Summary
Poonawalla Fincorp Limited - Q3 FY2025-26 Earnings Call Summary Friday, January 16, 2026, 6:00 PM IST
Event Participants
Executives 8 Arvind Kapil (MD & CEO), Harsh Kumar (CHRO & Head AI), Sanjay Miranka (CFO), Shabnum Zaman (Company Secretary), Shriram Iyer (Chief Credit & Analytics Officer), Sunil Samdani (Executive Director), Veeraraghavan Iyer (CBO Commercial), Vikas Pandey (CBO Consumer)
Analysts 5 Abhijit Tibrewal (Motilal Oswal), Agam (Agam Investments), Chintan Shah (ICICI Securities), Kaitav Shah (Anand Rathi), Nischint Chawathe (Kotak Institutional Equities)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Assets Under Management (AUM) | ₹55,017 crores | +77.6% YoY, +15.3% QoQ; driven by new product scaling and robust retail demand. |
| Total Disbursements | ₹9,500+ crores (est) | +84% YoY; monthly run rate for new products reached ₹950 crores in Dec-25. |
| Net Interest Margin (incl. Fee) | 8.62% | +22 bps QoQ; benefit of improved pricing on new originations at ~15.5%. |
| Cost-to-AUM (Opex) | 4.41% | -40 bps QoQ; reflecting onset of structural operating leverage as AUM scales. |
| Profit After Tax (PAT) | ₹150 crores | +102% QoQ, +702% YoY; substantial jump due to AUM growth and opex efficiency. |
| GNPA | 1.51% | -8 bps QoQ; sequential improvement reflects prudent underwriting and risk calibration. |
| NNPA | 0.80% | -1 bps QoQ from 0.81%; asset quality remains resilient across portfolios. |
| Stage-1 Assets | 97.4% | +30 bps QoQ; indicates improving asset quality and stable borrower performance. |
| Quarterly Credit Cost | 2.62% | -5 bps QoQ; normalized credit cost for non-instant products is ~1.4% to 1.5%. |
| Cost of Borrowing | 7.65% | -39 bps over 9M; driven by rising NCD mix and lower interest rate environment. |
| Capital Adequacy (CRAR) | 18.17% | Includes Tier-1 capital of 17.15%; surplus liquidity of ₹6,488 crores. |
Geographic & Segment Commentary
- Consumer Business: Prime personal loans (70% with 750+ bureau score) achieved ₹430 crore monthly disbursement. Consumer durable business is scale-efficient, reaching 12,000 outlets across 190 locations with 28% fully digital STP processing.
- Commercial Business: Segment AUM stands at ₹33,700 crores, with LAP (₹15,100 crores) and Unsecured Business Loans (₹8,000 crores) as primary drivers. Direct-to-customer (non-DSA) channel now contributes 22% of commercial retail disbursements.
- Strategic New Products: Gold loan monthly disbursements doubled to ₹207 crores in Dec-25 across 192 branches. Education loans logged 16,000 files in 9 months, focusing on top-tier international universities and affluent households.
Company-Specific & Strategic Commentary
- AI Integration: 30 of 57 planned AI projects are live, including “BuildBuddy” for IT, “DartGenie” for data insights, and conversational AI agents for customer service (targeting 80% autonomous resolution).
- Liability Management: Strategic shift to long-term funding with NCD share rising from 7% in Mar-25 to 33% in Dec-25. Long-term borrowing now constitutes 84% of the total borrowing mix.
- Operating Leverage: Management stated that the heavy lifting of upfront investments (tech, branches, people) is complete; incremental growth is now being absorbed by the established backbone, driving down marginal costs.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| AUM Growth | 35% - 40% CAGR | Directional target maintained despite recent higher growth; focus remains on “growing better, not just faster.” |
| Product Mix | 50% - 60% AUM | Target for Gold, Education, Personal Loans, and LAP share to drive lower credit costs and higher ROA. |
| Credit Cost | Sustained Reduction | Expected to decline as low-risk products (Gold, LAP) scale and portfolio seasoning occurs. |
| Capital Raising | ₹5,500 crores | 12-month enabling approval taken for strategic flexibility to support growth. |
Risks & Constraints
| Risk | Context |
|---|---|
| Portfolio Mix & Credit Cost | Consolidated credit cost is a mathematical average; higher contribution from instant loans can inflate the optics of risk relative to the core 12 products. |
| Operational Control | Geographic expansion in Gold Loans requires high “supervisory depth” to manage physical collateral risks, limiting rapid national rollout. |
| Regulatory Compliance | Management is aligning AI models with the regulator-defined “Seven Sutras” to mitigate algorithmic bias and safety risks. |
Q&A Highlights
Asset Quality & PCR
- Question: Why has the Stage-3 PCR declined from 57% to 48% over the last year? (Chintan Shah)
- Answer: Improvement in Stage-1 assets (97.4%) and reduction in Stage-3 book (1.51%) naturally lower PCR requirements. The rundown of old, higher-provisioning STPL books also contributes to the optical decline (Shriram Iyer).
Operating Leverage
- Question: Is there more investment needed or will the cost-to-income ratio continue to improve? (Kaitav Shah)
- Answer: Strategic investments are largely complete. While some incremental sales and branch costs continue, the trade-off is now firmly in favor of operating leverage (Arvind Kapil).
Gold Loan Strategy
- Question: Why is the branch presence concentrated in Western India? (Abhijit Tibrewal)
- Answer: The strategy is focusing on density pockets with high supervisory depth to maintain solid control over physical collateral. Expansion is moving state-by-state, currently entering Karnataka and Odisha (Arvind Kapil/Vikas Pandey).
Credit Cost Drivers
- Question: How will credit costs reduce as the portfolio seasons? (Abhijit Tibrewal)
- Answer: Every product is showing improved calibration and early risk indicators (6-MOB). The primary driver for consolidated reduction is the mathematical mix shift toward structurally lower-cost products like Gold and LAP (Arvind Kapil).
Key Takeaway
Poonawalla Fincorp delivered a robust Q3 FY26, characterized by 77.6% YoY AUM growth and a significant surge in PAT to ₹150 crores. The quarter marked a strategic milestone with ROA crossing the 1.2% threshold, supported by a 40 bps QoQ reduction in Opex-to-AUM as operating leverage begins to manifest. Management successfully transitioned the liability profile, increasing NCD contribution to 33% while simultaneously improving asset quality (GNPA at 1.51%). Strategic focus remains on a “credit-first” approach, with new products like Gold and Education loans scaling rapidly to dilute the credit cost impact of the instant loan segment. With 30 AI projects live and a 12-month enabling approval for a ₹5,500 crore capital raise, the company is positioned to maintain a 35-40% growth trajectory while focusing on bottom-line compounding. The company remains on track to achieve a more balanced, high-ROA portfolio as low-risk secured assets increasingly dominate the mix.
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