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Target: ₹350
CMP: ₹280.85
Poonawala Fincorp (PFL) is an NBFC which focuses on consumer and small business finance via products like personal loans, loans to professionals, business loans, SME loans, LAP, pre-owned car finance, medical equipment loans and auto lease. It operates across 21 states with a lean branch network and standalone AUM of ₹13,200 crore as of Sep’22.
This NBFC is the erstwhile Magma Fincorp wherein consequent to a capital raise of ₹3,500 crore in May’21, the Poonawalla Group acquired a controlling stake in the NBFC.
There were several improvements that transpired after the new management took control around May’21 – including but not limited to – sharpening the underwriting framework, front-ending of write-offs by implementing a stringent write-off policy and leveraging analytics for policy optimisation.
We model an AUM/PAT CAGR of 37 per cent/65 per cent over FY22-FY25, respectively. We also model an RoA/RoE of 4.8 per cent/12 per cent in FY25. PFL will have more levers from its fee income and operating cost ratios to deliver a further improvement in its RoE profile when it reaches steady-state.
Initiate coverage with a BUY and a TP of ₹350 (premised on 2.3x FY25 BVPS).
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