A year after taking over Magma Fincorp, Poonawalla Fincorp has transformed the firm into an agile new-age retail play finance one from the traditional non-bank finance company (NBFC). With the tech-based lending and a sharp focus on the top 200 locations across the country, the company has set a target to achieve assets under management (AUM) of Rs 42,000 crore by March 2025.
Poonawalla Fincorp (now a Cyrus Poonawalla group) promoted NBFC with a majority stake owned by Rising Sun Holdings — a company owned and controlled by Adar Poonawalla.
Abhay Bhutada, managing director of Poonawalla Fincorp said, “The targets set by Poonawalla Fincorp at the time of acquisition were to reduce the cost of funds, bring down NPAs by 2025 and improve asset quality.”
The company had managed to achieve the said targets within the first year of operations under the new ownership and management, Bhutada said. For example, the cost of funds went down to 6.9% in the June quarter of 2022 from the 12-14% range during Magma’s period. The non-performing assets (NPA) fell 0.95% in the first quarter of FY23 and the asset quality also improved. The net interest margins (NIM) stood at 9.5% in the June quarter, while return on assets was up 150 basis points to 2.4%.
At the time of acquisition, the company’s AUM was at Rs 15,006 crore, gross NPA was 6.9% and net NPA was 4.5%. At present, the AUM has gone up to Rs 22,000 crore.
Poonawalla Fincorp will be raising around Rs 5,000 crore to Rs 6,000 crore for growth plans. It recently raised Rs 650 crore via commercial paper and NCDs. The NBFC was aiming to be among the top 3 players in the retail loan segment and it was in line to disburse around Rs 12,000 crore in retail loans this fiscal and grow at a CAGR of 25-30%.
The NBFC has moved away from the semi-urban and rural markets and shifted focus on the formal income and largely urban segment with a portfolio of personal loans, professional loans, business loans and loans against property. Poonawalla Fincorp has just entered supply chain financing and machinery loans and it is expected to foray into consumer durable financing, credit cards, EMI card and merchant cash advances in the next 12-18 months. It exited tractor finance to focus on the used car financing business where they see a bigger market opportunity.
In the housing finance segment, the subsidiary company, Poonawalla Housing Finance with an AUM of Rs 5,282 crore would remain focused on the affordable housing segment with an average ticket size of Rs 30 lakh. There is value unlocking plans for the housing finance business with an IPO planned in 2025. The housing business would raise around Rs 1,000 crore in FY23 with 10-15% dilution in one or more tranches.
The company has done away with the intermediaries like direct selling agents and would increase lending via a direct, digital and partnerships model of origination. The NBFC is now partnering with digital aggregators, fintech and other ecosystem partners and has overhauled the business to become a digital-first organization.