Home First Finance, Aavas Financiers- Homing In On Affordable Housing: Nirmal Bang Initiates Coverage With Buy

Nirmal Bang Report

Despite healthy growth trajectory and return ratios, listed affordable housing finance companies have seen a sharp de-rating in recent months. Apart from top management attrition (Aavas Financiers Ltd.), stake sales by large price-earnings funds have led to the underperformance.

We remain positive on the ability of affordable housing finance companies to deliver long-term growth, while maintaining a decent asset quality profile, factoring in a gradual decline in operating costs as they build scale.

We expect earnings compound annual growth rate of 19%-28% for these companies over FY23-26E led by continued growth momentum, geographical expansion and stable asset quality metrics.

We initiate with a Buy rating on Home First Finance Company India Ltd. and reiterate our Buy recommendation on Aavas Financiers.

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