CRISIL Ratings Ltd (CRISIL) has upgraded Poonawalla Fincorp Limited (PFL)’s long-term debt instruments and bank facilities to “CRISIL AAA (triple A)/ Stable”.
Commenting on the upgrade, Mr. Abhay Bhutada, Managing Director, said, “The rating upgrade testaments our business model and relentless focus on executing the stated strategy to build a strong foundation for a long-term sustainable leadership position in the industry. The upgrade would help further strengthen our liability franchise, optimize borrowing cost, and accelerate our growth journey.”
CRISIL Ratings has upgraded Poonawalla Fincorp Limited’s (PFL) long-term bank facilities and non-convertible debentures to ‘CRISIL AAA/Stable’ from ‘CRISIL AA+/Stable’. The commercial paper rating has been reaffirmed at CRISIL A1+.
PFL’s rising strategic relevance to Cyrus Poonawalla Group, whose flagship firm is Serum Institute of India Private Limited (SIIPL; rated CRISIL AAA/Stable/CRISIL A1+), is driving the rating action. This is consistent with the group’s emphasis on domestic consumption as a key component in their growth strategy. Following the divestiture of Poonawalla Housing Finance Limited (PHFL), PFL will play a vital role in implementing this strategy across the group’s areas of focus, namely consumer and MSME (micro, small, and medium businesses) financing through tech driven lending.
Poonawalla Finance Limited (PFL) has seen an improvement in its standalone profile, as evidenced by the steady scale-up of its loan book, healthy capitalization metrics, and improving earnings profile. The company’s healthy resource profile, marked by competitive cost of funds, has also been a factor in its success.
Following the acquisition of Magma Fincorp Limited (MFL) by the Cyrus Poonawalla Group, PFL has revised its product strategy to target good quality, credit-tested, mass-affluent retail consumers, and small businesses in semi-urban/urban locations. As a result, PFL has announced its plans to discontinue some of the loan products originated by MFL.
Despite this change in portfolio strategy, PFL’s asset quality metrics remain comfortable, with most of the Gross Non-Performing Assets (GNPA) stemming from the legacy portfolio. In Q4FY23, PFL’s AUM increased by 16% QoQ and 37% YoY to reach ~Rs 16,120 crore as on March 31, 2023. The company has also focused on a direct digital origination strategy, which contributed to ~81% of disbursements in Q4FY23.
In December 2022, the Board of PFL approved the complete stake sale in Poonawalla Housing Finance Ltd (PHFL) to Perseus SG Pte Limited. The transaction will involve a sale of 24,98,21,117 equity shares held by PFL in PHFL at a valuation of Rs 3,900 crore. Post the consummation of the transaction, TPG Global will hold a majority stake in PHFL. PFL plans to retain the entire proceeds received from the stake sale to support its business growth.