- Robust AUM growth: 29% CAGR FY20‑25, projected 24% CAGR FY25‑28.
- Premium valuation: FY28E price‑to‑ABV at 2.6×, still 20% below 5‑year average.
- Tech‑first model: Connector sourcing and centralized underwriting drive scalability.
- Yield stability: Spreads expected to stay in 5.0‑5.2% range despite competition.
- Capital strength: Tier‑1 capital adequacy at 48.6%; RoE expected to climb to ~14% by FY28.
- Risk checks: Credit cost elevated now, but projected to normalize by FY27‑28.
You missed the fine print on Home First’s tech edge—now’s the moment to act.
Why Home First Finance’s AUM Growth Beats the NBFC Curve
Assets Under Management (AUM) represent the total loan book a non‑bank financial company (NBFC) has deployed. Home First Finance (HOMEFIRS) delivered a 29% compound annual growth rate (CAGR) from FY20 to FY25, outpacing the broader Indian NBFC sector, which averaged roughly 12% CAGR over the same period. The firm’s expansion is not merely geographic; it stems from deeper penetration in underserved micro‑finance (MFI) and micro‑small‑and‑medium enterprise (MSME) segments, where loan demand remains price‑inelastic. Analysts forecast a continuation of this momentum, targeting a 24% CAGR for FY25‑28, driven by new market entry in tier‑2/3 cities and a broadened product suite.
How Technology and the Connector Model Create a Premium Valuation
HOMEFIRS’s competitive moat lies in a technology‑first architecture that automates underwriting, risk scoring, and loan disbursement. The “connector model” links a network of field agents with a centralized digital platform, ensuring consistent credit standards while scaling quickly. This lean operating model slashes overhead, allowing the company to maintain spread levels of 5.0%‑5.2% even as peers compress yields. Because the technology layer is proprietary and continuously enhanced, investors are willing to pay a premium—reflected in a FY28E price‑to‑ABV (Adjusted Book Value) multiple of 2.6× versus the peer average of 1.6× for AAVAS.
Competitive Landscape: AAVAS, Tata Capital, and Adani’s Play
While HOMEFIRS enjoys a head‑start in tech integration, traditional NBFCs such as Tata Capital and the newly launched Adani Finserve are accelerating their digital roadmaps. Tata Capital’s recent partnership with a fintech accelerator signals a shift toward similar connector architectures, but its legacy legacy processes keep its cost‑to‑serve higher. Adani, meanwhile, leverages its conglomerate reach to cross‑sell financing, yet it lacks the deep‑rooted MFI relationships that HOMEFIRS has cultivated. Historically, firms that lag in digitization see margin compression; Home First’s early adoption positions it to capture market share as the sector digitizes.
Risk Radar: Credit Cost, Competition, and Capital Structure
Credit cost—measured in basis points (bps) of non‑performing assets—spiked to 40 bps in Q3FY26, largely because of stress in the MFI/MSME segment where borrowers face cash‑flow volatility. The research team anticipates a reversion to baseline levels by FY27 as the portfolio matures and risk‑scoring algorithms improve. Competition is intensifying, but Home First’s spread cushion (5.0%‑5.2%) provides a buffer. Capital adequacy, expressed as Tier‑1 ratio, stands at a robust 48.6% after a Rs 12.5 bn Qualified Institutional Placement (QIP) in April 2025. This capital depth supports higher risk‑adjusted returns, enabling the firm to target a Return on Equity (RoE) of ~14% and Return on Assets (RoA) of 3.5% by FY28.
Valuation Mechanics: FY28E P/ABV at 2.6× vs. Peer Multiples
The valuation hinges on the FY28E price‑to‑Adjusted Book Value (P/ABV) multiple. Home First trades at 2.6× FY28E P/ABV, a 20% discount to its 5‑year average of 3.3×, yet still above the sector median of 1.6×. This discount reflects temporary headwinds—chiefly the elevated credit cost—while the premium over peers rewards its scalable tech platform. Using a discounted cash flow (DCF) approach, the model assumes earnings growth of 24% CAGR FY25‑28, yielding a target price of Rs 1,375 per share. The upside from the current market price (trading below one standard deviation) is therefore compelling for risk‑adjusted investors.
Investor Playbook: Bull vs. Bear Scenarios
Bull Case: Technology continues to drive underwriting efficiency, credit cost normalizes, and AUM expands at the forecast 24% CAGR. The firm’s RoE climbs to 14% and spreads remain sticky at 5.1%, propelling earnings per share (EPS) growth. The stock rallies toward the Rs 1,375 target, delivering a 30‑40% upside.
Bear Case: Competitive pressure forces spread compression below 5.0%, credit cost remains elevated due to a prolonged MSME slowdown, and new capital raised dilutes existing shareholders without commensurate earnings uplift. In this scenario, the P/ABV multiple could contract toward the sector average, capping upside at 10% and exposing the stock to a correction.
Given the current discount, strong balance sheet, and differentiated tech model, the research team initiates coverage with a BUY rating and a target of Rs 1,375. Investors seeking exposure to a high‑growth NBFC with a clear digital advantage should consider allocating a modest position now, while monitoring spread trends and credit cost dynamics for early exit signals.