Poonawalla Fincorp Limited — Q1 FY27 earnings call

Call held 17 Jul 2026

Management summary

Poonawalla Fincorp delivered a strong Q1 FY27, marked by robust AUM growth, significant ROA expansion, and improved asset quality metrics. The company's focus on digital-first operations and diversified product mix contributed to higher disbursement yields and lower credit costs, reinforcing a positive outlook despite a slight increase in borrowing costs. Management is confident in achieving its long-term ROA targets through structural improvements.

Highlights

  • AUM grew 11% QoQ to ₹67,054 crores, driven by continued momentum in retail products.

  • ROA improved by 17 bps QoQ to 1.98%, reflecting a 130 bps improvement over Q1FY26.

  • PAT grew 20.8% QoQ and 391.5% YoY to ₹308 crores.

  • Asset quality improved with GNPA at 1.37% (down 7 bps QoQ) and NNPA at 0.70% (down 4 bps QoQ).

  • Credit cost declined by 11 bps QoQ to 2.4%, supported by a lower 6-MoB-30+ of 0.64% for the recent cohort.

  • Disbursement yield expanded by approximately 50 bps over Q4FY26, contributing to NIM expansion to 9.10%.

  • Opex to AUM reduced to 4.06% in Q1FY27 from 4.13% in Q4FY26, demonstrating operating leverage.

Concerns

  • Cost of borrowing increased slightly to 7.72% in Q1FY27 from 7.63% in Q4FY26.

  • Management acknowledged potential for 10-25 bps 'upside' (increase) in opex-to-AUM quarter-on-quarter due to investment strategies and gold branch openings.

Key financials

  1. AUM ₹67,054 Cr +11%QoQ
  2. NIM 9.1%
  3. Credit Cost 2.4% -4.4%QoQ
  4. GNPA 1.4% -4.9%QoQ
  5. NNPA 0.7% -5.4%QoQ
  6. Opex to AUM 4.1% -1.7%QoQ
  7. PAT ₹308 Cr +391.5%YoY
  8. ROA 2% +191.1%YoY
  9. NII + Fees ₹1,415 Cr +84.3%YoY
  10. Pre-provisioning Operating Profit ₹785 Cr +12.9%QoQ
  11. Cost of Borrowing 7.7% +1.2%QoQ
  12. Provisioning Coverage Ratio 49.1%
  13. Debt-Equity Ratio 3.82×
  14. Capital Adequacy Ratio 19.5%
  15. Tier 1 Capital 18.4%
  16. Liquidity Coverage Ratio 199.6%

What they filed

Q1 FY27: revenue up 77.3%, net profit up 388.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue989 1,057 1,166 1,314 1,542 +56%1,818 +72%2,115 +81%2,330 +77%
Net profit-471 19 62 63 74 +116%150 +689%255 +311%308 +389%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Liquidity Liquidity disclosed Surplus liquidity of ₹4,012 crores as on June 30, 2026, keeps us in comfortable position.
    Our liquidity coverage ratio stood at 199.62% as of June 30, 2026. On the liquidity front, a surplus liquidity of ₹4,012 crores as on June 30, 2026, keeps us in comfortable position.

Guidance & targets

Profitability

  • ROA Profitability · by June 2028 exit · High confidence 3-3.5%
    if you see our guidance, we have given a guidance of probably June exit of 2028, which is 2 years from now, and you're already at 1.98%. So I think it should inspire adequate structural strength and confidence from now on.

    — Arvind Kapil, Managing Director and Chief Executive Officer

  • NIM Profitability · for the year · Medium confidence comfortably NIM accretive
    I think we could be very comfortably NIM accretive and if you look at the way we've raised NCDs and the term loans from wider spectrum of participants, we have a substantial strength of long-term funding that we have raised, and that is the strength this company has. So I wouldn't be too worried on the net trade-off. It should be comfortable for the year.

    — Arvind Kapil, Managing Director and Chief Executive Officer

Volume

  • Gold Loan Branches Volume · FY27 · High confidence ~400 branches
    We plan to add similar number of approximately 400-odd branches during FY27, largely in Tier 2, Tier 3 locations.

