Buy Poonawalla Fincorp; target of Rs 350: Motilal Oswal

Motilal Oswal's research report on Poonawalla Fincorp

Poonawalla Fincorp (PFL)’s 2QFY25 loss stood at ~INR4.7b (MOFSLe: INR3b+). The company reported a loss in 2QFY25 mainly due to a one-time provision in STPL book of ~INR6.7b and a one-time opex of ~INR710m from investments in technology. PFL reported net loss ~INR1.8b in 1HFY25, and we expect 2HFY25 PAT to decline ~45% YoY. NII grew ~18% YoY to ~INR5.6b (8% miss), while its PPoP declined 17% YoY to ~INR2.8b (37% miss). Opex rose ~90% YoY to ~INR3.7b (~40% higher than estimates), with C/I ratio increasing QoQ to ~57% (PQ: 36% and PY: ~37%). Provisions stood at INR9.1b, including one-time provisions on the STPL book.

Outlook

The near-term outlook will warrant a detailed understanding of the various pillars of execution, and we will look forward to more clarity before taking any rating action. Reiterate BUY with a TP of INR350 (premised on 2.7x Sep’26E BVPS).