By Lithin Reddy
Published: Friday, Jan 28, 2022, 12:08 [IST]
Poonawalla Fincorp has given stellar returns of 528% in just one year despite the company having a poor Return on equity track record of -4.61%, PAT margin has shrunk by 30.02%, delivered poor profit growth of -3.60 over the past 3 years, and poor operating income growth of -3.60% over the past 3 years.
Ponawalla Fincorp started rallying after the capital infusion and reconstitution of the board with Mr. Adar Poonawalla taking over as chairman, after the capital infusion by Adar Poonawalla, the company has strengthened its management team across verticals. The company has shifted the focus to the consumer and small business segments along with the discontinuation of non-focus products.
Ratings Upgraded by CARE
CARE has upgraded the long-term bank facilities rating to CARE AA+ from CARE AA- and reaffirmed the short-term rating at CARE A1+ following the infusion of capital, induction of professional management, revised product focus towards better quality borrowers, and reduction in the cost of funds.
Emkay Global on Poonawalla Fincorp
Poonawalla fin corp is well placed in terms of adequacy and liquidity. New management plans to diversify the current portfolio by making an effective mix of secured and unsecured products, such that affordable housing, pre-owned cars, and business loans from current offerings, and new offerings like LAP, PL, loans to professionals. etc.
Poonawalla Fincorp management aims to triple the AUM by FY25E, aided by sufficient liquidity and diversity in product offerings. The company plans to discontinue the relatively riskier businesses of used CV/CE and tractor financing. The company also plans to introduce consumer durable financing, co-branded credit card, and digital lending products by end of FY22.
The change in promoters should significantly improve the company’s borrowing profile, which should, in turn support rejig of the asset mix with the right blend of secured and unsecured loans, de-risking the loan book from black swan events. With the ease in the cost of funds, the company has a dual advantage with a good scope of margin expansion, the company can focus on the quality of customers.
About the Company
Poonawalla Fincorp, known earlier as Magama Fincorp is a Poonawalla group non-banking financing company that focuses on consumer and MSME financing. Poonawalla Fincorp offers a diversified product suite to address the growing financing needs of retail financing and enterprises.