POONAWALLA Q2 FY25 earnings call.

Guidance to track

• Management reaffirmed its long-term AUM growth target of 30-40% annually over the next five years, driven by product expansion and geographic deepening in T2/T3 markets.
• The company plans to expand from approximately 101 branches to 500+ branches over the next financial year, focused on T2/T3 locations with 12-15 month breakeven timelines and heavy cross-sell into core businesses.
• Product portfolio will expand from 4 to 10 products (Prime PL already launched, consumer durables, shopkeeper loans, used commercial vehicles, gold loans, education loans) with budgets finalized and business heads hired.
• Technology, distribution, and people investments estimated at INR 50 crore per quarter over the next six quarters (INR 300+ crore total) to fund the franchise buildout, viewed as foundational for future growth and profitability.

Risks flagged

• Management reduced STPL disbursements from INR 1,000-1,200 crore monthly to INR 200 crore in September. Scaling up is deliberately deferred 60-90 days pending full confidence on credit quality, customer cohorts, and pricing—creating near-term growth headwinds from this segment.
• The company is hiring for six new businesses, building 400 branches, implementing AI/ML scorecards, and modernizing collections concurrently. Management acknowledges this is a 4-6 quarter build with significant incremental OpEx, and any delay in any stream could impact the 30-40% growth trajectory.
• Analyst Avinash Singh directly asked about the INR 1,200 crore prudential buffer created from the housing asset divestment and whether it was fully utilized before the INR 666 crore additional STPL provision. Management's response (INR 259 crore of the exceptional provision remains) was given after the call but was not fully transparent on how much of the original buffer was consumed.
• Gross NPA rose to 2.1% from previous levels due to higher slippages in the STPL portfolio. While Net NPA is stable at 0.33%, the increase in gross NPA indicates seasoning issues in the inherited book that may continue to pressure asset quality metrics.

Key quotes

• I've been always telling you we'll be solid in risk management. When I say we'll be solid, it only means that we are to walk the talk as a management team, which is fundamentally important as we embark upon sustainable, predictable, and transparent long-term strategy.
• This management team, by the way, is not just one level below me. You've got guys who are two levels below, now three levels below. We used to have difficulty getting that quality of talent at that pace. Now, I think we have a pipeline of guys who want to join us.
• We've curtailed down our disbursals in the STPL higher risk business by almost one. We're down to one-fifth. So whatever we were doing in STPL, we're down to around approximately 20% of that disbursals a month. Despite that, you notice we show the 5% sequential growth, which means the rest of the business have to start growing at a much accelerated rate, and which we managed to do even in the first four months.