Hold Poonawalla Fincorp; target of Rs 270: Emkay Global Financial

Emkay Global Financial's research report on Poonawalla Fincorp

Poonawalla Fincorp (PFL), in its board meeting held on 14-Dec-2022, approved the sale of its housing finance subsidiary – Poonawalla Housing Finance (PHFL) – to TPG (Perseus SG Pte., an entity affiliated with TPG Global, LLC). The deal has been struck at Rs39bn, which values PHFL at a trailing Sep-22 P/BVPS of 3.4x. This is broadly in line with our TP implied trailing Sep-22 valuation of 3.3x for the consolidated entity. As per our interactions with the management, post the approval from the respective regulatory authorities, shareholders and lenders, the deal is expected to be completed within 3-6 months. As of Sep-22, PFL (standalone) had an AUM of ~Rs129bn and reported RoA of 4%, while PHFL’s AUM stood at ~Rs56bn and RoA at 2.4%.

Outlook

Considering the ambiguity around operational plans, in terms of composition of product segments, and cost structure/credit costs associated with these, we retain our HOLD rating with unchanged Sep-23E TP of Rs270.We will revisit our estimates post further clarification from the management.

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