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Target: ₹214
CMP: ₹220.10
Vijay Deshwal has stepped down as the CEO of Poonawalla Fincorp (Poonawalla) and ceases to be a key managerial personnel with effect from MarcH 4. He has decided to take up a strategic role within the Cyrus Poonawalla Group where he will spearhead emerging investment opportunities.
Abhay Bhutada, Managing Director, will continue to be responsible for both operational and strategic matters of the organisation supported by a strong management team.
When business transformation is underway with realignment of product and geographic strategy with focus on healthy IRR, RaRoC, granularity and cross-sell opportunities, stability at the senior management is key driving factor to give confidence. CEO stepping down would derail that confidence.
It seems Chief Technology Officer, Gaurav Sharma, too has exited (after having joined in Sep’21 from L&T Financial Services) and Kandarp Kant (CTO of erstwhile Poonawalla Finance) has taken charge. Besides, there seems to be change in Head - HR with Manish Kumar being replaced by Smita Mitra.
We expected that an RoA profile of over 3 per cent, coupled with AUM growth of 25 per cent/35 per cent for FY23/FY24 and gained confidence on management execution capabilities, can rerate the stock to 3.5x FY24E book.
However, the latest developments at senior management level could cap rerating in the interim at 2.25x book. We downgrade the stock to Reduce from Buy with a revised target price of ₹214 (earlier: ₹333).
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