, the E Kata issue is mostly behind us in up. The team is being built and we are preparing a strong base for FY28. 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 one of the company providing the high quality training ground that modern AI systems demand. Our AI strategy is anchored in three 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. Parallel AI LED interventions in lead qualification, legal and technical valuation and bureau analysis are currently in pilot and will progressively move to production as we scale our intelligent underwriting stacks on sustainability, our Green Homes initiative continue 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 FY27 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 and deepen our customer franchise and continue delivering strong and sustainable profitability. With that, I now hand it over to Nitin to take you through the financial performance in more detail. Over to you Nutan.
Nutan Gaba Patwari — Chief Financial Officer
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 505 crores up by 21.3% YoY and 4.4% quarter on quarter. Specifically on the interest on term loans went up from 406 crores in quarter three to 412 crores in quarter four presenting 1.6% quarter on quarter increase as against average principal outstanding growth of 5.5% on a quarter on quarter basis.
In the interest income on term loans two lesser days in the quarter that is quarter four versus quarter three impacted by 2.2% 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 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 spread at a portfolio level in our guided range of 5% to 5.25%.
Net interest margin for quarter four 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 a business model. For FY26 NIM stood around 5.7%. Moving to operating efficiency it remains strong. Cost to income for quarter four was 32% improving 10 basis points sequentially. For FY26 the cost to income spread 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 3.3 crores recorded earlier in quarter three 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 provisioned operating profit in quarter four stood at 212 crores up by 44.9% yy. This reflects the operating leverage inherent in the franchise as the book continues to scale.
Profit after tax for quarter four stood at 149 crores up by 42.7% YoY and 6.6% QoQ for FY26 profit after tax stood at 540 crores representing 41.4% YoY growth. Return on assets of 3.9 and return on equity of 15.7%. Following the 1250 crore QIP completed earlier in April, our balance sheet remains very well capitalized on a pre money basis. Adjusted ROE for FY26 stood at 16.8%. Moving on to provisions on asset quality, credit costs for quarter four and the year stood at 40 basis points. Provision on stage three 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 26th 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% of assignment and co lending we balanced from NCDs, ECDs and NBSC. During quarter four, we executed direct assignment transaction of 264 crores in co lending. Disbursement for FY26 doubled rising from 153 crore in FY25 to 307 crores in FY26. The co lending book grew to 593 crores and now represents 3.7% of AUM in FY27. 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 assets 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 4,357 crores and book value for shares is 480 rupees as of March 26. This positions us well to continue investing in growth while maintaining a disciplined leverage. With that, we conclude our opening remarks and are now happy to take your questions.
Questions and Answers:
Operator
Thank you very much, ladies and gentlemen. We will now begin the question and answer session. Anyone who wishes to ask a question may enter Star and one on the Touchstone telephones. If you wish to remove yourself from the question queue, you may enter Star and 2. Participants are requested to please use only handsets while asking a question. We will wait for a moment while the question queue assembles. The first question is from the line of Abhijit Tibriwal from Motilal Oswal. Please go ahead.
Abhijit Tibrewal
Yeah. Thank you for taking my question. Am I audible?
Unidentified Participant
Yes, Abhijit.
Abhijit Tibrewal
Yeah. Yeah. Thank you, Manoj. So two questions. One is. One is maybe near term what we have seen over the last one 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. Weakness both in terms of demand as well as I would say asset quality. And then when we moved to the third quarter we saw some semblance of stability coming in. And then fourth quarter, obviously we have 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 US Tariffs. How is credit trending now? Is something I wanted to understand. I remember you saying in your opening remark that April 26th was better than April 25th and 24th.
But just trying to understand how are these two things, demand and credit, trending right now?
Manoj Viswanathan
Yes. So I mean, looking at the first half, I mean first the discussion on the first half, so there were two or three things which were happening simultaneously. One was that we were just coming out of the whole overhang of the, you know, credit issue. So, you know, there were delinquent, delinquencies were elevated, so and collection was a bit difficult, so also impacted by tariffs, etc. There was a bit of sluggishness in demand as well at that point of time. And we were also internally going through some issues.
You know, some of the locations, you know, regions were not staffed properly, there was some attrition and so on. Right. So all of these things were happening simultaneously at that point and hence the a little bit of a 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, collections started improving.
The tariff issue was also kind of put to rest at some point. And the demand also started. From October onward, the demand also started improving. So all these things kind of came together in the last two quarters and then helped us deliver this good results.
Abhijit Tibrewal
Got it, Manish. And then the last question that I had was a little bit, I would say a medium term strategy. I remember you saying in your opening remarks that we are entering FY27 from a position of strength. You also acknowledge 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 should we look at maybe the next two to three years, you did Mention that we’ll be looking to grow our AUM at 25% this year.
