Poonawalla Fincorp bets on new product launches to drive growth for 12-18 months
A year after the rebranding and management change, Poonawalla Fincorp is rebuilding its product line for a more retail-focused approach.
The non-bank lender, which started with 2-3 products, now offers a growing range of 12 products, including recently launched categories such as personal loans, business loans, small business loans, loans on property, medical equipment loans, machinery loans and procurement. channel financing.
NBFC is now focusing on digital consumer lending and plans to launch an EMI card, credit card, consumer credit and cash advance for merchants in the next 12-18 months, according to the MD Abhay Bhutada.
“We are a young, tech-packed NBFC that rebooted in prime time from the pandemic. We are focusing on SME as well as consumer segments to build a retail franchise,” Bhutada said. Activity area .
When it took over Magma Fincorp in July 2021, Poonawalla Fincorp initially purchased loan portfolios from some larger NBFCs, as it had discontinued some products previously offered such as CVs, tractors and rural finance; also “due to excessive system liquidity and market opportunities” available at the time.
“Now we are doing more than ₹1,000 crore in consolidated disbursements and we don’t need to acquire portfolio in the future,” Bhutada said.
Organic lender disbursements – additional loans generated by Poonawalla Fincorp on its own, rose to ₹2,738 crore in the first quarter of FY23 from ₹338 crore a year ago. Expecting this growth momentum to continue, Bhutada has pegged growth in assets under management for FY23 at 25-30%. Consolidated AUM stood at ₹17,660 crore as of June 30, up 22% year-on-year.
“Direct, digital and partnership models” are key areas for NBFC to drive loan growth, Bhutada said, adding that currently 40-50% of overall monthly disbursements are completely paperless.
Direct, digital and partnership channels accounted for 34.1% of organic disbursements in Q1FY23, compared to 17.5% in Q4FY22, and are expected to grow 30-40% for the remainder of the year, Bhutada said.
Poonawalla Fincorp has also linked up with e-commerce platform KrazyBee through which NBFC disburses loans of around ₹200 crore every month.
Loan portfolio quality
As a “pure retail game”, Poonawalla Fincorp will focus on retail and MSME lending, with a view to improving asset quality over the next three quarters, Bhutada said, adding that collections and quality assets had improved over the last 5 quarters.
Poonawalla Fincorp aims to limit the net NPA ratio to less than 1% and the gross NPA ratio to less than 2% by the end of FY23. As of June 30, the gross ratio for Stage 3 assets was 2.19% and the Stage 3 net asset ratio was 0.95%.
The improvement is due to the company stopping riskier lending undertaken by former Magma Fincorp, and instead targeting cash flow and GST-based lending, and borrowers in formalized income segments, a said Bhutada.
Cost of funds
Poonawalla Fincorp’s cost of borrowing decreased in the first quarter of FY23, primarily due to the repricing of high cost funds raised by the former Magma Fincorp through the sale of debt and assets; and shifting to other channels such as bank loans and capital market debt to raise funds.
While borrowing costs are expected to rise slightly over the remainder of the financial year, Bhutada said the company will pass them on to customers as it is “still very competitive” in terms of lending rates. The non-bank lender has already raised rates on 3-4 loan products in Q1FY23.
Consolidated cost of funds for NBFC declined by more than 50 basis points year on year to less than 7% in Q1FY23. Bhutada said he expects this to stabilize around 7.25% by the end of the year, adding that the 20 to 25 basis point hike will not impact the NIM or profitability of the lender.
August 03, 2022