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.