So what all changes have you done this year which is giving us confidence that we’ll be able to sustain that 25% growth. And then if you could also talk about how are you looking at your distribution, your expansion into newer states or other deepening into newer states. Just do two, three points if you can cover.
Manoj Viswanathan
Yes. So one is, you know, the, you know, teams being rebuilt and you know, all senior leadership positions being filled across the country. I think that is a big positive with which we are entering this year. So we have now the teams on the ground, you know, fully focused on delivering the result 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, in terms of the wide bouquet of products that we are able to offer.
So there the co lending also comes into play where we are, you know, so if you are going to a connector or to any distribution channel, we are able to offer them, you know, a larger bouquet of products where they can, you know, address more number of customers. It’s a wider target target market that they can address. So that is also, that is also. And that is being, that is being well recognized by the channels, you know, with you would see that 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. So all of this and the other, you can say important development is our huge success that we have got in places like Bombay and Pune, which were traditionally seen as formal markets and where only the banks could operate, etc. So we have really turned around and created a huge success there. So all of these things gives us the confidence that as for the next two to three 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.
Abhijit Tibrewal
Got it. Thank you so much. That answer my questions and I wish you and your team the very best.
Operator
Thank you. The next question is from the line of Prashant Kothari from Pictet. Please go ahead. Mr. Kothari. Your line is unmuted. Yes, please go ahead, sir.
Abhijit Tibrewal
Hello. Two quick questions from my end. The first one would be that, you know, you mentioned that you’re on track for growth in the Southern states in FY27. I just wanted to check how did our market shares move in say Karnataka and Tamil Nadu in FY26 and are there any specific competitors growing aggressively in these regions? That would be my first question. I’ll come back to the second.
Manoj Viswanathan
Sure. So a market shares in Tamil Nadu, you know, Tamil Nadu was not very strong to start with and you know it would have further dropped a little bit in this last year because you know, the growth was very muted in Tamil Nadu. But we will hopefully be able to make it up in the, in the coming couple of years because now the kind of base is ready and you know the teams are there so we should be able to catch up. As far as the TN is concerned in Karnataka it has been a fairly steady, steady growth except for a minor blip we had for one or two quarters because of the Ekata issue.
Otherwise, you know, it’s been, we would have sustained our market share in Karnataka.
Abhijit Tibrewal
Got it, got it. And any specific competitors that you are sort of looking out for there or growing aggressively in the southern states?
Manoj Viswanathan
No new names as such, you know, the, you know, set of existing players, you know, so depending on the season, depending on the year, depending on the year there are, you know, some players who are more active. So nothing significant to report in terms of new competition.
Abhijit Tibrewal
Got it, got it. Bibi, next sort of question. How do we think about risk adjusted yields when say compared to other peer play affordable housing finance players? Do we look at that and if so, what’s our thinking there?
Manoj Viswanathan
So on yields are thinking we are offering a wide bouquet of products starting from 5 lakh ticket size to a 40 lakh ticket size. And the idea, and we also do loan 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 corresponding decline in the yields. But overall we are looking to maintain a spread of 5 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 is a smaller ticket loans which will deliver slightly higher yields and then we have the larger ticket loans and then anyway co lending is there which is yield agnostic because. Because we are Anyway, getting an effective yield of about five, effective spread of about five, five and a half in the equal lending product. So the idea is to deliver the, you know, I mean sustain the profits and deliver the respectable or the promised ROE that we have, you know, we have committed to.
Abhijit Tibrewal
I was seeing more around sort of risk adjusted yield. So if we look at say the yield and take out the credit costs, how do we think about that on a portfolio basis on different segments, say different states and then how does it compare to our peers?
Manoj Viswanathan
So it would be, you know, see in certain segments it would be similar to peers. It also depends upon the kind of markets etc we are comparing. So some of our peers operate in more rural or you know, semi rural markets where the yields would probably be higher. Also in some cases they operate in the, you know, lab and you know, they have a higher proportion of LAP and micro lab segments. So where 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 ticket size is one axis and the other is the nature of the product which is whether it’s LAP or housing loan. So 12 to 13 and a half, 14% is generally the range in which we operate. It doesn’t vary beyond that.
Abhijit Tibrewal
Got it, Got it. And then just on that, on the lap segment compared to the home loan segment, the LAP segment, other yields higher and then the credit cost comparable or let’s say it will be different.
Manoj Viswanathan
Credit costs also don’t fluctuate, you know, fluctuate a lot. So I mean we are talking about overall credit cost of 40 basis points for the year. I mean the range will be between say 20 basis points to 60 basis points. So. So we are not operating a product where, you know, the credit cost is substantially higher and we’re just delivering a higher yield because that is not our strategy.
Abhijit Tibrewal
Got it. For LAP also it will be in the same range, right?
