Buy Poonawalla Fincorp; target of Rs 440: Motilal Oswal

Motilal Oswal's research report on Poonawalla Fincorp

Poonawalla Fincorp (PFL)’s 4QFY25 PAT declined ~81% YoY to ~INR623m (MOFSLe: INR1.8b). FY25 loss was INR983m (vs. PAT of INR10.3b in FY24). NII in 4QY25 grew ~8% YoY to ~INR6.1b (~12% miss). Other income rose ~34% YoY and ~80% QoQ to ~INR1b. The increase in other income is due to higher fee income and assignment income during the quarter. Opex rose 106% YoY to ~INR4.8b (~48% higher than MOFSLe), with the C/I ratio rising to ~67% (PQ: 45% and PY: ~36%). PPoP declined ~42% YoY to ~INR2.4b (~47% miss). Provisions stood at INR1.6b (MOFSLe: ~INR2.1b), translating into annualized credit costs of ~1.9% (PQ: 4.7% and PY: 0.4%).

Outlook

We cut our FY26E/FY27E PAT by 17%/10% to factor in higher operating expenses. We model a CAGR of 42% in AUM over FY25-FY27E and expect PFL to deliver RoA/RoE of ~2.9%/~18% in FY27. Reiterate BUY with a TP of INR440 (premised on 3.2x Mar’27E BVPS).