Poonawalla Fincorp · Material risks, their source context, and severity in the latest available quarter.
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Risk intelligence
Analyst (Abhijit Tibrewal) pressed management on the quantum of expected write-offs from the inherited ₹6,000 crore STPL book. Management provided qualitative guidance but deflected from giving specific expected loss numbers, stating 'it's better to be conservative.' Write-offs of ₹676 crore in Q3 included ₹520 crore on old book. The resolution timeline and ultimate recovery remain uncertain.
Q3 provisions of ₹348 crore (₹200 crore for STPL) and write-offs of ₹676 crore create noise in underlying profitability. While PPOP grew to ₹373 crore (up from ₹279 crore in Q2), the additional provisioning for legacy books obscures the true operating performance of the new calibrated book.
Management announced 7 new product launches (from 4 existing to 11 total) with 400 new branches in 12-15 months. This aggressive expansion requires significant hiring (feet-on-street up 30%), multi-state presence, and simultaneous new product rollout. The gestation period is acknowledged at 4 quarters, creating a multi-year investment phase before returns materialize.
The mix shift to secured products (now 54% of AUM) is credit-positive but margin-negative since secured products typically yield lower than unsecured. Cost of borrowing at 8.06% with 65% on variable rate also creates interest rate sensitivity in a tight liquidity environment.
