The December quarter results underscore Home First Finance's consistent operational momentum, with interest income registering sequential growth of 1.03% and year-on-year expansion of 18.76%. The company's ability to maintain healthy profitability margins whilst navigating a competitive housing finance landscape demonstrates operational resilience, though valuation concerns and technical weakness continue to weigh on investor sentiment.
Quarterly Performance Trajectory
| Quarter | Interest Earned (₹ Cr) | QoQ Change | Net Profit (₹ Cr) | QoQ Change | PAT Margin |
|---|---|---|---|---|---|
| Dec'25 | 480.78 | +1.03% | 140.20 | +6.33% | 29.16% |
| Sep'25 | 475.86 | +5.23% | 131.85 | +10.91% | 27.71% |
| Jun'25 | 452.22 | +9.41% | 118.89 | +13.56% | 26.29% |
| Mar'25 | 413.33 | +2.10% | 104.69 | +7.51% | 25.33% |
| Dec'24 | 404.82 | +8.83% | 97.38 | +5.58% | 24.06% |
| Sep'24 | 371.99 | +10.87% | 92.23 | +5.08% | 24.79% |
| Jun'24 | 335.51 | — | 87.77 | — | 26.16% |
Financial Performance: Sustained Margin Expansion
Home First Finance's Q3 FY26 financial performance reveals a company firing on multiple cylinders. Interest earned reached ₹480.78 crores in Q3 FY26, marking the seventh consecutive quarter of sequential growth. Whilst the quarter-on-quarter increase of 1.03% represents a moderation from the 5.23% growth witnessed in Q2 FY26, the year-on-year comparison remains robust at 18.76%, reflecting steady loan book expansion.
The standout feature of the December quarter was the remarkable margin expansion. PAT margin improved to 29.16%, up from 27.71% in Q2 FY26 and significantly higher than the 24.06% recorded in Q3 FY24. This 512 basis points year-on-year improvement in profitability margins demonstrates effective cost management and operational leverage. Operating profit margin (excluding other income) stood at 79.12% in Q3 FY26, marginally lower than the 79.58% in the previous quarter but maintaining the company's historically strong operational efficiency.
Net profit of ₹140.20 crores represents the highest quarterly profit in the company's history, surpassing the previous peak of ₹131.85 crores achieved in Q2 FY26. The sequential growth of 6.33% and year-on-year expansion of 43.99% underscore the company's ability to convert top-line growth into bottom-line performance. Tax expenses remained stable at 23.32% of profit before tax, slightly lower than the 23.89% in Q2 FY26.
Asset Quality and Capital Efficiency: Mixed Signals
Whilst Home First Finance demonstrates strong profitability metrics, its capital efficiency ratios present a more nuanced picture. The company's return on equity (ROE) stood at 11.28% for the latest period, with a five-year average of 12.23%. These figures, whilst positive, lag behind several housing finance peers and indicate room for improvement in capital deployment efficiency. Higher ROE levels would signal better utilisation of shareholder capital and enhanced value creation potential.
The company's return on capital employed (ROCE) of 11.14% similarly reflects moderate capital efficiency. For a housing finance company operating in a growth phase, these returns suggest that whilst the business is profitable, it has yet to achieve the superior capital efficiency that characterises industry leaders. The debt-to-equity ratio of 2.40 times indicates significant leverage, typical for financial services companies but requiring careful monitoring given the interest rate environment.
Employee costs rose to ₹63.56 crores in Q3 FY26 from ₹59.85 crores in Q2 FY26, representing a 6.20% sequential increase. Year-on-year, employee expenses surged 25.14%, outpacing revenue growth of 18.76%. This trend warrants attention, as sustained cost growth above revenue expansion could pressure margins in future quarters.
Capital Efficiency Alert
Home First Finance's ROE of 11.28% and ROCE of 11.14% remain below peer averages, indicating opportunities for improved capital deployment. The company must focus on enhancing asset quality and operational efficiency to drive superior returns for shareholders. The high debt-to-equity ratio of 2.40 times requires prudent liability management, particularly in a rising interest rate scenario.
