Poonawalla Fincorp to clean up by shutting ops in elevated default areas

Adar Poonawalla backs former MD Bhutada, says he hasn't done anything, according to lawyers

As a step towards cleaning up, Poonawalla Fincorp Ltd (PFL), erstwhile Magma Fincorp, will shut some products and also operations which have shown defaults. Also, Adar Poonawala, it's chairman, will increase his involvement in working following the departure of its managing director Abhay Bhutada.

Poonawalla said he has given direction on 3-4 areas to the entire team. This includes focus to bring down the cost of funds – which has already happened and will continue to happen.

The company has got a better credit rating and looks to diversify products and sources from which the company borrows from between short-term as well as long term borrowings. This will bring down the cost of borrowings so that the company can improve profitability.

The company also wants to shutdown areas which were not giving us right risk adjusted returns and geographies, which former Magma was operating in, with different levels of risks in terms of defaults (read elevated defaults). “We want to clean up all of that,” Poonawalla said in a conference call over the weekend in the backdrop of Bhutada's resignation. PFL stock closed almost five per cent lower at Rs 168.15 per share on BSE.

Bhutada quit after the (Sebi) barred him from accessing the securities market for allegedly insider trading in shares of PFL.

Poonwalla said it is business as usual. "The unfortunate incident (Bhutada's resignation) is not going to affect business and vision. In fact, it has expedited my direct interest and involvement in business, which was perhaps more at chairman's level, because Sajnay Chamria was vice chairman and Abhay Bhutada was Managing director," he added.

The company is carrying out an independent investigation into the events leading to the exit of Bhutada. Poonwalla said Bhutada will also be clear of what he's done, because he actually hasn't done anything, as far as the lawyers and others (who have) given him the reports, PFL said in a statement.

"Now in the absence of Abhay, I am going to take direct interest to drive it, the way I have driven Serum Institute, to manage risk and growth,” he said.