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Poonawalla Fincorp's Remarkable Journey To Achieving A Sub-1% GNPA

 


Poonawalla Fincorp Limited has achieved a significant milestone, boasting a Gross Non-Performing Assets (GNPA) ratio below 1% and a Net NPA (NNPA) below 0.5% as of May 31, 2024. This achievement marks a turning point for the company and highlights the exceptional leadership at Poonawalla Fincorp.

A Transformation Under New Leadership

In 2021, the Poonawalla Group acquired Magma Fincorp, marking the beginning of a transformative journey. Poonawalla Fincorp has experienced significant growth, both in scale and quality. This transformation has been driven by a strategic business model, robust risk management, and improved collection efficiency.

Also Read: Unveiling Abhay Bhutada’s Salary Journey And Impact As MD Of Poonawalla Fincorp

Impressive Financial Metrics

Before the acquisition, the legacy Magma had an Assets Under Management (AUM) of ₹11,631 crore and a GNPA of 8.23%. Fast forward to March 2024, Poonawalla Fincorp has not only doubled its AUM to ₹25,003 crore but also reduced its GNPA to an impressive 1.16%. These figures demonstrate the effectiveness of the new leadership and strategic direction.

Key Factors Behind the Success

Several key factors have contributed to Poonawalla Fincorp's success in achieving such impressive financial metrics.

1. Strategic Business Model: The company has adopted a data-driven lending approach, moving away from the traditional physical lending methodology. This shift has allowed for more accurate credit assessments and better risk management.

2. Robust Risk and Governance Practices: Implementing stringent risk management and governance practices has been pivotal. The company has focused on improving collection efficiency and maintaining a high-quality asset base.

3. Improved Collection Efficiency: The shift to digital collections has played a significant role in enhancing efficiency. Digital collections now make up 81% of the total, compared to just 10% before the acquisition.

4. Cost of Borrowing: The cost of borrowing has been reduced from 9.64% to 8.17%, reflecting the company's improved credit rating and better financial health.

A New Era of Digital-First Approach

One of the most notable changes has been the shift to a digital-first approach. This shift has not only streamlined operations but also significantly improved customer experience. By leveraging technology, Poonawalla Fincorp has been able to offer faster, more efficient services, attracting a broader customer base and enhancing overall profitability.

Remarkable Growth in AUM and Profitability

Under current leadership, the company's AUM per employee has increased from ₹2.14 crore to ₹11 crore. Additionally, the profit before tax (PBT) per employee has seen a dramatic rise from ₹0.12 lakh to ₹68 lakh. This growth highlights the increased efficiency and productivity within the company.

Also Read: Journey Of Poonawalla Fincorp’s Managing Director – Abhay Bhutada

Achieving Long-Term Goals Ahead of Schedule

Poonawalla Fincorp set ambitious long-term goals during the acquisition, aiming to achieve a Net NPA below 1% by 2025. Remarkably, the company has surpassed this target well ahead of schedule, with a Net NPA of 0.59% as of March 2024. This early achievement is a testament to the company's strategic planning and execution.

Commitment to Superior Asset Quality

Maintaining superior asset quality has been a cornerstone of Poonawalla Fincorp's strategy. The company has focused on prudent credit policies and careful monitoring of its loan portfolio. This approach has resulted in a pristine asset quality, further enhancing the company's financial stability and reputation in the market.

Financial Performance Highlights

The company's financial performance over the past three years has been nothing short of stellar. Key metrics as of March 2024 include:

- AUM Growth: 55%

- Profit Growth: 84%

- Return on Assets: 5.73%

These figures not only surpass the company's long-term guidance but also set new benchmarks in the industry.

Looking Ahead: Sustaining Growth and Stability

As Poonawalla Fincorp moves forward, sustaining this growth and maintaining financial stability will be crucial. The company plans to continue leveraging technology, enhancing its risk management practices, and exploring new avenues for growth. Under this leadership, the future looks promising for Poonawalla Fincorp.

Also Read: Unveiling Abhay Bhutada: A Leader’s Inspiring Odyssey In Finance

Conclusion

The company's journey to achieving a sub-1% GNPA is a remarkable success story. Poonawalla Fincorp has transformed itself into a leader in the lending space, setting new standards for performance and asset quality. With a strong foundation and a forward-looking approach, Poonawalla Fincorp is well-positioned to continue its trajectory of growth and excellence in the financial sector.

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