Manoj Viswanathan
LAP also it will be in the same range. Correct.
Abhijit Tibrewal
Got it. But yield will be higher. Is that correct?
Manoj Viswanathan
Yeah, yield is higher. So again we are not operating in the very high yielding lab category. You know, our lab yields are also in the say 14, 14 and a half percent range.
Abhijit Tibrewal
Got it. No helpful. Thank you so much.
Operator
Thank you. Our next question is from the line of Sripal Doshi from Icirus. Please go ahead.
Unidentified Participant
Hi sir. Thank you for giving me the opportunity. My question is pertaining to PLR. So we had taken 10 basis point PLR 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 our pricing strategies that we have as of today?
Nutan Gaba Patwari
Sripal, we will wait for the repo car repo hike if at all they were to happen in the later part of the year. We will also have to watch out how banks are repricing from the MCLR line and only if we need we will take the decision to hike. As I explained in my call, they have a fully floating book and 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 hikes come through in the next one 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 one in and around the levels of last quarter.
Unidentified Participant
Got it, Got it. My second question was on branch expansion. So I was looking at the disbursement upon branch number and it’s already at closer to 50 crore per branch and this is really at a peak level. So incrementally when you say you want to let we’ll be doing a 25% loan growth and so what is our branch expansion strategy? Where do you see the disbursement per branch as a run rate? And also wanted to understand which locations would we add branches and what is the number of branches or percentage of branches with disbursement per branch below 10 crore.
Manoj Viswanathan
So generally our strategy to put up a branch is only if the branch has the potential to reach this, you know, average branch branch disposal potential which is, you know, two to three crores a month. So we would typically not put a branch where you know, the potential is only 1 crore a month so that we would just operate as a touch point or a satellite location. So branch strategy is to add about 30 to 40 branches every year. So that is what we are planning and productivity of the branch. Obviously the disposal for branch should keep inching up, you know, as we scale up.
That has always been the, you know, what you call it principle under which we are operating. So productivity of the branch and overall aum, AUM per branch, disposal per branch and AUM per employee should keep on going up.
Unidentified Participant
Okay, but then where I’m coming from is that while we focus on business, our employee at branch level is responsible for collections as well. So in that case, you know, the AUM per employee continues to inch up. In that case are we planning to create a bandwidth for Buckets like let’s say 31 to 60 and 60 to 90 with additional bandwidth there.
Manoj Viswanathan
No. So how we facilitate this increase in productivity is only through technology and tools which are made available to the employees. So the idea is to take away the time they are spending in mundane tasks and just focus their attention more on customer facing activities. So originating leads, closing the transaction with the customer and collecting from more difficult customers. These are the key front facing or the customer facing activities that we want to spend the time of the front end teams on.
So if they are spending time on any other activity like making receipts or you know, updating records, things like that, so those we continue to, you know, keep observing and automating those activities.
Unidentified Participant
So just two follow ups here. Which one was that in terms of AUM per branch? If you could highlight number of branches or percentage of branches with let’s say AUM per branch having below 10 crore sort of a number or endorse 10 to 50 crore sort of a number. And the second question was where would we plan to add these 30 to 40 branches in incoming year? Thank you.
Manoj Viswanathan
So 30 to 40 branches would be broad based. It is not. We are not really targeting a specific state as such. We are looking at. So it’s a two pronged strategy. There will be a few additions in new locations or new cities that we have identified across the, across various states. And a lot of addition will also be in existing cities where we are increasing the density of the branches. So larger cities where we have a few branches, we would be increasing the number of branches in the larger cities to improve our distribution and you know, access to the customer.
So it’s going to be a two pronged strategy. Number of branches which are less than 10 crores would be very small. So it would be about, I don’t know, about 10, maybe 10 odd branches which are less than 10 crore in a. Yeah. Less than 50 crores you’re talking about.
Unidentified Participant
Yeah. Yes, less
Manoj Viswanathan
Than 50 crores will be about 50 branches.
Unidentified Participant
Got it. Thank you sir. Thank you so much for answering my questions. Good luck for the next quarter.
Operator
Thank you. Participants. It’s a request. Please limit your questions to two questions per participant. Our next question is from the line of Kunal Shah from Citigroup. Please go ahead.
Kunal Shah
Yeah, thanks for taking the question. So not sure if cold ending peace got addressed. So this quarter it was low. How much time would it take to rectify this and again scale it up? I understand that the regulatory and all the guideline changes as met today, but is it addressed to A larger extent. And when should we again start seeing a pickup in this?
Manoj Viswanathan
It should get addressed this quarter. So some progress has been made in the first month in April and by end of May, hopefully all the issues should get addressed. So I think June should be a normal month.
Kunal Shah
Okay. So thereafter the run rate of co lending would be similar or maybe better than what we saw last year.
