Poonawalla Fincorp Ltd Q4 FY22 Earnings Conference Call Insights

Key highlights from Poonawalla Fincorp Ltd (POONAWALLA) Q4 FY22 Earnings Concall

Management Update:

• POONAWALLA said its Housing arm delivered its highest ever profit before tax of INR101 crores against INR14 crores last year.

Q&A Highlights:

• Nikhil Rungta from Nippon India asked about the 30 basis points impact due to ESOPs on the opex side and if it could change materially going forward. Sanjay Miranka CFO said that the charge may increase for FY23. But this is a notional charge to P&L and will get reflected multifold into the performance of the company.

• Nikhil Rungta from Nippon India enquired about provision; when standard asset provisioning will be coming in the numbers. Sanjay Miranka CFO answered that overall provision is very healthy at 58.9% as far as the stage 3 PCR is concerned.

• Harshvardhan Agarwal of IDFC asked about the disbursement number, if it has an element of any inorganic portfolio the company has acquired. Abhay Bhutada MD replied that that number has got both organic and inorganic book. However, the focus has been building the organic book.

• Sonal from Nirmal Bang asked about the digital tieups and what kind of partnerships the company is entering into. Abhay Bhutada MD answered that all the partnerships need to have two things; scalability and the risk management practices. Therefore, FLDG is something the company is not banking on.

• Sonal from Nirmal Bang also asked if the digital tieups will be more like DSAs or co-lending partners. Abhay Bhutada MD answered that the company does a mix of both. So wherever there’s the NBFC available for the partner, the preference would be a co-lending arrangement. In absence of that, the company looks at it as their origination with the risk management being done by the company.

• Pankaj Agarwal from AMBIT Capital enquired about the competitive intensity in the housing finance segment. Abhay Bhutada MD said the entire space has gone through a deep rationalization. The size of the industry itself has gotten halved.

• Pankaj Agarwal from AMBIT Capital asked that given the competitive intensity and the growth potential, what kind of ROA and ROE can be expected on a sustainable basis. Abhay Bhutada MD said the company is at 1.8% for the year. At a steady state level, the company looks at a 3% ROA and sub 3% opex number in about 3 years’ time.