Rationale

 The ratings continue to factor in Home First Finance Company India Limited’s (Home First) healthy profitability and comfortable asset quality. Its assets under management (AUM) grew by ~35% in FY2024 to Rs. 9,698 crore as on March 31, 2024. It reported a profit after tax (PAT) of Rs. 306 crore in FY2024, translating into a return on average managed assets (RoMA) of 3.2% and return on average net worth (RoNW) of 15.5%. The gross non-performing assets (GNPAs) stood at 1.7% (on-book) as on March 31, 2024 (1.6% as on March 31, 2023) with a provision coverage ratio (PCR) of ~30%1 on GNPAs. The ratings also factor in Home First’s comfortable capitalisation with a net worth of Rs. 2,121 crore and a capital-to-risk weighted assets ratio (CRAR) of 39.5% as on March 31, 2024. ICRA notes that the gearing has been increasing with the on-book gearing at 3.5 times and the managed gearing2 at 4.2 times as on March 31, 2024 compared to 2.7 and 3.3 times, respectively, as on March 31, 2023. In ICRA’s opinion, Home First will need to raise equity capital in the next 2-3 years to support its growth plans while maintaining a prudent capitalisation profile. The ratings also consider Home First’s good fund-raising ability through a diversified lender base, though it would need to continue expanding the same to support its growth plans. The ratings remain constrained by Home First’s relatively high geographical concentration with Gujarat accounting for 31% of its AUM as on March 31, 2024. ICRA notes that the share of Gujarat has been gradually declining along with the share of the top 3 states (58% of the AUM as on March 31, 2024 vis-à-vis 61% as on March 31, 2023). As the company continues to scale up its operations in the southern and northern states, the geographical diversity is expected to improve gradually with the same remaining important from a credit perspective. The ratings are also constrained by Home First’s relatively unseasoned book as a significant part of the AUM growth was achieved in the last few years and mortgages are long-tenor assets. ICRA takes note of the company’s focus on the salaried affordable housing segment (68% share of salaried borrowers in AUM as on March 31, 2024), which is likely to be more resilient from an asset quality perspective, and the limited exposure to non-housing loans. The Stable outlook on the [ICRA]AA- rating reflects ICRA’s opinion that the company would be able to maintain its portfolio quality and healthy profitability, supported by its experienced management, systems and processes.