Poonawala Fincorp surges 13% after a 15% decline in past four trading days

Motilal Oswal Financial Services recently initiated coverage on Poonawalla Fincorp with a 'buy' rating and a target price of Rs 350 per share

Shares of Poonawala Fincorp moved 13 per cent higher to Rs 277.50 on the BSE in Monday’s intra-day trade due to a nearly two-fold jump in the average trading volumes. In comparison, the S&P BSE Sensex was up 1.08 per cent at 60,489. 

A combined 6.8 million shares of the company had changed hands on the NSE and BSE till 01:29 PM. The stock had hit a record high of Rs 344 on April 13, 2022.

Poonawalla Fincorp (formerly Magma Fincorp) is a Cyrus Poonawalla group promoted non-deposit taking systemically important non-banking finance company (ND-SI-NBFC).

Consequent to the capital raise of Rs 3,456 crore in May 2021, the company is now part of the Cyrus Poonawalla Group with a majority stake owned by Rising Sun Holdings, a company owned and controlled by Adar Poonawalla registered with the RBI.

On December 14, Poonawalla Fincorp in its board meeting approved sale of its housing subsidiary Poonawalla Housing Finance to TPG (Perseus SG Pte. Ltd., an entity affiliated with TPG Global, LLC) at a valuation of Rs 3,900 crore.

The transaction will maximize the shareholders’ value in the long term as Poonawalla Fincorp focusses on building a tech-led and digital-first financial services company with leadership in consumer & MSME financing, the company said.

Motilal Oswal Financial Services (MOFSL) has initiated coverage on Poonawalla Fincorp with a ‘buy’ rating and a target price of Rs 350 per share.

“Consumer and small business finance – the segments targeted by Poonawala Fincorp – have a huge market opportunity. While we expect the early green shoots of a transformed company to become visible within the next three-to-six months, the company has laid down a robust foundation for sustainable profitability through initiatives that will lead to lower operating costs (as a  per cent of AUM), higher business volumes and robust asset quality,” MOFSL said in a report.

The brokerage has modelled an AUM/PAT CAGR of 37 per cent/65 per cent over FY22-FY25E, respectively, with a RoA/RoE of 4.8 per cent/12 per cent in FY25E.

"The will have more levers from its fee income and operating cost ratios to deliver a further improvement in its RoE profile when it reaches steady-state,” it said.