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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.
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