In a rare convergence of conviction, two leading brokerage houses—Motilal Oswal Financial Services (MOFSL) and Anand Rathi—have reiterated their bullish stance on Poonawalla Fincorp (PFL), underscoring a promising growth trajectory and significant re-rating potential. Despite a short-term earnings miss in Q4FY25, analysts remain optimistic, backed by the company’s strategic business pivots, AI-driven risk frameworks, and aggressive distribution expansion.
🚀 Dual Buy Calls with Distinct Targets
- Motilal Oswal maintains a BUY rating with a target price of INR 440, suggesting a 18% upside from the current market price of INR 380.
- Anand Rathi goes a step further, projecting a INR 504 target, implying over 35% upside from the closing price of INR 372 on 6 May 2025.
Both brokerages cite robust asset growth, tech-led underwriting, diversified product rollout, and the company’s strategic shift away from legacy books as key drivers for their positive outlook.
📊 Poonawalla Fincorp Q4FY25 Snapshot: Earnings Miss But Strategic Progress Intact
PFL reported a sharp YoY PAT decline of 81% in Q4FY25 to INR 62.30 crore, against Motilal’s estimate of INR 180 crore. FY25 ended with a net loss of 98.30 crore, reversing a profit of INR 1,030 crore in FY24. The earnings miss was primarily attributed to:
- A 106% YoY surge in operating expenses, as the company rapidly scaled new business verticals and branch networks.
- A 130bps QoQ contraction in Net Interest Margins (NIMs) due to yield compression.
- Elevated C/I ratio at 67%, a spike from 36% YoY, reflecting front-loaded investments.
However, credit costs reduced sequentially, and Gross Stage 3 loans (GS3) remained stable at ~1.85%, indicating underlying asset quality remains under control.
🧭 Long-Term Growth Strategy
Despite short-term profitability pressures, both brokerage firms remain unfazed, emphasizing PFL’s long-term execution strength and evolving operating model.
- AUM grew 43% YoY to INR 35,600 crore in Q4FY25, beating earlier guidance of 30–35%.
- Management maintains a FY26 AUM growth guidance of 35–40%, with Motilal Oswal modeling 44%/41% growth in FY26/FY27.
- Six new lending verticals—Gold Loans, Education Loans, CVs, Shopkeeper Loans, Consumer Durables, and STPL (new strategy)—are fully operational and ahead of schedule.
These businesses follow distinct go-to-market strategies, supported by 400 planned branches, 10,000+ PoS touchpoints, dealer networks, and digital-first platforms. Importantly, the erstwhile stressed STPL book has shrunk to 8% of AUM, with 80% of that now at 0 days past due (DPD)—a significant cleanup milestone.
📈 AI-Powered Transformation: Risk, Credit, and Collections
Both brokerages also highlight PFL’s AI-first approach as a structural advantage. Key digital initiatives include:
- AI-driven credit underwriting, improving credit manager efficiency by 35–40%.
- Suspicious transaction monitoring via ML tools (expected rollout by Q3 FY26).
- A real-time, persona-based collections strategy, which has improved first EMI bounce rates by 25%, and forward collection efficiency by 9–10%.
This tech infusion is not just operational — it’s strategic, enabling scalable growth without proportionate risk escalation.
💰 Valuations and Profitability Outlook
| Metric | FY25 | FY26E | FY27E |
|---|---|---|---|
| PAT (INR crore) | (98) | 970 | 1,760 |
| RoA (%) | (0.3) | 2.3 | 2.9 |
| RoE (%) | (1.2) | 11.3 | 17.8 |
| NIM on AUM (%) | 7.8 | 8.0 | 8.2 |
| AUM (INR crore) | 35,600 | 51,400 | 72,200 |
| P/BV (x) | 3.6 | 3.2 | 2.8 |
While FY25 marked a transition year with one-time losses and elevated costs, both Motilal and Anand Rathi project a return to sustainable profitability from FY26, with RoE approaching 18% by FY27.
🏁 Analyst Verdict
Anand Rathi calls PFL a “high-quality, scalable franchise” and estimates the stock could trade at 4x FY27E P/BV at their target price of INR 504. Motilal Oswal, despite trimming its earnings forecasts by 17%/10% for FY26/FY27, maintains conviction in the company’s multi-year growth narrative.
For investors seeking a high-growth NBFC with structural tailwinds, Poonawalla Fincorp is shaping up to be a long-term wealth creation story—albeit with short-term earnings volatility.
📌 Investment Considerations
Positives:
- Clear business pivot to retail, secured, and tech-backed lending.
- Successful cleanup of legacy portfolio.
- Early success across six new verticals with defined distribution.
- AI-led risk and operational execution showing tangible gains.
Risks:
- Failure to contain costs post-branch expansion.
- Market share loss or margin pressure in competitive verticals.
- Execution slippage in scaling new businesses.
Final Take
With institutional optimism building, Poonawalla Fincorp is entering a phase of high visibility, where execution will be the key differentiator. For investors with a medium-to-long-term horizon, the stock offers a rare blend of growth and turnaround potential. The coming quarters will test the depth of its strategy, but early signs remain encouraging.
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