Manoj Viswanathan
That’s right.
Kunal Shah
Okay. And secondly, in terms of the bounce rates, we have heard from many of them that the bounce rates have been better in April than that of March. Okay, but I hear you that you mentioned at least it’s better than that of April of previous years. But how has been it trending and is it showing any sign of worry in any of the pockets because of the macroeconomic sectors at this point in time?
Manoj Viswanathan
No, as of now, there is absolutely no visible impact.
Nischint Chawathe
I
Manoj Viswanathan
Mean, there are sporadic, you know, anecdotal, you know, discussions going on, but really nothing that we are seeing, you know, at a central level in terms of a visible impact of this whole Middle east issue.
Kunal Shah
Okay, got it. Yes, thank you.
Operator
Thank you. The next question is from the line of Gaurav Khandelwa from JP Morgan. Please go ahead.
Abhijit Tibrewal
Hi, good afternoon. Thanks for taking my questions. My first question is on the sourcing rate. So that’s is the 13% number average for the quarter or is that the exit sourcing average
Nutan Gaba Patwari
For the quarter?
Abhijit Tibrewal
And where are we at the quarter end exit rates?
Nutan Gaba Patwari
It’s similar, Gaurav. It doesn’t vary month to month. Probably will be 2 basis points plus 2 basis points minus that will be the range.
Manoj Viswanathan
See the, this is all the pricing is largely centrally driven in our case. So it’s all algorithm based. So you know, the cases, the loans, loan applications get logged in and there is a rate, you know, risk adjusted rate which gets generated and communicated to the customer. And there is a little bit of a cushion for bargaining that is left. So it’s a very, it’s a, this is a process we are following since several years. So there will not be generally, you know, month to month variation once we have fixed, you know, once we have fixed a certain rate.
Abhijit Tibrewal
Got it. Thanks, that’s very helpful. My second question, are you seeing more competition in your product segments, your ticket sizes by the larger housing finance companies off late? The competition always is high. But any new incremental,
Manoj Viswanathan
Nothing new as you report, frankly. It’s, it’s, it’s, I mean it all, it’s always up and down depending upon this, depending upon the month or season. But otherwise there Is nothing as such new or significant to report.
Abhijit Tibrewal
Got it. Okay. No, 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 and hence based my discussion with some of these, they are trying to target some of the zip codes where you excel in and hence the question.
Manoj Viswanathan
Yeah, but we are not, I mean there’s nothing significant that we have seen or you know, any new activity that we have seen as of now.
Abhijit Tibrewal
Thank you so much.
Operator
Thank you. The next question is from the line of Jyoti Khatri from Ambit Wealth. Please go ahead.
Unidentified Participant
Yeah, thanks for taking my question. One was with respect to ticket size of the loans this quarter round we are seeing higher growth coming in from the higher ticket size loans from 50 to 20 lakhs and 20 to 25 lakh ticket size. So what’s the outlook there? So assume that if this Sunday continues, will it exert some pressure on the margin side? Because I assume that even in the high ticket ticket size loans competition is relatively higher and so the margin pressure too. So what is the outlook there?
Manoj Viswanathan
So you know, as we have been saying since last couple of years, the, you know, there’s a customer segment, the same customer who used to purchase a smaller house or lower ticket size property earlier is migrating upwards but his or her challenges continue to remain the same in terms of the 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 of the houses, price of the houses have gone up.
So which is why you’re not seeing, if you look at, you know, there has been an increase in the ticket size but you are not seeing such an impact on the yield. We are still reporting origination yields of 13% and that is largely also because of the drop in borrowing cost. So adjusted for borrowing cost there is actually there is no decline in yields at all. So the reason is that we are addressing the same customer and the customer is willing to pay that premium to us to, for us to solve as problem, problem.
So you know, five years down the line we will be probably talking about a 40 lakh ticket size but you know 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.
Unidentified Participant
Okay, fine. And second thing is on the fact that over the last three months we have seen interest rates hardening. Do you foresee although your incremental cost of borrowing has come down and your guidance sustains, you know, 5 to 5.25% margins, do you feel that this might continue in FY27 as well given the interest rates have hardened in the Q4 fourth quarter?
Nutan Gaba Patwari
So let me take it in two parts. Quarter one, 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. That decision is not available today. We are very confident of maintaining the spread above 5% which is in our guided range of 5 to 525.
Unidentified Participant
Thank you. Thanks so much.
Nutan Gaba Patwari
Thank you.
Operator
Thank you. The next question is from the line of Kushan Parikh from Morgan Stanley. Please go ahead.
Abhijit Tibrewal
Thanks for taking my question. Just wanted to understand how you are seeing asset quality on the ground in the month of April. And I mean, what is your assessment for the year and also what your guidance is 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. Just wanted to get your assessment of the thing. Yeah, those are my questions.