Long-Term Growth Trajectory: Impressive Fundamentals
Zooming out to the longer-term perspective, Home First Finance's growth credentials appear formidable. The company has delivered a five-year sales compound annual growth rate (CAGR) of 30.91%, demonstrating consistent market share gains in the affordable housing finance segment. Operating profit (EBIT) has grown even faster at a 32.35% CAGR over the same period, reflecting improving operational leverage and margin expansion.
Annual results for FY25 showcased interest earned of ₹1,529.00 crores, representing 34.50% year-on-year growth from ₹1,137.00 crores in FY24. Net profit for FY25 reached ₹382.00 crores, up 25.25% from ₹305.00 crores in the previous fiscal year. The company's PAT margin for FY25 stood at 25.00%, slightly compressed from 26.80% in FY24, primarily due to higher interest costs as the loan book expanded rapidly.
The balance sheet reveals a company in expansion mode. Total assets have grown substantially, with shareholder funds increasing from ₹1,817.34 crores in March 2023 to ₹2,521.28 crores in March 2025, a 38.73% increase over two years. Current liabilities—representing borrowings and customer deposits—surged from ₹4,939.41 crores to ₹9,726.89 crores over the same period, reflecting aggressive loan book growth.
| Financial Year | Interest Earned (₹ Cr) | YoY Growth | Net Profit (₹ Cr) | YoY Growth | PAT Margin |
|---|---|---|---|---|---|
| FY25 | 1,529.00 | +34.50% | 382.00 | +25.25% | 25.00% |
| FY24 | 1,137.00 | +43.90% | 305.00 | +33.77% | 26.80% |
| FY23 | 790.00 | +32.80% | 228.00 | +22.58% | 28.90% |
| FY22 | 595.00 | +24.70% | 186.00 | +86.00% | 31.30% |
| FY21 | 477.00 | +19.80% | 100.00 | +26.58% | 21.00% |
Peer Comparison: Premium Valuation Without Matching Returns
When benchmarked against housing finance peers, Home First Finance's positioning reveals both strengths and vulnerabilities. The company trades at a price-to-earnings (P/E) ratio of 24.09 times trailing twelve-month earnings, representing a significant premium to the sector median. This valuation multiple exceeds that of Can Fin Homes (12.50 times), Sammaan Capital (9.09 times), and Aptus Value Housing (15.76 times), though it remains comparable to Aavas Financiers (23.62 times).
The premium valuation becomes harder to justify when examining return metrics. Home First Finance's ROE of 12.23% lags behind Can Fin Homes' impressive 17.03% and Aavas Financiers' 12.54%. The company's debt-to-equity ratio of 2.40 times positions it favourably compared to Can Fin Homes' elevated 6.61 times leverage, but higher than Sammaan Capital's conservative 2.04 times.
Price-to-book value (P/BV) multiples tell a similar story. Home First Finance trades at 2.72 times book value, a premium to Can Fin Homes (2.23 times) but below Aavas Financiers (3.07 times) and Aadhar Housing Finance (2.96 times). The dividend yield of 0.35% appears modest, particularly when compared to Can Fin Homes' more attractive 1.42% yield.
| Company | P/E (TTM) | P/BV | ROE (%) | Debt/Equity | Div Yield (%) |
|---|---|---|---|---|---|
| Home First Finance | 24.09 | 2.72 | 12.23 | 2.40 | 0.35 |
| Aadhar Housing Finance | 20.64 | 2.96 | 14.33 | 2.55 | — |
| Aptus Value Housing | 15.76 | — | — | — | — |
| Can Fin Homes | 12.50 | 2.23 | 17.03 | 6.61 | 1.42 |
| Sammaan Capital | 9.09 | 0.52 | 5.26 | 2.04 | — |
| Aavas Financiers | 23.62 | 3.07 | 12.54 | 3.29 | — |
The peer comparison suggests that whilst Home First Finance commands a valuation premium based on its strong growth trajectory and consistent execution, investors are paying a higher price for returns that don't significantly exceed peer averages. The company's growth story justifies some premium, but the current multiple appears stretched relative to fundamental performance metrics.
