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Poonawalla continues to deliver strong growth, with AUM rising to ~Rs603bn (~69% YoY), backed by strong disbursement momentum—new businesses contributed ~24% in disbursements. Profitability improved meaningfully, with PAT at ~Rs2.55bn (up ~70% QoQ), while RoA expanded to ~1.81% (vs ~0.78% YoY), driven by margin expansion, operating leverage, and stable albeit sticky credit cost. Asset quality improved, with GNPA at ~1.44% and improvement in early indicators, including lower 6MoB delinquency (~1.05%) and ~50% reduction in the 12M 90+ delinquency. However, credit cost at ~2.5% of AUM stays strong, mainly due to higher write-offs (Exhibit 6). Opex/AUM fell to ~4.13% (by ~28bps QoQ), showing early signs of scalability despite continued investments. The management reiterated focus on calibrated growth with portfolio quality and long-term RoA the key priorities, aided by improving pricing power and strong liability profile. Poonawalla remains well capitalized (CAR: ~16.83%; ~20.74% post money), providing sufficient headroom to sustain ~35-40% growth; we build in another fund raise of Rs30bn in FY28E to support the momentum. We retain REDUCE on the stock while raising Mar-27E TP by ~9% to Rs360 (from Rs330), implying 1.6x FY28E P/B (assume another Rs30bn equity raise in FY28E at Rs450/sh) as RoE stays subpar vs peers.

Strong growth and improving profitability, but credit costs stay high

Q4 PAT stood at ~Rs2.55bn (up ~70% QoQ), with better RoA at ~1.81% (vs ~1.2% in Q3, ~0.78% YoY), on margin expansion (NIM: ~9.05%), lower credit cost (~2.51% vs ~2.62% QoQ), operating leverage (Opex/AUM: ~4.13%, ~28bps lower QoQ). AUM was ~Rs603bn, growing ~69% YoY, backed by strong disbursement momentum, with new business disbursements at 24%. Asset quality enhanced, with GNPA/NNPA at ~1.44%/~0.74%; early indicators strengthened, including 6MoB 30+ delinquency falling to ~1.05% (vs ~1.34% QoQ) and ~50% drop in the 12M 90+ delinquency for recent cohorts. Collection efficiency improved, with ~2x YoY improvement in bucket flow + higher Stage1 assets (~97.5%), indicating better portfolio quality and underwriting.

Maintains growth and profitability outlook

The mgmt reiterated AUM growth guidance of ~35-40%, on continued traction in new businesses (now ~24% of disbursements), expanding distribution (ongoing branch scaleup), and increasing digital penetration. Focus remains on improving profitability, with RoA expected to improve from current levels (~1.8%), driven by margin expansion (higher disbursement yields), operating leverage (declining Opex/AUM), and stable-to-lower credit costs supported by portfolio mix and improving early indicators. Poonawalla highlighted continued strengthening of its liability profile, with a diversified borrowing mix and stable CoFs (~7.6%) supporting margins. Capital position remains strong (CAR: ~16.8%; ~20.7% after the recent raise), offering adequate headroom for growth, though we factor in an added capital raise of Rs30bn in FY28E to support growth and maintain sufficient capital buffers.

We tweak estimates; reiterate REDUCE while raising our TP to Rs360

Factoring in the Q4 show, we tweak our FY27-28 estimates; this leads to EPS expanding 16%/4% in FY27E/28E (Exhibit 2). We retain REDUCE; raise Mar-27E TP by 9% to Rs360, implying 1.6x FY28E P/B, assuming added equity raise of Rs30bn in FY28 at Rs450/sh.

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