Home First Finance shares edged up as international brokerage house, Bernstein said the lender is one of the more durable plays in affordable housing finance segment despite a soft second quarter. The brokerage retained its Outperform rating and set a target price of Rs 1,650, implying about 38% upside. The brokerage argued that stronger margins and an improving fee mix outweigh the slowdown in disbursements and a mild rise in early delinquencies. Bernstein said the latest quarter showed a business holding its ground in a tricky demand patch, even if loan growth and credit costs need closer tracking over the next few quarters.
Bernstein on HomeFirst: What the quarter showed
HomeFirst’s Q2FY26 net interest income came in at Rs 206.5 crore. Fee income jumped sharply to Rs 21.3 crore. Bernstein referred to this as a structural positive for the franchise. Total income for the quarter was Rs 276.4 crore, while reported net profit after tax rose 43% year on year to Rs 131.8 crore.
The brokerage house noted net interest margins improved to 5.4% from 5.2% sequentially, helped by a roughly 30 basis point fall in the cost of funds to 8.1%, despite a small compression in portfolio yields to 13.3%. This margin lift supported a 32% year-on-year increase in net interest income. Bernstein said management expects margins to remain broadly stable at current levels.
Bernsterin on HomeFirst: AUM and disbursement growth below targets
Assets under management stood at Rs 14,178.1 crore at quarter end, up 26% year on year but short of the company’s long-term 30% growth aspiration. Disbursements for the quarter were Rs 1,289.4 crore, an increase of 10% year on year and a modest sequential pickup from the prior quarter. Bernstein attributed the moderation to a prolonged monsoon, tariff pressures on small businesses in some states, and selective tightening of underwriting in certain self-employed segments. Management reiterated full-year growth of above 25% while keeping the long-term 30% target intact, conditional on a normalising macro environment.
Bernstein on HomeFirst: Cautionary note onasset quality
The Q2 provisions have risen to Rs 15.2 crore, lifting credit cost to about 40 basis points as early delinquency buckets (1+ and 30+ days past due) increased. Gross NPA edged to 1.9% and net NPA to 1.5%, both up 10 basis points quarter on quarter. Bernstein described this uptick as emerging but not yet alarming, and the report quoted management’s view that credit costs could stay elevated for one to two quarters before normalising to roughly 25–30 basis points. The brokerage flagged that this pattern warrants monitoring because HomeFirst’s NPAs were already higher than some peers.
Bernstein on HomeFirst: Fee income and operating leverage surprise
Bernstein said higher processing fees, better cross-selling of insurance products, and lower balance transfer outflows explained the surge. Non-interest income reached Rs 69.9 crore and now looks set to grow faster than loans, the brokerage said. Operating expenses were broadly stable, which helped return on assets rise to 3.8% from 3.4% a year ago. Bernstein viewed improving fee mix and operating leverage as structural strengths that support medium-term earnings.
Bernstein on HomeFirst: Risk factors
That said Bernstein listed key downside risks that could derail the the growth trajectory. According tothem, aggressive competition from banks or larger NBFCs in the affordable housing segment, a broader economic slowdown that hits borrower incomes, and elevated portfolio attrition. On the quarter-by-quarter docket, the brokerage advised watching the trajectory of early delinquency buckets, management’s commentary on underwriting in higher-risk vintages, and the pace of recovery in disbursements across regions.
The firm kept an optimistic stance on HomeFirst’s medium-term potential while flagging that the near term will show variability as the company navigates a slower demand patch and an uptick in early delinquencies. Fee income momentum and margin resilience were the positives; slower than targeted loan growth and higher credit costs were the offset. For investors, the choice is between patience for the company’s structural drivers and vigilance on asset quality over the next two quarters.