Summary of earnings call for Poonawalla Fincorp Ltd published on 31 Jul, 2025
Poonawalla Fincorp Limited
Q1 FY26
Call date · July 25, 2025
1 · Management Commentary
Key Positives
- AUM grew by 53% YoY and 15.8% QoQ to Rs. 41,273 crores as of June 30, 2025.
- Disbursements up 13.6% QoQ to Rs. 10,651 crores.
- Significant improvement in credit costs: overall credit cost reduced by 53 bps to 2.61%; for 12 core products (ex-STPL), credit cost at 1.43%.
- Share of NCDs in total borrowings increased from 7% (March 2025) to 24% (June 2025); additional ~Rs. 1,000 crores raised in July.
- Multiple new business launches (Prime PL, Gold Loan, Consumer Durable, Commercial Vehicle Loan, Education Loan) showing strong early traction.
- Robust digital and AI initiatives across underwriting, collections, marketing, and operations.
- Board approved Rs. 1,500 crores equity infusion by promoter at Rs. 452.5/share.
Key Negatives
- Net Interest Margin (NIM) moderated due to portfolio recalibration and lower-yielding legacy STPL book; management expects NIMs to recover over next 3–4 quarters.
- OPEX to average AUM at 4.8% as investments in new businesses, branches, and technology continue.
- Profit after tax at Rs. 63 crores, reflecting significant investments in growth and technology.
Forward Guidance
- Capex: Continued investment in branch expansion (targeting 400 gold loan branches by March 2026; 80 operational as of June), technology, and AI projects.
- New products/segments: Scaling up recently launched Prime PL, Gold Loan, Consumer Durable, Commercial Vehicle, and Education Loan businesses.
- Client wins/losses: Not specifically disclosed; strong channel partner and customer acquisition momentum highlighted.
- Revenue/margin outlook: AUM growth expected to exceed 35–40% guidance for FY26; NIMs targeted to return to ~9% in 3–4 quarters; credit cost guidance maintained at 1.5–2% with further improvement expected over 2–3 years.
- Strategic initiatives: AI-first approach in underwriting, collections, and operations; digital transformation; omnichannel sourcing; focus on risk-calibrated growth and long-term liability optimization (targeting 35% NCD share in borrowings over next few years).
2 · Q&A Highlights
Q 1 (Composite): What is the composition and risk profile of the MSME and STPL books, and how is the company managing asset quality in these segments?
A (Management):
• MSME book is 63–70% secured (mainly LAP); asset quality is strong with low GNPA and well-calibrated risk.
• Old STPL book now ~4% of AUM, with substantial provisioning and improving collection efficiency; expected to run down over next 7–8 months.
• New STPL book is well-calibrated, with significant reduction in cheque bounces and improved collection efficiency.
Q 2 (Composite): What is the outlook for NIMs and credit costs, and when will steady-state profitability be achieved?
A (Management):
• NIMs expected to recover to ~9% within 12 months as portfolio mix shifts and new digital products scale.
• Credit cost guidance maintained at 1.5–2%; for 12 core products, credit cost at 1.43%.
• Steady-state post-tax ROA guidance of 3–3.5% by June 2028.
Q 3 (Composite): What is the impact of new business launches and branch expansion on OPEX, and how will operating efficiency evolve?
A (Management):
• OPEX to average AUM at 4.8% due to investments in new businesses, branches, and technology.
• AI and digital initiatives expected to drive efficiency gains from Q4 onwards; operating leverage to improve as scale builds.
Q 4 (Composite): What is the sourcing mix (in-house vs. third-party) and how is digital transformation impacting customer acquisition and cost?
A (Management):
• Sourcing through DSAs, digital channels (Meta, Google, affiliates), and direct app/web journeys; 44% of digital marketing disbursals now from app.
• Omnichannel strategy and cross-sell expected to lower acquisition costs over time.
Q 5 (Composite): What are the segmental yields and ROA targets across key businesses?
A (Management):
• All businesses designed for 3–3.5% post-tax ROA; some digital journeys and products (e.g., Prime PL) achieving even higher yields/ROAs.
• Focus remains on risk-calibrated, profitable growth.
Q 6 (Composite): What is the capital strategy post-promoter infusion, and is further capital raise planned?
A (Management):
• Rs. 1,500 crores promoter infusion strengthens capital base; external capital raise to be considered if debt-to-equity approaches 4.75–5x.
3 · Other Key Numbers
- AUM: Rs. 41,273 crores as of June 30, 2025 (53% YoY, 15.8% QoQ growth)
- Disbursements: Rs. 10,651 crores in Q1FY26 (13.6% QoQ growth)
- LAP book growth: 128% YoY, 22% QoQ
- Business loans growth: 57% YoY, 10% QoQ
- Prime PL: >Rs. 300 crores disbursed in June 2025
- Gold Loan: Rs. 31 crores disbursed in June; 80 branches operational (target 400 by March 2026)
- Consumer Durable: ~3,000 dealers signed up across 160 locations; 15,000 customers acquired; Rs. 34 crores disbursed in June
- Commercial Vehicle Loan: Rs. 92 crores disbursed since launch; Rs. 47 crores in June; present in 27 locations across 10 states
- Education Loan: 4,000+ files logged in 90 days; Rs. 56 crores disbursed in June; 100 partners onboarded
- Share of NCDs in borrowings: 24% as of June 2025 (up from 7% in March 2025); Rs. 1,005 crores raised in July; YTD NCD raise Rs. 6,463 crores
- Cost of borrowings: 8.04% in Q1FY26 (vs. 8.07% in Q4FY25)
- Net Interest Income (incl. fees/other income): Rs. 768 crores in Q1FY26 (~7% QoQ growth)
- OPEX to average AUM: 4.8%
- PPOP: Rs. 325 crores in Q1FY26
- PAT: Rs. 63 crores in Q1FY26
- GNPA: 1.84%; NNPA: 0.85%; Provisioning coverage: 53.93%
- Debt-to-equity: 3.72x
- Capital adequacy: 20.55% (Tier-1: 19.02%)
- Liquidity coverage ratio: 130%
- Surplus liquidity: Rs. 4,465 crores as of June 30, 2025
- Employee base: 4,685
- Branch network: 80 gold loan branches operational; expansion ongoing
- Digital: Monthly app installs up 10x in last 3 months; 44% of digital disbursals from app
- AI: 35 projects identified, 8 completed/executed; 500+ digital marketing experiments in 6 months
- Secured mix to AUM: 57% (up from 49% in Q1FY25)
- Erstwhile STPL portfolio: Down to 4% of AUM (from 8% in March 2025); credit cost for erstwhile STPL: Rs. 64 crores in Q1FY26 (down from Rs. 137 crores in Q4FY25)
- Promoter equity infusion: Rs. 1,500 crores at Rs. 452.5/share (subject to approvals)
Note: This is an AI generated summary of the earnings call. There may be inaccuracies in the summary. Please refer to the original transcript before making investment decisions.