Abhay-Bhutada-Managing-Director-Poonawalla-Fincorp-Limited
Pune-based non-banking financial company (NBFC) Poonawalla Fincorp is planning to scale up its growth betting big on digital growth channels, said Managing Director Abhay Bhutada.
The NBFC recorded its highest ever quarterly profit after tax (PAT) of Rs 150 crore in the October-December quarter. The company had sold its housing arm in the quarter ended December 2022.
In an exclusive interview with Moneycontrol after announcing the quarterly results, Bhutada said that the company also wants to cut down its operation expenditure over the next few quarters, and is also looking at partnering with fintechs to further augment growth.
Edited excerpts from the interview:
How’s the business momentum at this point?
Our legacy book has less stress now and we are working towards expanding our digital reach. In line with our plans to partner with fintechs, we expect our operational expenditure to come down by Rs 30 crore every quarter from the next fiscal year and are working towards more digital and employee consolidation.
Could you comment on the sale of the housing finance arm?
The sale of our housing arm gave us a good valuation and network of existing customers for our lending operations.
What is the focus at this point?
We are majorly focusing on working towards an employee and branch lite and digital model with a major focus on technology-driven lending.
Also, our plan from now focuses solely on organic growth by using our own capital. We expect a growth of 30 to 40 percent in the next four years.
Are you looking at partnerships?
As part of our organic and digital plan of growth, we would look for partnerships. But acquisition of fintechs is not part of our plan.
How’s MSME (micro, small and medium enterprises) lending looking at this point?
The MSME sector is huge with few players in the lending business. Our product proportion is quite strong in this sector due to our digital first focus which gives us an advantage. Except for some lending operations in the pre-owned car and property loan sections where there is the requirement of additional documentation and government procedures, the overall work in this segment is digital.
Also, we will be working towards consumer lending as demand in the sector is quite high with fewer competitors.
Is the worst on non-performing assets (NPAs) over?
Our NPA numbers have some pending cases from our Magma Fincorp acquisition. Lending for us is solely in the retail sector and our performance has been better than expected.
We are confident of maintaining our net NPA below 1 percent as the segment we target is credit tested and formal income segment.
Going further, we could see some reduction in our NPA numbers as our guidance for the next three to four works around maintaining our GNPA between 1.4 percent and 1.7 percent.
Do you think Reserve Bank of India regulations for NBFCs are too tight?
Due to the NPA norm for terming a loan as a bad loan if unpaid till 90 days, except for some NBFCs including ours, there are chances that the NPAs of the majority of NBFCs could shoot up.
The implementation of SARFAESI (the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act) for NBFCs would see more and quick recoveries.
What are your expectations from the budget?
Looking at the overall liquidity situation, we are expecting some special liquidity support window. Other than this, the market is expecting an easing in the SARFAESI norms for NBFCs. And lastly, tax relaxations for NPA provisioning is a key expectation as it would bring NBFCs on a par with banks.
What is your business outlook for the next few quarters?
On the AUM (assets under management) front, we are expecting growth between 8 and 10 percent quarter on quarter. With respect to profits, 10 percent growth sequentially is my brief expectation.
Also, we expect some reduction in NPA numbers in the next few quarters. Despite interest rate hikes, we are expecting to keep our NIMs (net interest margins) under control. Also, we want to further work on reducing our operational expenditure.
