POONAWALLA - POONAWALLA FINCORP LIMITED Share Price

Management Outlook and Major Points:

Outlook:

• AUM Growth Guidance: Confident in achieving 30-35% YoY growth for FY24-25 and 30-40% thereafter, with Q3 AUM at Rs.30,984 crores (up 41% YoY, 9% QoQ).
• Profitability: Expect robust, sustainable profit trajectory from FY26-27 onward, targeting ROA of 3-3.5% as new businesses mature.
• Product Expansion: Launching 6-7 new products (e.g., 24/7 Digital Prime PL, Gold Loans, Equipment Leasing) and 400 branches from Q1 FY25-26 to diversify revenue streams.

Key Highlights:

1. Business Performance:

   • Disbursements: Rs.7,149 crores in Q3 (+13% QoQ); core retail disbursements doubled YoY.
   • Segment Growth: LAP book grew 86% YoY to Rs.6,795 crores; Business Loans up 42% YoY.
   • Asset Quality: Gross NPA improved to 1.85% (down 25 bps QoQ); Net NPA at 0.81%.

2. Strategic Initiatives:

   • Digital/AI Focus: Launching AI-driven 24/7 personal loans, AI-based HR/credit processes, and hyper-personalized customer journeys.
   • Product Mix: Targeting a balanced secured (54%) vs. unsecured (46%) portfolio.
   • Risk Management: Recalibrated STPL policies improved early delinquencies by 50%; collections enhanced via AI-driven strategies.

3. Financial Health:

   • Capital Adequacy: CRAR at 25.89%, liquidity surplus of Rs.4,808 crores.
   • Credit Cost: Provisions of Rs.348 crores in Q3 (largely STPL-related), expects sequential decline.

4. Operational Focus:

   • Culture/People: Leadership team fully onboarded; emphasis on agility, innovation, and AI-first culture.
   • Tech Modernization: Hybrid cloud strategy, modular tech stack, and data-driven decision-making.

Management remains bullish on scaling AUM through diversified products, optimizing risk-adjusted returns, and leveraging AI/tech for sustainable growth.

Question 1:
"Firstly, congratulations, Arvind, on a good quarter on the operating front... If you could just throw some light as to the provisions which have been made this quarter are pertaining to which particular product category and what would be the write-off for the quarter?"
Answer Summary:
Provisions totaled Rs.348 crores, with Rs.200 crores allocated to the short-term personal loan (STPL) book and the rest spread across other products. Write-offs for the quarter amounted to Rs.676 crores, distributed across various product categories.

Question 2:
"How should we look at our steady-state credit cost? Where should it stabilize? And typically, the credit cost corridor, if you can highlight, that would be really helpful."
Answer Summary:
Credit costs are expected to decline quarter-over-quarter as incremental businesses grow with robust risk calibration. Management anticipates ROA to reach 3%-3.5% by FY26-27, driven by sustainable profitability from diversified product portfolios and disciplined risk management.

Question 3:
"Would you have any provisions on the old book? Any write-offs that we expect further on the old book? Or is that all completely done and clear?"
Answer Summary:
The majority of write-offs (Rs.520 crores) pertained to the legacy book. Sufficient provisions are in place, and the focus remains on improving collections, with confidence in resolving legacy issues through sustained recovery efforts.

Question 4:
"How should we sort of expect [credit cost] to trend? Is there a way we can corroborate it with your loan book mix?"
Answer Summary:
Credit costs are projected to decline sequentially due to improved portfolio calibration and growth in new, low-risk products. Management emphasized AUM growth as a key metric, with legacy STPL issues largely addressed and collections showing marked improvement.

Question 5:
"Out of the Rs.27,000 crores of AUM that you inherited, what is the credit cost that you expect on the inherited AUM?"
Answer Summary:
The Rs.6,000 crore STPL book was identified as the primary legacy challenge. Adequate provisions and write-offs have been made, with collections improving significantly (50% reduction in early delinquencies). Management remains cautiously optimistic, emphasizing conservative provisioning and resolution progress.