POONAWALLA Q4 FY25 earnings call.
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Poonawalla Fincorp delivered a strong 42.5% YoY AUM growth to INR 35,631 crore in Q4 FY25, exceeding initial guidance, while the erstwhile STPL portfolio was reduced to just 8% of on-book AUM from 21% in September 2024. Credit costs declined 27% QoQ to INR 253 crore, enabling PAT recovery to INR 62 crore from INR 19 crore in Q3. The company has launched all six planned new businesses (gold loan, commercial vehicles, education loans, consumer durable, shopkeeper loans, and PL Prime) with 400 gold loan branches targeted this fiscal. Management remains confident on FY26-27 profitability guidance despite elevated OpEx (4.8% of AUM in Q4) due to new business investments, expecting stabilization by Q4 FY27. Key risks include potential capital raise requirement given 22.94% CAR with 1,100 crore capital consumed during FY25, and NII-AUM divergence as the high-margin STPL book is rebuilt. The 80% zero-DPD composition of residual STPL book provides comfort on credit cost normalization.
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Guidance to track
- Company achieved 42.5% YoY in FY25 and guides sustained 35-40% growth trajectory for FY26 and beyond, underpinned by strong distribution credibility and diversified product suite.
- Management reiterates confidence on previously communicated robust profitability targets for FY26-27, citing improving credit costs and operational leverage from scaling new businesses.
- OpEx to AUM will temporarily inch higher in next 2 quarters due to 6 new business launches and 400 gold loan branches, then stabilize at prudent levels reflecting operational efficiencies and scalability by March 2027.
- Management indicated potential capital raise in early calendar year 2026 (financial year 2026-27) given 1,100 crore capital consumed during FY25 leaving CAR at 22.94% against robust growth plans.
Risks flagged
- Company consumed ~1,100 crore of capital during FY25 with CAR at 22.94%, and AUM growing at 42.5%. While headroom exists, sustained high growth may necessitate equity raise earlier than projected FY27 profitability recovery.
- AUM grew 42.5% YoY while NII grew only 12% YoY due to STPL book slowdown during recalibration. Management expects gap to narrow as STPL rebuilds but gives no specific timeline or quantum guidance.
- Six new businesses launched within compressed timelines (gold loan, commercial vehicles, education, consumer durable, shopkeeper loans, PL Prime) with phased scaling approach. Risk of slower-than-expected momentum during quality-focused initial 4-6 months.
- PPOP declined QoQ from INR 373 Cr to INR 333 Cr partly due to mix shift towards secured products (now 57% vs 49% a year ago) which typically carry lower yields than unsecured. Management acknowledges this but sees long-term risk diversification benefit.
Key quotes
- 80% of the residual book is zero DPD, and we do not expect any increased stress on the residual book. This makes it quite clear that the erstwhile STPL issue has been addressed.
- Our digital journeys, in-house AI-developed models, and there's a whole lot of AI visibility that I'll give you today. All these three will enable us to use data and insights across businesses from sourcing to underwriting and collections, which will, in my view, make technology a competitive advantage for us.
- We are looking at three, three and a half [ROE]. So I think you will at some point start inching upwards. The AUMs I can assure you are all being constructed at 3+% ROAs.
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