    — Arvind Kapil, Managing Director and Chief Executive Officer

Credit Cost

  • Credit Cost Trajectory Credit Cost · next couple of quarters · Medium confidence structurally improving
    Second is credit cost is presently declining, but it's reached 2.4%. We see that structurally improving quarter-on-quarter for a couple of quarters. Let me park it there for you.

    — Arvind Kapil, Managing Director and Chief Executive Officer

Operating Efficiency

  • Opex to AUM Operating Efficiency · over the year · Medium confidence come down
    if I take a year's time, our guidance is that structurally opex costs will come down.

    — Arvind Kapil, Managing Director and Chief Executive Officer

What to watch in Q2 FY27

Credit Cost Trajectory

Next couple of quarters
Current 2.4% (Q1FY27)
Target Continued QoQ improvement

Why it matters

Continued reduction in credit costs is a key driver for profitability and ROA expansion.

Our credit cost has declined by 11 basis points quarter-on-quarter, from 2.51% to 2.4%. ... We see that structurally improving quarter-on-quarter for a couple of quarters.

Risks & concerns

  • Macroeconomic Volatility and Cyclical Risks

    medium

    Management acknowledges the need to be watchful of macro indicators and the impact of different economic cycles on various product segments, but expresses confidence in their diversified portfolio to smooth out cyclical risks.

    Management acknowledged

  • Opex-to-AUM Fluctuation

    low

    Management noted a potential for 10-25 bps 'upside' (increase) in opex-to-AUM quarter-on-quarter due to investment strategies and gold branch openings, but expects structural reduction over time.

    Management acknowledged

Q&A highlights

7 direct
ROA levers and sustainability, credit cost, and opex-to-AUM trajectory Direct
I think it should inspire adequate structural strength and confidence from now on. ... if you see our guidance, we have given a guidance of probably June exit of 2028, which is 2 years from now, and you're already at 1.98%.

Analyst sought clarity on the drivers for future ROA expansion, and management provided a long-term ROA target and reiterated confidence in NIM, credit cost, and opex trends.

Asked by Chintan Shah

Early delinquency trends, specifically in salaried IT sector customers in Southern India Direct
absolutely no reason for us to worry at all. As a matter of fact, I have already in my first answer and in my brief, given a guidance, not a guidance, but probably given you a sense that from the lens today, if you look at it, internally, we see a lot of strength in our quality of calibration.

Analyst raised a potential sector-wide concern, and management provided a strong rebuttal, citing internal asset quality metrics (6-MoB-30+ at 0.64%) and robust collection performance.

Asked by Abhijit Tibrewal

Performance of new businesses, identifying any surprises or slower-scaling segments Direct
I think the only one which we probably did not accelerate is the Shopkeeper loans, which we came across in the earnings call in the first one and I shared with you. And right now, that we're not accelerating and for all our decision basis is between credit cost environment and also on the ROA.

Analyst sought insights into the execution of new product launches, and management transparently identified one segment (Shopkeeper loans) that was not being accelerated due to strategic considerations, while highlighting strong performance in others.

Asked by Abhijit Tibrewal

Outlook on cost of borrowings (stability vs. further increase) Direct
I think for me, having NCDs at anything in the range of 25% to 30% and a diversified borrowing, I wouldn't be too worried. ... But like Arvind alluded earlier, the product mix is changing, our disbursement yield is changing, and we will more than be able to offset this impact. So we don't see any challenge at NIM level.

Analyst probed on a key input cost, and management provided a balanced view, acknowledging potential for slight increases but expressing confidence in their ability to offset this through product mix and yield expansion, thus protecting NIM.

Asked by Abhijit Tibrewal

Write-offs run rate and the impact of legacy portfolio Direct
So write-offs have been reducing quarter-on-quarter and control over slippages because of the better collection efficiency. So I don't see write-offs going up from here on. Also coming to the point on the legacy portfolio, there is no materiality now because there's hardly anything left in that book.

Analyst sought clarification on the sustainability of the current write-off levels, and management confirmed a declining trend and minimal impact from the legacy book, indicating structural improvement.

