Poonawalla Fincorp Ltd Q4 FY24 Earnings Conference Call Insights

Key highlights from Poonawalla Fincorp Ltd (POONAWALLA) Q4 FY24 Earnings Concall

• Macroeconomic Update
  • Inflation projections manageable with normal monsoon season anticipated.
  • Volatile crude oil prices pose external challenge for economy.
  • RBI kept policy repo rate unchanged at 6.5%, expects GDP growth of 7% and inflation at 4.5% for FY2024-25.
  • Outlook positive, with rural demand, moderating inflation, and growth in manufacturing and services supporting economic growth.
• Performance Highlights
  • Achieved significant milestones of AUM crossing INR 25,000 crores and profit after tax crossing INR 1,000 crores.
  • Recorded higher quarterly disbursements and best-in-class asset quality numbers.
  • Differentiated strategy and relentless execution reflected across all business metrics.
  • Quarter 4 was the best ever quarter for the company.
• Growth and Outlook
  • Fundamentals of Indian economy strongly deep-rooted, presenting opportunities for steady credit growth in MSME and consumer segments.
  • Company well-positioned to leverage opportunities and enable customers’ dreams.
  • Slight adjustment in interest rates expected over next couple of quarters to support growth while keeping inflation in check.
  • Headwinds from geopolitical tensions and trade disruptions pose risks to outlook.
• Financial Highlights
  • Highest ever quarterly disbursement of INR 9,688 crores, up 52% YoY, 11% QoQ.
  • AUM at INR 25,003 crores, up 55% YoY, 14% QoQ.
  • Gross NPA at 1.16%, down 28 bps YoY, 17 bps QoQ; Net NPA at 0.59%, down 19 bps YoY, 11 bps QoQ.
  • Net Interest Margin healthy at 11.06%, up 4 bps QoQ.
  • Operating Profit INR 409 crores, up 93% YoY, 17% QoQ; PAT INR 332 crores, up 84% YoY, 25% QoQ.
• Industry Leadership and Innovation
  • First tech-led NBFC with inverse relationship between headcount and growth.
  • Pioneered branch-light model, focusing on depth rather than wide expansion.
  • Built strong risk and governance culture, setting benchmarks in wellness programs.
• Risk Management
  • Robust risk management practices in place.
  • Early warning signals, scorecards, business rule engines used for risk management.
  • Fraud risk management framework, operational and InfoSec risk management practices followed.
  • Corporate governance and compliance maintained at highest standards.
• Technology and Digitization
  • Advanced technology stack and end-to-end digitized customer journeys.
  • Automation and digitization of processes using available technology solutions.
  • Systems hosted on cloud for enhanced availability and scalability.
  • Digitization and automation in sales to increase workforce efficiency.
  • Adoption of technology in collections for efficient cash management.
• Customer Service
  • Multiple customer service touchpoints like WhatsApp, app, call centers, branches.
  • Over 70% of customer requests handled through WhatsApp channel.
  • Investments in latest collection solutions for changing payment systems.
• Profitability
  • Crossed INR 1,000 crore PAT and INR 25,000 crore AUM milestones.
  • Focus on operational efficiency, with industry-best opex to AUM ratio.
  • Improvements in NIM through optimal product mix and low-cost borrowings.
  • Recalibration of product mix for a balanced portfolio.
• Asset Quality
  • Focused on credit-led model rather than collection-led model.
  • Continuously strengthening credit policies based on learnings.
  • Expect further improvement in GNPA and NNPA over next four quarters.
• Net Interest Margins
  • Delivered superior NIMs above 11% guidance, aided by low opex model.
  • Among lowest cost of funds in industry after CRISIL AAA rating.
  • Started borrowing via CPs; scope for further reduction in cost of funds from Q3 onwards.
  • Guided to maintain NIMs around 10%, with continued focus on risk-adjusted returns.
• Regulatory Environment
  • Well-placed to capitalize on regulatory changes with strong capital base, credit rating, risk practices.
  • Interest rate dynamics favorable with fixed-rate advances and variable borrowings.
  • Focus on compliance, governance, and risk culture to navigate regulatory landscape.
  • Quarterly review of policies to ensure adherence to regulations.
• Cost Optimization
  • Consistent reduction in opex ratio from 5.5% to around 4% levels over last few quarters.
  • Opex ratio of 3.35% after excluding ESOP charge, among the best in industry.
  • Continued focus on productivity and efficiency to drive further opex ratio improvement.
• Co-branded Credit Card Launch
  • Received regulatory approval for co-branded credit card with IndusInd Bank.
  • Launch planned for May 2024 after ensuring compliance with regulations.
  • Unique product proposition with no joining/annual fees to differentiate from market offerings.
  • Poonawalla to receive one-time payout and revenue share while IndusInd handles risk and collections.