Motilal Oswal Financial Services Ltd. (MOFSL) has issued a BUY recommendation for Home First Finance Company India Ltd., setting a 12-month target price of Rs 1,500, which represents an 18% upside from the current market price (CMP) of Rs 1,266. The report underscores Home First Finance’s robust growth trajectory, digital innovation, and expanding footprint in high-potential affordable housing markets. Key highlights include a recent credit rating upgrade to AA (Stable), successful capital infusion via QIP, stable asset quality, and industry-leading technology adoption. The company is projected to deliver an AUM and PAT CAGR of ~26% and ~30% respectively over FY25–27, with attractive valuations and healthy return ratios.

BUY Call and Valuation

Motilal Oswal Financial Services Ltd. (MOFSL) has initiated coverage on Home First Finance Company India Ltd. with a BUY rating and a 12-month target price of Rs 1,500. This recommendation is predicated on the company’s strong fundamentals, superior execution, and compelling valuation metrics.

Current Market Price (CMP): Rs 1,266
Target Price (TP): Rs 1,500
Upside Potential: +18%
Valuation Metrics:

FY27E P/BV: 2.7x

Implied Target P/BV: 3.2x (Mar’27E)

FY27E P/E: 20.2x

The target price is based on a forward-looking assessment of the company’s book value and earnings growth, positioning Home First Finance as a preferred pick in the affordable housing finance (AHF) segment.

Growth Drivers and Business Model

Digital-First Approach:
Home First Finance has established itself as a leader in tech-enabled lending. Over 50% of new sourcing is now fully digital, and Account Aggregator penetration stands at ~75% as of FY25. This digital edge has streamlined processes, reduced turnaround times, and enhanced customer experience.

Geographic Expansion:
The company is intensifying its focus on emerging states—Rajasthan, Uttar Pradesh, and Madhya Pradesh—where infrastructure development and economic activity are accelerating. In FY25, Home First expanded its presence to 10 additional districts and added 40 new touchpoints, including 22 branches. Seven of these branches were located in emerging states, reflecting a strategic shift toward high-growth regions.

Physical Footprint:
Home First Finance operates a robust network of 155 branches and 361 touchpoints across 13 states. The company plans to add 30–40 additional ‘phygital’ touchpoints in FY26, blending digital capabilities with physical outreach to deepen market penetration.

Financial Performance and Projections

Capital Infusion and Credit Rating Upgrade:
In April 2025, Home First completed its maiden QIP, raising Rs 12.5 billion. This capital infusion is expected to strengthen the balance sheet, improve CRAR, and reduce leverage. Concurrently, the company received a credit rating upgrade to AA (Stable) from both ICRA and India Ratings, which is anticipated to lower borrowing costs and support margin expansion.

Asset Quality and Collections:
The company has maintained stable asset quality, with gross NPA at 1.7% as of March 2025. Its robust collections framework ensures that ~96.9% of collections are non-cash, reducing operational risks. The focus on early bucket collections has kept credit costs benign and collection efficiency high.

Financial Metrics (INR Billion):

Key Ratios:

NIM (%): 5.7 (FY25), 6.2 (FY26E), 6.1 (FY27E)

C/I Ratio (%): 35.6 (FY25), 33.5 (FY26E), 33.4 (FY27E)

RoAA (%): 3.5 (FY25), 3.9 (FY26E), 3.8 (FY27E)

RoAE (%): 16.5 (FY25), 15.6 (FY26E), 14.2 (FY27E)

Technology and Innovation

Digital Sourcing and Underwriting:
Home First Finance leverages technology to originate, underwrite, and collect payments efficiently. The integration of digital customer and property data with physical home visits enables an industry-leading loan approval turnaround time of 48 hours.

Generative AI and Cybersecurity:
The company is exploring generative AI to enhance communication and collection strategies while maintaining robust cybersecurity. Human oversight remains integral to all processes, ensuring a balance between automation and risk management.

Asset Quality and Risk Management

Stable GNPA and Low Credit Costs:
Gross NPA has improved from 2.3% in March 2022 to 1.7% in March 2025. The company’s focus on prudent customer selection, underwriting, and early delinquency containment has resulted in consistently low credit costs and stable asset quality.

Collection Efficiency:
Collection efficiency improved from 99.1% in March 2024 to 99.4% in March 2025. The company uses automated reminders and a structured collection approach to minimize defaults.

Human Capital and Organizational Strength

Campus Recruitment and Employee Tenure:
Home First Finance primarily hires freshers with strong technical skills and a learning mindset. Around 85% of hires are recruited through a structured campus program. Employee tenure is robust, with ~12% of staff having over five years of service.

Attrition Rates:
Attrition rates are monitored by gender, age, and level, ensuring a balanced and motivated workforce.

Peer Comparison and Investment Thesis

Valuation vs. Peers:
Home First Finance trades at a slight discount to some peers in the AHF segment, despite superior growth and execution.

Investment Levels and Strategy

Entry Point:
Investors can consider accumulating Home First Finance shares at current levels (Rs 1,266) or on minor dips, given the robust growth outlook and attractive valuation.

Target and Stop-Loss:

Target Price: Rs 1,500 (18% upside)

Stop-Loss: Rs 1,100 (on a closing basis, to protect against unexpected downside)

Investment Horizon:
The recommendation is for a 12-month period, aligning with the projected improvement in financial metrics and expansion in geographic footprint.

Conclusion

Home First Finance Company India Ltd. stands out as a high-quality franchise in the affordable housing finance sector, underpinned by digital innovation, strong governance, and a validated business model. The company’s recent capital raise, credit rating upgrade, and focus on emerging markets position it for sustained growth. With a BUY rating and a target price of Rs 1,500, Motilal Oswal Financial Services Ltd. underscores the stock’s potential to deliver superior risk-adjusted returns over the next year. Investors seeking exposure to India’s burgeoning affordable housing segment should consider Home First Finance as a core holding.