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Significant reduction in Provisions, improving Asset Quality, strong growth across all business segments helps Poonawalla Fincorp to post strong Q4 FY22 results | Q4 FY22 Result Analysis

Significant reduction in Provisions, improving Asset Quality, strong growth across all business segments helps Poonawalla Fincorp to post strong Q4 FY22 results | Q4 FY22 Result Analysis & Conference Call Highlights

Published on 16 May 2022 .Views 19 .Comments 0
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Business Environment:

The inherent economic strength and potential growth is robust which is indicated by all time high GST collections in April 2022.
World’s highest GDP growth projection by IMF and sharp business expansion visible in April PMI numbers.
With inherent strength and in placed growth level company is well placed to write the rising curve of credit growth that lies ahead for the economy.
Well prepared to manage the rise in borrowing cost if here will be a monetary tightening by RBI and threat of inflation.
Removal of Accommodation by RBI is an expected event to control inflation which is factored into the business.
Borrowing cost reduction and deep repricing are done in FY22 to sustain marginal decline to flat borrowing costs in FY23.
Diversified funding sources and liquidity pools to optimize the borrowing cost.
FY23 will see the full benefit of 100 percent term loan repricing done till FY22.

PFL Financial Highlights (Consolidated):

Consolidated AUM grew by 16.5% YoY and 8.9% Q-o-Q to 16,579 crores in Q4 FY22.
AUM of focused products grew by 64% YoY and 17.3% Q-o-Q.
Discontinued book stood at 17.9% of consolidated AUM.
Total Disbursements stood at 3,336 crores n Q4 FY22 grew by 80.8% Q-o-Q.
Disbursements stood at 9,494 crores grew by 158% YoY.
NIM stood at 9.5% in Q4 FY22 compared to 8.8% in Q3 FY22.
NIM stood at 8.9% in FY22 compared to 8.1% in FY21.
ROA is at 2.5% in FY22 and 3.1% in Q4 FY22.
CAR is at 49.5% as on march 2022.
Consolidated PAT stood at 375 crores in FY22 compared to loss of 559 crores in FY21.
Average cost of borrowings stood at 7.4% in Q4 FY22.
Average cost of borrowings reduced by 215 bps from Q1 FY22 while GS3 and MS3 stood at 2.7% and 1.1% by march 2022 compared to 3.5% and 1.8% in previous quarter.
Cost to Income ratio down by 110 bps in Q4 FY22.
Stress free book declined by 103 bps YoY and 84 bps Q-o-Q to 2.7% in Q4 FY22.
Restructured portfolio reduced to 4.7% of AUM in Q4 FY22 compared to 5.9% in Q3 FY22.
Collection Efficiency stood at 108.4% in Q4 FY22.
Carrying 140 crores of specific covid provisions as of march 2022. 
Maintained management overlay of 140 crores which is 0.8% of AUM.
From start of FY22 embarked on end-to-end digital transformation across sourcing, sales, underwriting, customer onboarding, collections and customer servicing.
On May 12, 2022 approval is given to raise funds for PHFL subsidiary through board of directors meeting.
A dividend of 20% of the face value of the share is approved subject to the Shareholders approval.
Housing subsidiary almost doubled its AUM in last two years in march 2022.
Proposed capital raise for housing subsidiary would not exceed 1000 crores and it is used for business expansion.
With capital raise in housing subsidiary AUM could see a CAGR of 25% and reach 10,000 crores by 2025.

PHFL Financial Highlights:

PHFL emerged as a leading affordable housing finance company with focus on low-income group and contiguous markets across semi urban locations.
PHFL is located in 20 states with 128 branches.
Average ticket size is of 11 lakh rupees per customer in the granular loan portfolio.
Customer base expansion has been four times over the last four years and currently stood at 46,000 customers.
Company has recorded 29% CAGR growth over last four years.
Mission to achieve dignity of living for customers by serving customers through GO HL and GO DIRECT.
Branch count stood at 242 as of march 31, 2022 down from 297 in march 31, 2021.
On book affordable loan stands at 69%.
Closed AUM stood at 5060 crores as on march 2022 with 27% AUM growth.
Disbursals grew by 57% YoY stood at 1970 crores in FY22.
Disbursals stood at 797 crores in Q4 FY22.
Net stage 3 stood at 1.1% as on march 2022.
77% of the business has been sourced directly.
Earning asset book grew by 46% YoY in FY22.
Ratio of earning assets to total assets has sharply risen from 73% to 84% in FY22.
PBT stood at 101 crores in FY22 compared to14 crores in FY21 which is highest ever.
Collection Efficiency stood at 98.9% in Q4 FY22 compared to 97.6% in Q3 FY22.
Gross phase three assets stood at 0.96% at the end of FY22.
PCR stood at 37.4% in Q4 FY22.
Overall Provisions is 1.7% of the total loan book.
Assigned with AA+ stable ratings by Crystal.
Cost of Borrowings reduced by 230 bps from 9.1% in beginning of year to 6.8% at the end of the year.
Liquidity is at 1100 crores in the form of sanction limits.
Received a fresh sanction of 725 crores from NHB during FY22.

Digital Initiative Highlights:

Added a digital consumption loan products to 100% retail product portfolio in March 2022.
Created a in house contact service centre to ensure excellent customer service with focus on first time right resolution.
Disbursement contribution of the DDP channels stood at 17% in Q4 FY22.
Contribution of partnerships in pre-owned car book disbursements has doubled over the previous quarter.


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Disclosure with regard to ownership and material conflicts of interest:
1. Neither Research Analyst nor the entity nor his associates or relatives have any financial interest in the subject Company;
2. Neither Research Analyst nor the entity nor its associates or relatives have actual /beneficial ownership of one percent or more securities of the subject Company, at the end of the month immediately preceding the date of publication of the research report or date of public appearance;
3. Neither Research Analyst nor the entity nor its associates or his relatives have any other material conflict of interest at the time of publication of the research report or at the time of public appearance.
Disclosure with regard to receipt of Compensation:
1. The Research Entity and its associates have not received compensation from the subject company in the past twelve months.
2. The subject company is not or was not a client during the twelve months preceding the date of recommendation

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