Valuation Analysis: Expensive Territory
Home First Finance's valuation metrics consistently point towards expensive territory. The stock trades at a P/E ratio of 24.09 times, nearly double the housing finance sector average of approximately 13 times. This represents a substantial premium that assumes continued strong growth and margin expansion. The price-to-book value of 2.72 times similarly reflects elevated investor expectations.
The company's proprietary valuation grade has fluctuated between "Expensive" and "Very Expensive" over the past year, with the current assessment firmly in "Very Expensive" territory since early April 2025. The EV/EBITDA multiple of 13.81 times and EV/Sales ratio of 10.99 times both suggest limited margin of safety at current prices. The PEG ratio of 1.78 indicates that investors are paying a premium even after adjusting for growth, as ratios below 1.0 typically signal better value.
The stock's 52-week range of ₹838.65 to ₹1,518.80 provides context for the current price of ₹1,049.60. Trading 30.89% below its 52-week high and 25.15% above its 52-week low, the stock occupies a middle ground. However, the substantial decline from peak levels suggests that earlier valuations were even more stretched, and the current correction may not yet fully reflect fundamental value.
Shareholding Pattern: Institutional Confidence Building
The shareholding pattern reveals evolving institutional sentiment towards Home First Finance. Foreign institutional investor (FII) holdings increased to 40.82% in Q3 FY26 from 39.99% in Q2 FY26, marking the fourth consecutive quarter of FII accumulation. This 83 basis points sequential increase, following a more substantial 280 basis points jump in Q2 FY26, signals growing international investor confidence in the company's growth prospects.
Mutual fund holdings, however, declined to 21.93% in Q3 FY26 from 23.34% in Q2 FY26, representing a 141 basis points reduction. This follows a significant 533 basis points increase in Q2 FY26, suggesting some profit-booking by domestic institutional investors after the sharp rally. Insurance company holdings rose to 3.60% from 3.32%, continuing a steady upward trend that began in March 2025.
Promoter holdings have gradually declined from 14.25% in March 2025 to 12.35% in December 2025, with consistent quarterly reductions. This systematic reduction likely reflects pre-planned stake sales rather than loss of confidence, given the company's strong operational performance. Non-institutional holdings increased to 19.22% from 18.78%, suggesting retail investor interest remains stable.
| Investor Category | Dec'25 | Sep'25 | Jun'25 | QoQ Change |
|---|---|---|---|---|
| Promoter Holding | 12.35% | 12.39% | 12.43% | -0.04% |
| FII Holding | 40.82% | 39.99% | 37.19% | +0.83% |
| Mutual Fund Holding | 21.93% | 23.34% | 18.01% | -1.41% |
| Insurance Holdings | 3.60% | 3.32% | 2.02% | +0.28% |
| Other DII Holdings | 2.08% | 2.18% | 1.86% | -0.10% |
| Non-Institutional | 19.22% | 18.78% | 28.49% | +0.44% |
The overall institutional holding of 68.43% indicates strong professional investor interest, which typically provides stability and liquidity to the stock. The presence of 202 FIIs and 25 mutual funds demonstrates broad-based institutional participation rather than concentrated holdings, reducing single-investor risk.
Stock Performance: Significant Underperformance
Home First Finance's stock price performance presents a concerning picture for investors. Over the past three months, the stock has declined 16.26% whilst the Sensex fell just 2.51%, resulting in a negative alpha of 13.75 percentage points. The six-month performance is even more troubling, with the stock down 24.98% compared to the Sensex's marginal 0.15% gain, generating a stark negative alpha of 25.13 percentage points.
