POONAWALLA Q1 FY26 earnings call.
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Poonawalla Fincorp delivered a strong Q1 FY26 with AUM at INR 41,273 crores, growing 53% YoY and 15.8% QoQ, driven by robust disbursement momentum across new and existing product lines. The company completed a full year of strategic execution, launching 6-7 new businesses including Gold Loans, Consumer Durable Finance, Commercial Vehicle Loans, and Education Loans. Credit costs improved significantly to 2.61% (down 53bps QoQ), with an industry-leading 1.43% on the core 12-product book excluding STPL. The STPL legacy portfolio has been reduced to just 4% of AUM from 8% in Q4 FY25. The company raised INR 5,200 crores in secured NCDs during the quarter, increasing NCD share from 7% to 24% of borrowings, with promoter infusing INR 1,500 crores equity capital. NIM moderation was anticipated due to portfolio recalibration, with management guiding to ~9% NIM within 4 quarters. Operating expense ratio stands at 4.8% of average AUM as the company invests aggressively in expansion. PAT of INR 63 crores reflects intentional investment phase in new businesses, branches, and AI initiatives. Key risks include near-term NIM compression during portfolio transition, elevated OpEx as new branches scale, and seasoning risk on newly launched unsecured products.
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Guidance to track
- Management expects FY26 AUM growth to exceed the earlier guided 35-40% range, reflecting strong credit-calibrated growth momentum across existing and new products.
- Net Interest Margin expected to return to approximately 9% within the next three to four quarters as the newly calibrated STPL book scales up and older high-yield legacy book is gradually reduced.
- Steady-state credit cost guidance maintained at 1.5%-2% range. Management internally targets noteworthy year-on-year improvement with further reduction over 2-3 years for sustained profitability.
- Gold Loan expansion on track with 80 branches already operational. Target of 400 branches by March 2026, with 95% in tier-2 and tier-3 cities. Break-even expected in 11-13 months per branch.
Risks flagged
- Net Interest Margin has moderated due to deliberate portfolio recalibration involving transition from old STPL book to new well-calibrated products. NIM expected to recover to ~9% only after 4 quarters as new products scale.
- Management guided to sanction approximately 4,000 students within FY26 from 100 partners currently, implying need to scale to 500+ education consultants in remaining 9 months. Execution risk on partner acquisition and sanction velocity.
- Analyst questioned whether the remaining 20% of old STPL book (~INR 500-600 crores) would result in near-total write-off. Management response was 'better to be conservative' and 'watchful till it's gone' — suggesting potential provisioning inadequacy or recovery uncertainty.
- Company added ~1,000 employees and 80 branches in Q1. Operating expense ratio at 4.8% of average AUM. Multiple new businesses (Gold Loan, Consumer Durable, CV, Education) in early-stage investment mode with cost build-ahead of revenue scaling.
Key quotes
- We don't see that time. We see a very optimistic road ahead for the country. We also see immense value getting added from the credit bureaus, and the name of the game will be risk calibration.
- We have said what we had to say. By limited pointers, there are two figures we have done this time. One is an additional disclosure. If I remove STPL from there, we've done an additional disclosure that 12 of my businesses, which is approximately 80% of 41, which might be what, 34,000 or 32, 33, whatever it is, that is a decently sized book, which is a credit cost of 1.43. I have not seen this in the NBFC world, by the way.
- If you ask me, the problem actually doesn't exist now anymore. This is just over the next seven to eight months; it may kind of run off, and we have sufficient provisioning around that.
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