POONAWALLA Q3 FY26 earnings call.
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Poonawalla Fincorp delivered a robust Q3 FY26 with AUM at ₹55,017 crore, growing 77.6% YoY and 15.3% QoQ. Total disbursements surged 84% YoY with new products contributing 20% of quarterly disbursements. Asset quality improved meaningfully—GNPA reduced to 1.51% from 1.59% QoQ, Stage 1 composition strengthened to 97.4%, and quarterly credit cost improved to 2.62%. PAT of ₹150 crore represents 702% YoY and 102% QoQ growth, with ROE reaching 1.2%. NIM expanded 22bps QoQ to 8.62%, and cost of borrowing reduced to 7.65% (down 39bps in three quarters). Operating leverage is materializing—OpEx-to-AUM improved 40bps QoQ to 4.41%. Management highlighted that new products (prime personal loans, gold loans, commercial vehicles, education loans) are scaling ahead of expectations with strong asset quality indicators, and AI initiatives (30 of 57 projects live) are driving operational efficiency. The company maintains 35%-40% AUM growth guidance and targets 30%-35% NCD mix in borrowing. Key risk: elevated credit costs are weighted toward the instant loan portfolio, which could compress margins if the mix shifts unfavorably.
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Guidance to track
- Despite growth significantly outpacing guidance in recent quarters, management prefers to maintain the 35%-40% long-term AUM growth target, noting near-term periods may exceed this range.
- Management aims to increase NCD contribution to long-term borrowings from current ~33% to 30%-35% range, enhancing liability diversification and tenor match.
- Non-VSA in-house direct distribution channel currently at 22% of commercial retail disbursements is expected to scale to 40%-50% over time, improving profitability through lower cost-to-acquisition.
- Next-generation AI platform for omnichannel customer service targeting 80% autonomous resolution of voice and chat interactions, initially in Hindi and English with deployment across 6 regional languages thereafter.
Risks flagged
- Stage 3 PCR has declined from 57% (December 2024) to 48% currently, while 44% of the book remains unsecured. An analyst questioned whether 50% Stage 3 PCR represents steady-state; management provided no specific target.
- Instant consumer loan business carries inherently higher credit costs by design. Management acknowledged consolidated credit cost represents a weighted average, and faster scaling of this business could elevate overall credit costs above normalized levels.
- Rapid expansion of gold loan branches (planned rollout ongoing) requires robust custody controls for gold collateral. Management emphasized density and supervisory depth as critical success factors, acknowledging this as a key operational risk.
- An analyst asked about timing of the ₹5,500 crore equity issuance approval (12-month approval taken). Management deflected by stating there's no specific timeline guidance, which may concern investors seeking clarity on dilution plans.
Key quotes
- We are designing a high-quality, stable, low-volatile credit portfolio, not accumulating a balance sheet. From inception, every product we scale is built to deliver sustainable, healthy ROE over a two-to-cycle basis. Growth is therefore a means to compound intrinsic value, not an objective in itself.
- Over 70% of customers have bureau scores above 750, are salaried with category A corporates, and earn net monthly income exceeding ₹75,000. This validates our risk-calibrated acquisition strategy.
- I think the very fact that these are designed and, to be honest, a lot of investments, strategic investments which we did over the last 18 months. And if you ask me, the trade-off is in complete favor of operating leverage. So not that you won't make incremental sales teams, and not that you won't have new branches. But I think it's usually in favor of operating leverage from now on.
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