The one-year return of 5.88% marginally trails the Sensex's 7.73% gain, producing a negative alpha of 1.85 percentage points. This underperformance becomes more pronounced when compared to the housing finance sector's robust 28.57% one-year return, highlighting Home First Finance's 22.69 percentage points underperformance versus its peer group. Such significant sectoral underperformance suggests company-specific concerns beyond broader market movements.
Technical indicators paint a uniformly bearish picture. The stock currently trades below all key moving averages—5-day (₹1,060.78), 20-day (₹1,082.93), 50-day (₹1,124.11), 100-day (₹1,180.21), and 200-day (₹1,218.26)—a classic sign of downtrend momentum. The technical trend shifted to "Bearish" on December 16, 2025, from "Mildly Bearish," with MACD, Bollinger Bands, and KST indicators all flashing bearish signals.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -3.03% | -1.29% | -1.74% |
| 1 Month | -5.89% | -3.81% | -2.08% |
| 3 Months | -16.26% | -2.51% | -13.75% |
| 6 Months | -24.98% | +0.15% | -25.13% |
| YTD | -4.75% | -3.42% | -1.33% |
| 1 Year | +5.88% | +7.73% | -1.85% |
| 2 Years | +6.56% | +15.24% | -8.68% |
| 3 Years | +42.51% | +35.77% | +6.74% |
The stock's high beta of 1.35 indicates greater volatility than the broader market, with a risk-adjusted return of just 0.15 compared to the Sensex's 0.69. The volatility of 39.13% classifies the stock as "HIGH RISK MEDIUM RETURN," suggesting investors are bearing substantial risk without commensurate returns. The immediate support level sits at the 52-week low of ₹838.65, whilst meaningful resistance emerges at the 20-day moving average of ₹1,082.93.
Investment Thesis: Quality Business, Expensive Price
Home First Finance's investment case rests on a foundation of solid long-term fundamentals tempered by near-term valuation and technical concerns. The company's proprietary Mojo score of 53 out of 100 translates to a "HOLD" rating, reflecting the tension between operational excellence and expensive valuations. The score breakdown reveals "GOOD" quality fundamentals, "POSITIVE" financial trends, but "FAIR" valuation and "BEARISH" technical indicators.
The quality assessment highlights several strengths: a robust 32.35% CAGR in operating profits over five years, healthy institutional holdings of 68.43%, and consistent achievement of record quarterly metrics. The financial trend remains positive, with Q3 FY26 marking all-time highs in net sales (₹480.78 crores), operating profit (₹380.38 crores), profit before tax excluding other income (₹181.40 crores), and net profit (₹140.20 crores).
However, the valuation parameter scores poorly. Trading at 24.09 times earnings—nearly double the sector average—and 2.72 times book value, the stock offers limited margin of safety. The "Very Expensive" valuation grade, maintained since April 2025, suggests that much of the company's growth potential is already priced in. Technical weakness compounds these concerns, with the stock in a confirmed bearish trend since mid-December 2025.
"Home First Finance delivers operational excellence with 30%+ growth rates, but investors are paying a steep premium that leaves little room for execution missteps or sectoral headwinds."
Key Strengths and Risk Factors
KEY STRENGTHS ✓
- Exceptional Growth Trajectory: Five-year sales CAGR of 30.91% and operating profit CAGR of 32.35% demonstrate consistent market share gains and operational leverage.
- Record Quarterly Performance: Q3 FY26 achieved all-time highs across key metrics—interest earned (₹480.78 crores), net profit (₹140.20 crores), and operating profit.
- Margin Expansion: PAT margin improved 512 basis points year-on-year to 29.16%, showcasing improving profitability and operational efficiency.
- Strong Institutional Support: Total institutional holdings of 68.43% with 202 FIIs and 25 mutual funds provide stability and professional oversight.
- Consistent Execution: Seven consecutive quarters of sequential interest income growth demonstrate reliable business momentum.
