POONAWALLA - POONAWALLA FINCORP LIMITED Share Price

Management of Poonawalla Fincorp provided an optimistic outlook during the Q4 FY2024-25 earnings conference call. The company reported a 42.5% year-over-year growth in Assets Under Management (AUM), reaching Rs.35,631 crores as of March 31, 2025, which exceeded the initial guidance of 30%-35% growth for the fiscal year. Moreover, total disbursements for Q4 were Rs.9,378 crores, marking a substantial 31% quarter-on-quarter increase.

Management emphasized three key differentiators that contribute to their competitive edge: digital journeys, in-house AI models, and a strong culture focused on execution and results. The company successfully launched six new business verticals earlier than planned, aiming for a higher focus on quality processes in the initial months of operation. For instance, the PL Prime initiative has expanded rapidly, growing from Rs.0 crores to over Rs.200 crores in just a few months.

Looking ahead, the management guided for a continued robust AUM growth trajectory and highlighted an anticipated stabilization of operating costs as a percentage of AUM, which they aim to reduce after an expected increase in the first two quarters. They have also set a target of approximately Rs.50 crores in incremental operating costs quarterly to support the expansion strategy, including the launch of 400 new branches within the year.

The company raised Rs.1,525 crores through NCDs in April 2025, reflecting its strategic focus on long-term funding. The net interest income for the quarter was Rs.715 crores, and the management is optimistic about narrowing the gap between AUM growth and NII growth in the coming periods. The credit costs have significantly improved, with a reduction of 27% quarter-on-quarter.

The management expressed confidence in achieving sustainable profitability while managing risks effectively, marking a positive outlook for FY26-27 with clear guidance on continuing momentum in AUM growth and profitability.

Here are the major questions and their detailed answers from the Q&A section of the Poonawalla Fincorp Q4 FY 2024-25 earnings transcript:

1. Roy Menes (Flagpoint Capital): "Can you give us guidance or indication on how NII growth will trend going forward?"

Arvind Kapil: I can't provide specific guidance, but AUM growth is strong, and it should continue robustly. The difference in NII is due to earlier high-rate STPLs being recalibrated. With improved bounce rates, future NII growth will incrementally improve as we stabilize and calibrate our portfolio, making it a strength area for the next couple of years.

2. Roy Menes (Flagpoint Capital): "What is the total write-off for FY25 and guidance for FY26 and FY27 credit costs?"

Sanjay Miranka: Our total write-offs for FY25 are Rs.1,548 crores. In Q4, write-offs decreased significantly compared to earlier quarters. As for guidance on credit costs, we expect improvements based on the recalibrated risk strategies showing better performance than industry standards, but I advise watching the seasoning over the next 3 to 6 months.

3. Chintan Shah (ICICI Securities): "What could the prudent level be for Opex-to-AUM in the future?"

Arvind Kapil: We're currently guiding for around Rs.50 crores per quarter, but with business launches and new branches, we expect a temporary increase in the percentage to AUM initially. However, our internal target is to see a decline in this ratio by next March, reflecting operational efficiencies and scale.

4. Chintan Shah (ICICI Securities): "Will there be a need for any fundraise in the near term?"

Arvind Kapil: If I had to project, we would likely consider a fundraise early next year, but we're keeping our options open and won't provide specific guidance at this stage.

5. Abhijit Tibrewal (Motilal Oswal Financial Services): "How are we planning distribution for the new businesses?"

Arvind Kapil: Each business has distinct distribution strategies; for instance, gold loan branches will be specifically focused, while consumer durable will target Tier 2, Tier 3 cities through 10,000 to 12,000 outlets. Our other offerings are focused on direct channels and dealership networks, ensuring strong market integration.

6. Abhijit Tibrewal (Motilal Oswal Financial Services): "Will there be elevated credit costs or write-offs from the residual STPL book?"

Arvind Kapil: No, we don't expect accelerated write-offs from the residual STPL book. Most residuals are zero DPD, and our collection efficiency is improving. I believe the worst is behind us, and we're in control, as evidenced by the decrease in credit costs this quarter.