Manoj Viswanathan
So asset quality wise, as I mentioned, April experience has been good and it’s been better than last two years. So gives us a lot of, I mean, it’s a, you know, gives a lot of confidence in terms of how it’s going to pan out rest of the year. Because if you remember last year, April, you know, was much worse than, you know, March. But this year we have not seen that. I mean, it’s been much better than last two years. And you know, overall, you know, for the coming year, we feel that, I mean, if this is a kind of indicator, it should be, 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 on, you know, as far as Karnataka is concerned. Generally our portfolio quality has been extremely good there and we are not seeing anything on the ground.
Abhijit Tibrewal
Thanks for that. Just the guidance on credit cost for the next year.
Manoj Viswanathan
Credit cost is the same. The same guidance, 30 to 40 basis points.
Abhijit Tibrewal
Got it. Those are my questions. Thank you.
Operator
Thank you. The next question is from the line of Meghna Luthra from Incred Equities. Please go ahead.
Unidentified Participant
Yeah, thank you, sir, for the opportunity.
Operator
I’m sorry, ma’, am, your line is not audible. Could you repeat? Yes, ma’. Am. Please Go ahead.
Unidentified Participant
Am I audible now?
Operator
Yes ma’. Am. Please go ahead.
Unidentified Participant
I had one quick question that what has changed on the sourcing strategy from Pune and Mumbai specific have been hired in the city plan to replicate in some of the other.
Manoj Viswanathan
Yeah. So we have you know, so Bombay Pune are you know more formal apartment markets where the sourcing largely comes from the you know, developers who are building building housing projects. So we have you know developed a good strategy to kind of tap into that, you know tap into that market and get leads from. From there. We already had a good similar, you know, similar you can say sourcing structure in places like Ahmedabad, Surat etc. Which are large developer led markets. So we managed to replicate that well in place like Bombay and Pune which used to be more of you can say the you know, I mean the banks used to be much stronger in these markets.
So we have been able to kind of penetrate that. So that is the, that is the main difference in the sourcing strategy.
Unidentified Participant
Thank you. Can we have some more color on how I mean there in Bombay and Bombay has been performing as a good market since I think many quarters in recent quarters. Right. So what is the shift that happened during the quarter is. I mean the crack that that. I mean if you can get some more color on that.
Manoj Viswanathan
So 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 2018 to 24 months. It’s just that, you know, it’s become much larger now. So we started this transformation about 24 months ago and you know entering these developer into entering to the developer segment and sourcing customers from there. It’s just that it has become much larger now and you know it’s really taking off, you know so that we, so we had, we had, we had a lot.
I mean last quarter we had a good quarter. So that is, that is the. It is not that it started last quarter. This transformation started some time ago. Sorry, can you just repeat that?
Unidentified Participant
Do we plan to replicate this in Bangalore, Delhi, Hyderabad? Are we going to see higher flows from the bigger cities?
Manoj Viswanathan
Yes, to some extent. But if you look at compare Bombay and Pune 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, some part of our Bombay strategy will be replicated in those markets.
Unidentified Participant
Okay. And lastly, is it fair to assume that the co lending and DA book is largely the last ticket high ticket aum that we have
Manoj Viswanathan
Large part of it Is Yes. So co lending is largely 2020 lakh plus. So 20 to 40 lakhs is where we do co lending. So a large part of the higher ticket is co lending.
Unidentified Participant
Thank you so much.
Operator
Thank you. Participants, please limit your questions to two questions per participant. The next question is from the line of Suraj Das from Sundaram Mutual fund. Please go ahead.
Suraj Das
Yeah. Hi. Am I audible?
Nutan Gaba Patwari
Yes.
Suraj Das
Yeah, thanks. Thanks. Ma’, am, two questions. First, if I look at the number of employees per branch, it has steadily increased, let us say from nine in effort 23 to almost 11 now. Do you believe further strengthening of the manpower will be required? Given probably the higher activity 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 ma’, am. On this origination yield, I’m looking beyond the quarterly movements.
You have taken 35 basis point PLR increase in FY25, yet still the yields remain broadly flat on FY25 versus FY24. If I look at your presentation, despite a higher laughings now over the past few quarters, the origination yields are coming down and then you have also taken a PLR cut. So over the latest in next couple of years, do you think yield could remain under pressure given the competitive intensity to sustain growth?
Manoj Viswanathan
Okay, so on the first question, as far as the number of employees per branch are concerned, there will be some fluctuation. So you know, so for example, if we add another, let’s say 30 branches next year, you know, that number can, will maybe come down, come down for a couple of quarters and then again pick up. So but broadly it will be in that 9 to 10, 11 for the 11 range. It’s not going to substantially jump up. It will only gradually move up as the company scales up. So maybe two to three years down the line that number can be a higher number.
