POONAWALLA - POONAWALLA FINCORP LIMITED Share Price

Management provided an optimistic outlook for Poonawalla Fincorp, highlighting robust demand for retail loans driven by increased consumer confidence. They report a 53% YoY and 15.8% QoQ growth in AUM, now at approximately Rs.41,273 crores, and project healthy growth for the financial year, expecting it to exceed the guidance of 35%-40%.

Key takeaways include:

1. AUM Growth: The company targets continued AUM growth, supported by strategic product launches, including Prime Personal Loans, which showed a growth trajectory with disbursements exceeding Rs.300 crores in June 2025.

2. Credit Cost Improvements: Management reported a sequential improvement in credit costs, which decreased 53 basis points to 2.61%. For its 12 core products, excluding the STPL book, the credit cost is at 1.43%, indicating strong risk management and credit analytics.

3. NIM Projections: The Net Interest Margin (NIM) has moderated but is expected to reach around 9% within 3-4 quarters, attributed to strategic portfolio recalibrations.

4. Capital Raising: A significant planned equity infusion of Rs.1,500 crores by promoters at Rs.452.5 per share aims to strengthen the capital base and further support growth initiatives.

5. Technology Adoption: Emphasis on tech and AI in operations is expected to enhance risk calibration and increase operational efficiency. This includes initiatives for digital journeys to boost customer acquisition and streamline processes.

6. Debt Strategy: The mix of borrowings has shifted significantly, with NCDs rising from 7% to approximately 24%. Future goals aim for NCDs to constitute around 35% of total borrowing.

Overall, management maintains a cautious yet confident attitude towards future growth while prioritizing risk management to ensure sustainable profitability.

Q&A Section Summary from Poonawalla Fincorp's Q1 FY25-26 Earnings Call

Question 1:

Chintan Shah: "Could you help me with the split into secured and unsecured for our MSME book which is 36% of the overall book?"

Shriram Iyer: "Around 65%-70% of our MSME business is mortgages (LAP), with 75%-80% being self-owned property. Thus, our MSME book is primarily secured."

Question 2:

Chintan Shah: "Is the 20% STPL book entirely old, or is some of it new? What is the timeline for running down the erstwhile STPL book?"

Shriram Iyer: "The old STPL book accounts for about 4%, while the remaining is new, well-calibrated business expected to provide substantial upside."

Question 3:

Chintan Shah: "Will the Rs. 1,500 crores promoter capital raise be the only one, or might there be a second round?"

Arvind Kapil: "We aim for a debt-to-equity ratio of about 4.75 to 5, hence any external raise would be aligned with this strategy."

Question 4:

Chintan Shah: "What is the steady state ROA target we could look at two years from now?"

Arvind Kapil: "We target a sensible ROA of 3%-3.5% by June 2028 while striving for better performance internally."

Question 5:

Abhijit Tibrewal: "What is causing the NIM contraction and when will it stabilize?"

Arvind Kapil: "NIMs should stabilize around 9% in four quarters, as we transition to more secure products and grow our customer base."

Question 6:

Mohit Jain: "Can you clarify the status of the STPL portfolio and expectations for recovery?"

Shriram Iyer: "We have a strong zero DPD book and sufficient provisioning, so we expect a gradual run-off and maintain confidence in our collection efficiency."

Question 7:

Nischint Chawathe: "What are the segmental yields across key business lines?"

Arvind Kapil: "Most businesses aim for 3%-3.5% ROAs as guidance, with some segments seeing yields up to 4%, reflecting our focus on profitability and risk management."

This summary encapsulates the primary concerns and insights shared during the question-and-answer segment of the earnings call, providing a clear overview of the management's responses within the requested character limit.