Poonawalla Fincorp has emerged as one of the fastest-growing NBFCs in India, with Anand Rathi maintaining a BUY rating and setting a target price of Rs 663 against the current market price of Rs432. The company’s performance is underpinned by a sharp 70% year-on-year AUM expansion, improving margins, and strong operating leverage. Backed by a high-caliber management team and aggressive digital transformation, the firm is positioned to deliver a 48% AUM CAGR over FY26–FY28. Asset quality continues to improve, while profitability metrics such as RoA are expected to strengthen meaningfully, making it a compelling growth story in the financials space.

Anand Rathi Maintains BUY Call with Strong Upside Visibility

Recommendation: Anand Rathi Share and Stock Brokers has reiterated its BUY rating on Poonawalla Fincorp, citing sustained growth momentum and improving profitability metrics.

Target Price: Rs663 (12-month horizon)
Current Price: Rs432
Implied Upside:

The valuation is anchored on a 3.5x Mar-28 estimated Price-to-Book, reflecting confidence in long-term return ratios and scalable growth architecture.

Explosive AUM Growth Driving Core Business Momentum

Best-in-Class Expansion: Assets Under Management (AUM) surged 70% YoY and 10% QoQ, demonstrating exceptional execution across both physical and digital channels.

Portfolio Composition:

Loan Against Property (LAP): 28%
Consumer Loans: 19%
Business Loans: 12%

New products contributed 14% to AUM, with disbursements reaching Rs30bn—accounting for nearly 24% of total disbursements. The company is rapidly scaling its distribution footprint:

400 gold loan branches
60 commercial vehicle hubs across 13 states
12,500+ consumer durable dealer touchpoints

This multi-channel strategy positions the company to sustain aggressive growth while diversifying revenue streams.

Margin Expansion and Operating Leverage Strengthen Profitability

NIM Expansion: Net Interest Margin improved by 70 basis points YoY, driven by favorable product mix and improved disbursement yields (+40 bps).

Operating Efficiency:

Cost-to-Income ratio improved by 550 bps QoQ to 46%
Opex-to-AUM declined to 4.13%

The company is benefiting from scale-driven efficiencies, even as it continues investing in technology, collections infrastructure, and branch expansion.

Technology and AI Integration as a Structural Advantage

Digital Transformation: Over 76 AI-led projects are underway, spanning underwriting, collections, and customer servicing.

Digital Contribution: Digital lending already accounts for 30%+ of the portfolio, enhancing turnaround time and risk calibration.

The management’s ambition to build an AI-first NBFC ecosystem is translating into measurable productivity gains, including reduced dependency on manual underwriting and improved scalability.

Asset Quality Continues to Improve with Strong Risk Controls

Key Metrics: - Gross NPA: 1.44% (improved by 7 bps QoQ) - Credit Cost: 2.5% (down 10 bps QoQ) - Stage-2 Assets: 1.1%

The steady decline in stress indicators highlights disciplined underwriting and robust collection frameworks. Additionally, early delinquency metrics (6MOB 30%+) have improved to 1.05%, signaling sustainable asset quality trends.

Financial Performance Snapshot

Growth Trajectory: Profit After Tax is projected to grow at over 60% CAGR between FY26–FY28, supported by strong topline expansion and margin stability.

Return Ratios Set to Improve Significantly

Return on Assets (RoA): Expected to improve from 1.1% in FY26 to 2.0% by FY28 Return on Equity (RoE): Forecasted to rise to 14.3% by FY28

The improvement is driven by:

Higher fee income contribution
Better cost efficiencies
Optimized asset-liability mix

These metrics indicate a transition toward a high-quality, profitable growth model.

Valuation Comfort Despite Strong Growth

At current levels, the stock trades at: - 2.7x FY27e P/BV - 2.4x FY28e P/BV

Given the company’s superior growth trajectory relative to peers, the valuation appears reasonable. The target multiple of 3.5x P/BV reflects anticipated improvement in return ratios and earnings visibility.

Management Outlook: Sustained Growth with Discipline

Growth Guidance: AUM expected to grow at 35–40% over the medium term

Strategic Focus Areas:

Expansion of high-yield product segments
Strengthening franchise distribution
Enhancing digital capabilities
Maintaining strict risk calibration

The management’s emphasis on RoA-driven decision-making ensures that growth does not come at the expense of profitability.

Key Risks to Monitor

Downside Factors: - Higher-than-expected asset quality deterioration - Slower-than-anticipated loan growth - Macroeconomic headwinds impacting credit demand

While current trends remain favorable, these risks could influence valuation re-rating.

Investment Verdict: High-Growth NBFC with Strong Structural Tailwinds

Poonawalla Fincorp stands out as a high-conviction growth play within India’s NBFC space. Its combination of rapid AUM expansion, improving margins, disciplined risk management, and deep technology integration creates a compelling long-term narrative.

With a target price of Rs663 and strong earnings visibility, the stock offers attractive risk-reward for medium- to long-term investors, particularly those seeking exposure to scalable financial services platforms.