- Assets under management exploded 77.6% YoY, reaching INR 550.2 bn.
- Portfolio split: 56% secured, 44% unsecured – a balanced risk profile.
- Target price revised to INR 463 based on a 3.1× FY28E ABVPS multiple.
- Rating upgraded from Reduce to Hold after recent price correction.
- Sector peers Tata Capital and Adani Finance are reacting with divergent strategies.
You missed the 78% AUM explosion at Poonawalla Fincorp—now’s the moment to act.
In Q3FY26 the company posted a jaw‑dropping rise in assets under management (AUM) to INR 550,170 million, a 77.6% year‑over‑year jump and 15.3% quarter‑over‑quarter growth. The surge was powered by strong inflows in both secured and unsecured loan books, leaving the on‑book mix at a comfortable 56% secured versus 44% unsecured. Such a blend cushions earnings volatility while still capturing higher yields from unsecured lending.
Why Poonawalla Fincorp’s AUM Surge Beats Sector Trends
The broader NBFC landscape has been grappling with tightening credit conditions and higher cost of funds. Yet Poonawalla Fincorp managed to outpace the industry average AUM growth of roughly 45% in the same quarter. This outperformance stems from three core levers:
- Geographic diversification: Aggressive expansion into Tier‑2 and Tier‑3 cities where credit demand is still under‑served.
- Product innovation: Introduction of hybrid loan products that combine asset‑backed security with flexible repayment schedules, attracting both retail and SME borrowers.
- Technology adoption: AI‑driven credit scoring that improves approval speed without compromising asset quality.
Collectively these factors generate a virtuous cycle—higher loan originations feed AUM, which in turn fuels cross‑selling opportunities and fee income.
How Competitors Like Tata Capital and Adani Finance Are Positioned
Tata Capital has leaned heavily into secured financing, maintaining a 70% secured‑loan mix. While this limits upside in a rising unsecured market, it preserves asset quality during stress periods. Conversely, Adani Finance has accelerated unsecured growth, pushing its unsecured share to 55%, but this has raised concerns about credit risk amid a volatile macro environment.
Poonawalla Fincorp’s 44% unsecured exposure sits neatly between the two, offering a balanced risk‑return profile. Investors should watch the upcoming earnings season for clues on whether peers will adjust their mix, potentially reshaping the competitive dynamics.
Historical Parallel: What the 2018 NBFC Boom Teaches Us
Back in 2018, several NBFCs reported double‑digit AUM growth fueled by aggressive unsecured lending. While earnings initially surged, a sudden rise in non‑performing assets (NPAs) forced many to retrench, and stock prices collapsed. The key lesson was over‑extension without adequate risk controls.
Poonawalla Fincorp’s current trajectory differs because its credit underwriting now incorporates machine‑learning models that flag early signs of borrower distress. Moreover, the secured‑loan component remains dominant, providing a cushion against potential downside.
Decoding the 3.1× FY28E ABVPS Valuation Multiple
The analyst team applied a forward‑looking price‑to‑book‑value‑per‑share (ABVPS) multiple of 3.1× for FY28E. This figure reflects two considerations:
- Growth premium: The 77.6% AUM growth justifies a higher multiple relative to peers trading around 2.3×.
- Risk discount: The modest unsecured share tempers the multiple, acknowledging residual credit risk.
At the derived target price of INR 463, the stock offers an implied upside of roughly 12% from its current level, assuming the correction holds and earnings continue to beat expectations.
Impact of the Rating Upgrade to HOLD on Your Portfolio
The shift from “Reduce” to “Hold” signals that the recent price dip may have been over‑reacted to, rather than a fundamental deterioration. For portfolio managers, this suggests a short‑term tactical pause rather than a full‑blown exit.
Key implications:
- Reduced downside risk perception may attract value‑oriented investors, supporting price stability.
- Institutional allocation committees might re‑weight exposure, keeping the stock in core‑mid‑cap baskets.
- Retail investors could see the rating as a green light to accumulate on the dip, especially given the attractive valuation.
Investor Playbook: Bull vs. Bear Cases
Bull Case
- Continued AUM acceleration beyond FY28, driven by rural credit penetration.
- Improvement in net interest margin (NIM) as unsecured pricing premium widens.
- Successful rollout of digital lending platforms reducing cost‑to‑serve.
- Potential strategic partnership or partial stake sale at premium valuation.
Bear Case
- Macroeconomic slowdown leading to higher credit stress, especially in unsecured segment.
- Regulatory tightening on NBFC capital adequacy ratios, forcing higher funding costs.
- Competitor pricing wars eroding margin, particularly if Tata Capital expands unsecured lines.
- Unexpected asset quality deterioration triggering a downgrade.
Investors should align position sizing with their risk tolerance, perhaps using a staggered entry strategy to capture upside while protecting against the downside scenarios outlined above.