The brokerage said while the company has delivered as per its strategy during the September quarter, the positive surprise element has been the steady decline in the consolidated stage-3 assets or credit impaired assets by 67bps quarter on quarter. “We expect aggressive write-offs (cumulative pool of Rs10.5 billion) followed by consistent recovery efforts (estimate 40-45% recovery run-rate over 12-18 months) to cushion credit cost till FY24E,” noted the brokerage firm.

The brokerage mentioned that the company’s path into the growth phase is reflected in:

• new products steadily scaling up
• monthly organic disbursement run-rate of Rs1,200-1,300 crore
• investment in people, technology, scale-up and rollout of new products leading to higher ‘opex to AUM’ at 5.9%.

The brokerage further said the company’s performance during the previous quarter augments visibility on AUM growth of 32% for FY23E/FY24E, NIMs being sustained upwards of 9% and credit cost being contained at 0.5-0.8%.

Sharp business execution, improved market positioning in focused product segments, business scale-up through diversified and granular portfolio mix, and consistent earnings delivery are likely to trigger rerating. Also, the proposed preferential issue in Poonawalla Housing Finance up to Rs 1,000 crore for

ICICI Securities iterated that with reaffirmation on the portfolio growth as well as RoA of over 3%, the company is seen to command a valuation of 3.8x FY24E consolidated book. The brokerage hence has upgraded the stock’s target price from Rs 335 to Rs 368.

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