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Informist, Monday, Oct. 21, 2024

By Sourabh Kumar

MUMBAI – Poonawalla Fincorp Ltd. is expected to report a decline in its net profit by a whopping 65.6% in the September quarter due to a high base effect. An average of estimates from four brokerage firms showed that the company's net profit rose to INR 2.96 billion in the quarter ended September, significantly lower than INR 8.60 billion recorded for the same period last year. Sequentially, however, the non-banking finance company's bottom line was seen to have grown, albeit by a mere 1.4%.

Last year, the company reported a one-time exceptional gain of INR 8.16 billion after it sold its investment in Poonawalla Housing Finance Ltd to Perseus SG Pte. Ltd, an entity affiliated to TPG Global LLC. This raised the company's net profit significantly last year.

The company's net interest income is estimated to rise 27.8% on year to INR 6.07 billion. Sequentially, the company is expected to report a growth of 5.4% in net interest income. The non-bank lender is scheduled to announce its earnings for Jul-Sept on Friday.

Further, the assets under management of the company are likely to rise 40-44% in Jul-Sep, with Emkay Global estimating the highest growth, by 44%. "We expect Poonawalla to register 8% sequential growth in disbursement in Q1FY25 (2024-25 (Apr-Mar)), resulting in AUM growing to INR 291 billion (8% QoQ & around 44% YoY growth)," Emkay Global Financial Services Ltd. said. As per provisional figures released by the company, the assets under management of the non-bank lender grew 40% on year to INR 283.50 billion as of Sept. 30.

Most brokerage firms expected the margins of the company to fall in Jul-Sept on a quarterly basis. "Margins will remain under pressure due to the higher cost of borrowing," KR Choksey Research said. Apart from higher cost of borrowing, Emkay Global said the margins are also expected to remain under pressure due to the company’s "increased focus on secured product".

Estimates also showed the company's cost-to-income ratio rising on quarter in Jul-Sept. "The cost-to-income ratio is likely 37.0% for the quarter, compared to 36.1% in Q1FY25 (Apr-Jun) (and 38.4% in Q2FY24 (Jul-Sep))," KR Choksey said. "The increase in cost ratio is expected to be on the back of increased spending on the new product basket."

Emkay Global also expected the company's operating expenses to have risen in the quarter ended September. "We expect operating expenses to inch up as the new management plans to go 'Phygital' resulting in Opex-to-AUM coming around 3.7% and a PPoP (pre-provisioning operating profit) of INR 4.54 billion," Emkay Global said. It further said the asset quality of the non-bank lender is expected to be stable "with GS3 (gross stage 3) and NS3 (net stage 3) coming in at 1.2% & 0.6% each (vs 0.67% & 0.32% in Q1FY25 (Apr-Jun))".

Emkay Global said commentaries on growth in personal loans, margin, and asset quality or credit costs are the key monitorable parameters.

At 1102 IST, shares of Poonawalla Fincorp Ltd. were 0.6% higher at INR 378 on the National Stock Exchange. Following are the Jul-Sept earnings estimates of Poonawalla Fincorp based on reports compiled by Informist from four brokerage houses:

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Vidhi Verma

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