But otherwise broadly it will be range bound in that 9 to 10, 9 to 9 to 12 number. As far as the yields are concerned, you know, want to just draw your attention to the spread. So we have been able to maintain the spread. So if you see last 3, 4/4 the 5.2, 5.3 that we have been talking about, we have been able to maintain the spreads. 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 you know, the yield reduces.
But we are still able to maintain the spread and our increase in, you know, the lap ratio is not Very substantial. So we have always been in that 14, 15% range. It’s just maybe a 1% increase, you know, which does not move the needle much. So broadly we are operating in that 5% spread. 5 to 5.2% spread, you know, kind of a construct. So depending upon whatever the borrowing cost is at that point of time. And we run a fully floating rate book. So we will, you know, ensure that we maintain that 5 to 520 spread.
So we either pass on the benefit to the customer or if there is an increase, then we kind of, you know, buzz that increased with the customer.
Nutan Gaba Patwari
Suraj, just one additional point. You refer to FY24 versus FY25. 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 of time, which led to a slightly higher spread. And even if we go back in that year, our guidance has always remained spread in 5 to 525. We enjoyed higher spread for a shorter period. And in our conversations we’ve always been guiding to this product mix that we now.
And we will stick to our spread guidance for some time to come.
Kunal Shah
Okay? Okay, sure. Sure, ma’. Am. Thanks.
Operator
Thank you. The next question is from the line of Arvind Ravi Chandran from Sundaram Alternatives. Please go ahead.
Unidentified Participant
Actually, thank you so much for the opportunity. Like my question was on the similar lines of Zuraj, but like do we really see the need to cut PLR further at least in the shorter term? You know, if the borrowing rates are like, especially the incremental borrowing rates are, you know, broadly stable. Visa vis the book?
Nutan Gaba Patwari
Not at the moment.
Unidentified Participant
Okay, already
Nutan Gaba Patwari
Done with the 10 basis January, so we will want to stay put for now.
Unidentified Participant
And this PLR cutter, like is it, is it effective for the entire book or like, you know, does it happen over some more time? Somewhat quarters
Manoj Viswanathan
Has to get transmitted to the entire book. Yeah,
Unidentified Participant
Yeah, yeah. Okay. Okay, thank you.
Operator
Thank you. The next question is from the line of Nishin Chavate from Kotak Institutional Equities. Please go ahead.
Nischint Chawathe
Hi, thanks for taking my question. If I look at the AUM growth trajectory, you know, we’ve come down from around 30 percentage to around 25 odd percent. You know, what gives us conviction and confidence that you sustain this? What is it that are we kind of actively going to shift into segments or is it the same segment that we pursue under liability side tailwinds? What is it that gives you this conviction that this 25 will kind of Remain here and not further taper down.
Manoj Viswanathan
So one is that you can say the organizational distribution strength that we have built in terms of our connector network, our branches, distribution, RMs, etc that we have across the country last year for a couple of quarters we were still in the process of rebuilding that. But now, you know, we have completed that process and you know, our delivery of the last two quarters gives us the confidence that yes, this is, you know, a good formula to kind of use or you know, keep kind of building on. And that is what gives us the confidence that we should be able to, you know, do this 25% growth.
So as far as FY27 is concerned, our, you know, exit momentum, our let us say continued disbursal in April. So that’s what gives us the confidence to kind of project that number for FY27. And beyond that, hopefully whatever good work we do this year in terms of building a distribution and team, etc. Should help us to keep going with the same momentum for the next couple of years.
Nischint Chawathe
Let me be a little more specific. See if I look at your loan book growth in the last one year and loan growth accretion, almost a third of the incremental loan growth comes in from ticket size, about 25 lakhs. So I believe you do get, I think you rightly mentioned that loans about 20 lakhs are sort of largely kind of co originated. So is this kind of a strategy? How much is the funding cost differential between your balance sheet borrowings and co lending or basically co lending and Yield differential above 25 lakhs.
And is this really the way forward in terms of we kind of slowly reducing the gap between us and maybe the target segment of larger finance companies?
Manoj Viswanathan
So it is co lending is one way to bridge that gap and we are using it more as a productivity enhancement tool. So you know, when our distribution comes across a customer who’s, let’s say a formal customer and who can get a loan from a bank, we, you know, push it through the co lending channel. I mean in the normal course we are sourcing customers who are from the informal segment and you know, that gets booked as a normal regular home first customer. So it’s just a way to kind of increase the target market, offer a better, you can say better proposition to our channels and increase the productivity of the team.
So that is the strategy behind co lending. But having said that, you know, we are at the moment it is only about 4% of our AUM and about maybe 10% of our 10% of our origination. So a good part of the 20 lakh plus is also coming as regular customers which are like I said, where there is, you can say increase in ticket size. So same customer segment who are from the informal segment but who want a larger ticket size. That is also, that also forms a part of the, you know, 20 lakh plus cohort.