- Quality Grade: "GOOD" fundamental quality rating based on long-term financial performance and growth consistency.
- Positive Financial Trend: Current quarter financial trend rated "POSITIVE" with multiple metrics at record levels.
KEY CONCERNS ⚠
- Expensive Valuation: P/E of 24.09x (vs sector 13x) and P/BV of 2.72x leave minimal margin of safety; "Very Expensive" valuation grade since April 2025.
- Weak Capital Efficiency: ROE of 11.28% and ROCE of 11.14% lag peer averages, indicating suboptimal capital deployment and value creation.
- Technical Weakness: Bearish trend since December 16, 2025; stock trading below all major moving averages with uniformly negative technical indicators.
- Significant Underperformance: Six-month decline of 24.98% versus Sensex's 0.15% gain; 22.69 percentage points underperformance versus housing finance sector.
- High Leverage: Debt-to-equity ratio of 2.40x requires careful liability management in uncertain interest rate environment.
- Rising Employee Costs: Employee expenses up 25.14% year-on-year, outpacing revenue growth and potentially pressuring future margins.
- High Volatility: Beta of 1.35 and volatility of 39.13% classify the stock as "HIGH RISK," exposing investors to sharp price swings.
Outlook: What to Watch
POSITIVE CATALYSTS
- Sustained Margin Expansion: Further improvement in PAT margins beyond 29% would validate operational leverage and pricing power.
- ROE Improvement: Achieving ROE above 15% would justify premium valuations and signal enhanced capital efficiency.
- Technical Reversal: Break above 20-day moving average (₹1,082.93) could trigger technical buying and trend reversal.
- Valuation Correction: Stock price consolidation bringing P/E closer to 18-20x would improve risk-reward ratio for fresh entry.
- Continued Institutional Accumulation: Further FII buying above 42% holdings would signal strong institutional conviction.
RED FLAGS
- Break Below Support: Decline below ₹1,000 or 52-week low (₹838.65) would signal deeper correction ahead.
- Margin Compression: Any sequential decline in PAT margins below 27% would raise concerns about competitive pressures.
- Asset Quality Deterioration: Rising non-performing assets or provisioning requirements would undermine growth narrative.
- Further Mutual Fund Selling: Continued reduction in MF holdings below 20% could indicate domestic institutional concerns.
- Cost Inflation: Employee costs growing faster than revenue for two consecutive quarters would pressure profitability.
The Verdict: Quality Business Awaiting Better Entry Point
Score: 53/100
For Fresh Investors: Avoid initiating positions at current levels. Whilst Home First Finance demonstrates strong operational execution and impressive growth metrics, the expensive valuation (24x P/E versus 13x sector average) and bearish technical setup offer poor risk-reward. Consider accumulation only on significant corrections towards ₹900-950 levels or if the stock demonstrates sustained technical reversal above ₹1,100.
For Existing Holders: Continue holding with a watchful eye on quarterly execution and valuation multiples. The company's consistent operational delivery and positive financial trends support the long-term investment case. However, consider partial profit-booking on rallies above ₹1,150 to reduce exposure. Set a stop-loss at ₹950 to protect against further downside if technical weakness persists.
Fair Value Estimate: ₹950-1,000 (9.45% downside from current levels), based on 20x P/E multiple applied to FY27 estimated earnings, which appears more reasonable given the company's growth profile and sector positioning.
Rationale: Home First Finance exemplifies the classic dilemma of a quality business trading at expensive valuations. The 30%+ growth rates, expanding margins, and strong institutional backing justify some premium, but not the current 85% premium to sector multiples. The bearish technical trend, significant recent underperformance, and modest ROE of 11.28% further limit upside potential from current levels. Patience for a better entry point appears prudent.
Note— ROCE = (EBIT - Other income)/(Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions. Past performance does not guarantee future results, and all investments carry inherent risks including potential loss of principal.
