ICICI Securities Recommends Buying Poonawalla Fincorp, Targets Rs 520

Poonawalla Fincorp Reports Strong Quarter, Maintains BUY Rating

Poonawalla Fincorp (Poonawalla) has reported another robust quarter, with a Profit After Tax (PAT) of INR 2.6 billion. This represents a Return on Assets (RoA) of 1.8%, a 61 basis point (bps) increase from the previous quarter and a 105 bps increase from the same period last year. The Asset Under Management (AUM) growth was exceptional at 10% quarter-on-quarter (QoQ) and 69% year-on-year (YoY), making it one of the highest AUM growth rates within India's listed Non-Banking Financial Company (NBFC) space.

The company's new products contributed 24% of disbursements in the fourth quarter, indicating confidence in sustaining high AUM growth. The credit cost has remained in the range of 2.5-2.7% over the past four quarters, while the Gross Non-Performing Assets (GNPA) and Net Non-Performing Assets (NNPA) have been declining since the past three quarters. Additionally, the operating expenses to Asset Under Management (opex to AUM) ratio has moderated 28 bps QoQ to 4.1%, as investments in branches, technology, and building network have enabled robust AUM growth alongside improved productivity.

Outlook and Recommendation

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Given the brighter AUM growth prospects, improving headline asset quality ratios, diversified portfolio offerings, expected moderation in opex to AUM, and an improving RoA trajectory, we maintain a BUY rating for Poonawalla Fincorp. Following the recent capital raise of INR 25 billion in April 2026, the Return on Equity (RoE) is expected to hover around 12-13% until FY28E, compared to 10% in Q4FY26. As a result, we revise our target price to INR 520 (from INR 600) by cutting our target multiple to 3.2x FY27E Book Value (from 4.1x).