Nischint Chawathe
How much is the difference in cost of funding between co, sorry co lending and balance sheet borrowings?
Nutan Gaba Patwari
Very similar. I mean it depends from bank to bank but the range will be less than 20 basis points.
Nischint Chawathe
And how much is the catch up between you and let’s say the larger, you know, larger housing finance. The AAA rated housing finance companies in cost of funding.
Nutan Gaba Patwari
Cost of funding will be 40 basis points. 40 at best, 50, not more than that.
Nischint Chawathe
So just as these companies, you know have a strategy of kind of having a small affordable housing book, you, you can probably also have a strategy of you know, having a small client book.
Nutan Gaba Patwari
No, I don’t. I think I want to, you know, come in here and address. 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 this borrower segment. Otherwise they wouldn’t have been able to deliver the deals. We are not targeting a prime book. I think it’s very important to differentiate.
Manoj Viswanathan
The prime customer would seek a rate in today’s market as you would see created between 7.25 to 8. Right. He’s 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, you know, like I said, you know, the same, you know, what do you call it? Customers who are slightly more, you know, they are some formal source of income etc.
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, you know, affordable housing customers who have informal incomes etc. And who are willing to pay us the rate which is you know, say 12.5% or 13% earlier the ticket size used to be lower. I mean they would have taken us, they would have bought a smaller house. But now they are going for a larger house, their income have gone up, you know and hence they are looking to take a larger ticket housing loan.
That’s the only difference.
Nischint Chawathe
Just one last one. In new markets like Mumbai And Delhi, the properties would be similar to that of the prime segment, but just said the customer segment would be different or are we just.
Manoj Viswanathan
Absolutely right. So, you know, if you see Bombay and Pune was, as I was mentioning, you know, 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, you know, documentation and so on. But there are always 10 customers who are left who are, you know, who have informal incomes 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. Right. We are talking about Kalyan, Ambarnath, Badlapur, Palgar, these kind of places.
Nischint Chawathe
Got it, Got it. Thank you. Thank you very much for answering all the questions and all the best.
Shubhranshu Mishra
Thank you.
Operator
Thank you. Participants, kindly limit your questions to two questions, please. The next question is from the line of Subranchu Mishra from Philip Capital. Please go ahead.
Shubhranshu Mishra
Hi, good evening. Thank you for the opportunity. So just wanted to understand this growth that we are forecasting. What proportion would come from home loans and what proportion would be from a 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, maybe because of the pmay or is it a very string PMAY this time around? So just wanted to pick your brains on these aspects.
Thanks.
Manoj Viswanathan
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 lapse will broadly remain in the same. 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, you know, West Asia crisis is concerned. At the moment we are not seeing any impact on the demand. So hopefully, you know, it should be behind us soon and, you know, things will move ahead.
So as of now, we are not seeing any drop in demand. April has also been fairly good.
Shubhranshu Mishra
Is it a more stringent policy than the previous one? Are we seeing any kind of throughput increase because of that?
Manoj Viswanathan
Yeah, so yes, it, I mean it has, it has a slightly more elaborate process, but I think some of the teething issues are getting addressed and we should see good traction this year in terms of transmitting the benefit to more 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
Shubhranshu Mishra
As more customers get
Manoj Viswanathan
The benefit, as more customers get the benefit of the scheme, you know, it will kind of pull in more customers.
Shubhranshu Mishra
And this one last question. In terms of data keeping. What is the differential between the home loan and the lab product at blended level?
Manoj Viswanathan
The yield difference 100 to 250 basis points.
Shubhranshu Mishra
And this would be same on an, on a APR basis also?
Manoj Viswanathan
Yes, yes. Because we are not, I mean for us, you know more or less the APR and the rate that we are charging. So reducing balance rate that we are charging. So the APR is almost same as the same as the rate interest rate which is charged.
Shubhranshu Mishra
Because APR calculation also takes into account the fee income. So sometimes the fee income will lap a slightly. Yeah, very
Manoj Viswanathan
Minimal. Right. So those are very minimal. So that’s why I said it will not. It doesn’t move the needle that much. I mean it would be a 10 basis points.
Shubhranshu Mishra
Thank you so much. These are my questions.
Operator
Thank you. The next question is from the line of Ravi Kumar Naredi from Naredi Investments. Please go ahead.
Abhijit Tibrewal
Thank you. To give me the opportunity. Sir, how much is Ito bad days from profit and loss account this year and how many units we auctioned?
Nutan Gaba Patwari
27,000.
Unidentified Participant
So the total write offs has been about. This year has been about 36 crores.
Abhijit Tibrewal
Okay. So you think this amount is extraordinary.