Asked by Nischint

Normalization of coverage ratios (Stage 1 and Stage 2) Direct
So PCR has declined because of the flows being contained at Stage 1, as I earlier said, due to improved collection efficiency and the portfolio calibration, which we have done across the portfolios, right? The legacy portfolio that historically carried higher expected credit losses that have gradually run off and the impact of ECL has reduced on account of that.

Analyst questioned the decline in coverage ratios, and management explained it as a result of improved asset quality, collection efficiency, and reduced impact from the legacy portfolio, rather than a deterioration in provisioning adequacy.

Asked by Nischint

Loan-to-Value (LTV) ratio for gold loans Direct
75%. Yes, it is 75%, yes.

Analyst sought a specific, key risk metric for the gold loan portfolio, which management promptly provided, indicating a conservative lending approach.

Asked by Nischint

3 min read 6 chapters

Detailed narrative

Robust Financial Performance in Q1 FY27

Poonawalla Fincorp reported a strong Q1 FY27, with Assets Under Management (AUM) growing 11% QoQ to ₹67,054 crores. Profit After Tax (PAT) surged 20.8% QoQ and 391.5% YoY to ₹308 crores, driving a significant improvement in Return on Assets (ROA) to 1.98%, up 17 basis points QoQ and 130 basis points YoY. Net Interest Income (NII) including fees also saw healthy growth of 10.9% QoQ and 84.3% YoY, reaching ₹1,415 crores, while pre-provisioning operating profit grew 12.9% QoQ to ₹785 crores.

Strengthening Asset Quality and Credit Costs

The company demonstrated continued improvement in asset quality, with Gross Non-Performing Assets (GNPA) declining to 1.37% (down 7 bps QoQ) and Net Non-Performing Assets (NNPA) to 0.70% (down 4 bps QoQ). Credit costs reduced by 11 basis points QoQ to 2.4%, supported by a lower 6-MoB-30+ for the recent cohort (0.64%), which was 41 bps lower than the previous quarter's origination. Collection efficiency remained strong at approximately 99.6%, with Stage 1 and Stage 3 slippage ratios improving by 5% and 13% respectively.

Diversified Product Growth and Yield Expansion

Poonawalla Fincorp's diversified product strategy is yielding results, with new products contributing 26% of disbursements, up from 24% in Q4FY26. Prime Personal Loans saw monthly disbursements of ₹537 crores, Gold Loans ₹875 crores, Consumer Durables ₹433 crores, and Education Loans averaged ₹144 crores monthly. The overall disbursement yield expanded by approximately 50 basis points over Q4 FY26, contributing to a healthy Net Interest Margin (NIM) of 9.10%, up from 9.05% in the previous quarter, reinforcing the structural strength of the business.

Operational Efficiency through Digital and AI Integration

The company continues to leverage digital and AI capabilities to drive efficiency and enhance customer outcomes. Opex to AUM further declined to 4.06% in Q1 FY27 from 4.13% in Q4 FY26, and 4.76% in Q4FY25. AI-powered tools like the 'Pay Easy bot' achieved a 42% recovery rate in collections, and in-house direct collection models reduced operating costs by 26%. AI-driven marketing efforts resulted in 2x higher click-through rates and over 60% cost savings compared to traditional agency approaches, with 101 AI projects underway, 50 of which are deployed.

Robust Capital and Liquidity Position

Following a capital raise of ₹2,500 crores through QIP in April 2026, the company maintains a strong capital position with a Capital Adequacy Ratio (CAR) of 19.46% and Tier 1 capital at 18.37%, providing ample headroom for growth. The Debt-Equity ratio stood at 3.82x. Liquidity remains comfortable with a surplus of ₹4,012 crores and a Liquidity Coverage Ratio (LCR) of 199.62% as of June 30, 2026, ensuring financial stability and supporting future expansion plans.

Strategic Outlook and Long-Term Vision

Management reiterated its long-term ROA target of 3-3.5% by June 2028, driven by sustained NIM expansion, improving credit costs, and structural reduction in opex. The company plans to add approximately 400 Gold Loan branches in FY27, primarily in Tier 2 and Tier 3 locations, to further strengthen its diversified portfolio. The focus remains on a risk-first approach, building a solid talent base, and leveraging digital and AI to achieve predictable, sustained profitability across different economic cycles.

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