Poonawalla Fincorp Q2 Profit Rises 22% to Rs 375 Crore as Bad Loans and Credit Costs Ease

Poonawalla Fincorp, the consumer and small-business lender backed by the Cyrus Poonawalla group, reported a consolidated net profit of about Rs 375 crore for the July-September quarter, a 21.8% jump over the Rs 308 crore it earned in the April-June quarter. The non-deposit-taking NBFC released its numbers after the stock market closed on Friday, October 9, so investors will get their first chance to trade on them when markets reopen on Monday.

The bigger story sits beneath the headline profit. The quarter shows the lender earning more on each rupee it lends while setting aside less for loans that go bad, which is the combination analysts look for when a lender is trying to show that a recovery is lasting.

Margins move up again

Net interest income, which the company reports including fees and other income, rose 12.3% from the previous quarter to Rs 1,589 crore. Net interest margin on the same basis widened by 16 basis points to 9.26%, from 9.10% in the June quarter.

A margin above 9% is high by NBFC standards and reflects Poonawalla's focus on retail and MSME loans, which usually carry higher yields than secured corporate lending. The expansion is notable given the backdrop: the Reserve Bank of India raised its repo rate to 5.5% earlier this week, its first hike since 2023, which tends to push up funding costs for non-bank lenders over the following quarters.

Asset quality and credit costs

Credit cost, the money set aside for expected loan losses, fell to 2.19% of average assets under management from 2.40% in the June quarter, a 21-basis-point improvement. Gross non-performing assets eased to 1.20% from 1.37%, and net NPAs came in at 0.61%.

Lower provisions and higher margins together lifted return on assets to 2.18%. That compares with 1.98% in the June quarter and 1.81% in the March quarter, so the ratio has improved for two quarters in a row.

Managing Director and CEO Arvind Kapil described the quarter as an inflection point. He said the gains came from loan growth, better pricing, lower credit costs and the company's in-house artificial intelligence systems working together.

Loan book and balance sheet

Assets under management stood at Rs 74,008 crore on September 30. The company said all of its retail products grew, and that newer product lines now make up about 18% of the book.

The balance sheet has room for more growth. The capital adequacy ratio was 18.68%, with Tier-1 capital at 17.15%, well above the 15% regulators require. The lender also held a liquidity buffer of about Rs 6,526 crore.

Poonawalla has made technology a central part of its pitch to investors. It said it started 42 new AI projects during the quarter, taking the total to 143, of which 84 are already in use across its operations.

What to watch on Monday

Shares of Poonawalla Fincorp closed 2.15% higher at Rs 447.30 on the NSE on Friday, before the results were out, giving the company a market value of about Rs 39,389 crore.

When trading resumes, investors are likely to focus on whether the improvement in credit costs can continue as interest rates turn higher, and whether loan growth can keep its pace without asset quality slipping. For borrowers, a stronger NBFC balance sheet usually means steady credit supply. Anyone weighing a new loan in a rising-rate environment can run the numbers with our EMI calculator.

This is an original summary based on public reporting. See our editorial policy for how we source, write, and correct our stories.