Manoj Viswanathan
It’s, it’s, you know the scale of the business is growing. So it’s more or less in line with the growth in the business.
Abhijit Tibrewal
And how many units we auctioned.
Manoj Viswanathan
So the auction about between anywhere between 50 to 100 units a month. So for the year it will be around thousand units.
Abhijit Tibrewal
Okay. And Sir Aum growth we achieved between March 23 to March 26 is 30% CAGR same growth can be expected expect from next year.
Manoj Viswanathan
So we have guided to a 25 growth, sir.
Abhijit Tibrewal
Ah, data. I have listened but it can be 30%. Not possible in current circumstances
Manoj Viswanathan
At this point. Difficult to say, sir.
Abhijit Tibrewal
Okay. Okay. Thank you very much and all the best.
Manoj Viswanathan
Thank
Operator
You. Thank you. The next question is from the line of Mayank Mistry from Antique Stock Broking. Please go ahead.
Abhijit Tibrewal
Yeah. Hi sir.
Nischint Chawathe
Hi
Abhijit Tibrewal
Sir. So just one question from you know on the connectors point, I think there are many, you know players saying that the connector fees is increasing for them. And just wanted to know have there been any higher demand from their side even in your case. And if you can highlight how. How the connector fees has moved since last you know, few years and maybe how it should trend.
Manoj Viswanathan
Yeah, so this is an ongoing, you know, negotiation with the connectors. So the, any connector, whatever fee structure is that if you are going ask him, he’s going to always want to want a higher fee. So that is a constant negotiation with them. So how we normally address that is by also addressing other issues which the connectors have, which is, you know, timely payouts, you know, a wider bouquet of products, faster turnaround. So faster turnaround to some extent compensates for, you know, the, you know, 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 be probably earning with somebody else.
So that is how we kind of address the commission issue. And if there are, you know, specific tactical, 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, particular connector, we need to increase the fees. We do that. But on a, on an overall basis, I would say probably you would have seen a preview a 10 basis points movement in the 10 to 15 basis points movement in the commissions.
Abhijit Tibrewal
Okay, so basically it, it varies across the connectors and across the geographies.
Manoj Viswanathan
Yes, varies across connectors and geographies and you know, we also kind of plan it depending upon the connectors through port, the quality of files and you know, various other metrics that we track the connectors on.
Unidentified Participant
Okay sir, thank you. Thank you. That was the only question.
Operator
Thank you. Participants, if you have any questions at this time, you may enter star followed by one on your handsets. We have a question from the line of Aditya Pal from MSA Capital Partners. Please go ahead.
Nutan Gaba Patwari
Yes, Aditya.
Abhijit Tibrewal
Yeah, thank you so much for the opportunity. Great set of results and really commendable performance on the asset quality. Just wanted to quickly understand what is the issue with Tamil Nadu and Telangana? Is it just human capital issue or is it something else that you are seeing on the ground?
Manoj Viswanathan
As we had mentioned, it is, I think largely to do with internal teams and building the teams. But now those things are behind us and we should have a good year as far as Tamil Nadu and Telangana are concerned.
Abhijit Tibrewal
Understood. And the other question is on strategy. So in your opening remark you had said that you have successfully implemented agentic AI and, and some, some piece of work has been already automated. So how are we thinking of will it, will it increase the productivity in terms of growth or will it increase the productivity in terms of OPEX cost?
Manoj Viswanathan
So as of now, the, you know, prediction, I mean we can be, we can more confidently predict the outcomes. On the cost side it is little more difficult to predict, you know, what kind of outcomes it will have on the origination side. But eventually it should have outcome, it should have origination outcomes as well. So on cost side, definitely yes, there will be outcomes. There will be a strong outcome because of implementation of AI, because of higher productivity. As far as new originations etc concerned, there are some pilots going on.
It could be a more gradual impact over there. I mean the, the, the, the outcome that we are looking for there is, you know, the ability for us to capture, capture loans which may be otherwise getting declined on the ground. You know, so that is something that is, that is going on. If it is successful, of course it should help us to improve originations. But that is something that we will. It’s difficult to predict at this point.
Abhijit Tibrewal
So that, that’s from, that’s all from my side. Wishing you and the entire team all the very best. Thank you.
Nutan Gaba Patwari
Thank you.
Manoj Viswanathan
Thank
Operator
You. Participants with questions at this time you may enter. Star and One. As there are no further questions from the participants I now hand the conference over to Mr. Manoj Vishwanathan for closing comments. Over to you, sir.
Manoj Viswanathan
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 on invested relations at home. Firstindia.com thank you.
Operator
Thank you on behalf of Home First Finance Co. India Ltd. That concludes this conference call. Thank you all for joining us. And you may now disconnect your lines. Thank you.