Acuité has reaffirmed its long-term rating of ACUITE AA+ (read as ACUITE double A plus) on the Rs.212.88 Cr. Non-Convertible Debentures of PFL. The outlook is revised from Stable to Positive.
Acuité has reaffirmed & withdrawn its long-term rating of ACUITE AA+ (read as ACUITE double A plus) on the Rs. 188.52 Cr. non-convertible debentures of Poonawalla Fincorp Limited (PFL). The rating withdrawal is in accordance with Acuité’s policy on withdrawal of rating. The rating is being withdrawn on account of the request received from the company and the NOC/No Dues received from the banker as per Acuité’s policy on withdrawal of ratings.

The revision in outlook is primarily on account of substantial improvement in earning profile, healthy growth in AUM along with improving asset quality. The earnings profile of PFL witnessed improvement in FY2022 on a consolidated basis (PFL & Poonawalla Housing Finance Limted (PHFL)) as reflected in PAT of Rs. 375.41 Cr. as compared to loss of Rs. 558.96 Cr. for FY2021. For Q1FY23, PAT stood at Rs. 141 Cr, up 18.5% QoQ and up 118.3% YoY, which resulted in a RoA of 3.4 percent for the same period. The rating action also draws comfort from significant improvement in asset quality with Gross Stage 3 and Net Stage3 at 2.2 percent and 0.95 percent respectively as on June 30, 2022, as against 2.7 percent and 1.1 percent respectively as on March 31, 2022 (3.7 percent and 1.2 percent for FY2021 respectively). Acuite expects further improvement in asset quality with Gross Stage 3 and Net Stage 3 around 1.6 and 0.9 percent by the end of September 2022.
The rating continues to factor in expertise and experience of board and management team with Mr. Adar Poonawalla as the Chairman and non-executive director of the ten-member board comprising five independent non-executive directors. The rating also takes into account the strong promoter group viz. Cyrus Poonawalla group, whose flagship company, Serum Institute of India Private Limited exhibits very strong financial flexibility. PFL’s credit profile further derives strength from its long and established presence of nearly three decades in retail financing and sequential uptick in disbursements coupled with business transformation initiatives such as realigning product mix, revised credit policies, digital focus etc. The rating also factors in growth in loan portfolio to Rs 16,579 Cr as on March 31, 2022 as compared to Rs. 15,228 Cr. as on March 31, 2021 owing to healthy disbursement levels. The total disbursements stood at Rs. 9,494 Cr. for FY2022. The AUM further grew to Rs. 17,660 Cr as on June 30, 2022 with disbursements amounting to Rs. 3,436 Cr for Q1FY2023.
These strengths are partially offset by limited seasoning of the new portfolio and relatively moderate scale of operations. PFL has realigned its product offering by discontinuing certain product lines like new car/CV/CE and used CV/CE. The dis-continued product lines, which contributed to around 36% of the AUM as of June 30, 2021, subsequently reduced to under 10%. Due to substantial growth in loan book in recent quarters the new portfolio generated has limited seasoning.
While Acuité takes cognizance of various structural and business transformation initiatives undertaken, PFL’s ability to grow its AUM in a sustained manner while maintaining healthy asset quality & profitability will remain key rating monitorable.