“As you know we operate at 102 branches, but maximum we are gaining market share there and going forward whatever guidance we have given 35% to 40%, I think in the past also we have over-delivered. Going further, we will stick to our guidance and we are confident of achieving the given guidance,” says Abhay Bhutada, MD, Poonawalla Fincorp.
You have delivered a great set of numbers, clearly beating what the market was anticipating. But tell me what are the triggers behind them and also want to understand what the guidance is for the current financial year?
We have received growth across all the products. For example, pre-owned car, loan against property, machinery loan, medical equipment loan, personal loan, business loan. So, from all the products if you see, professional loan, we have got good amount of growth and in three or four products, POC, LAP, BL, I think if you do the apple to apple comparison, we are in top three across the NBFC segment. As you know we operate at 102 branches, but maximum we are gaining market share there and going forward whatever guidance we have given 35% to 40%, I think in the past also we have over-delivered. Going further, we will stick to our guidance and we are confident of achieving the given guidance.
There is a consistent reduction in opex over the last couple of quarters. How was it achieved and how do you see the trajectory going forward?
We have reduced opex from 5.43% to 3.99% year on year and now going further you can expect further improvement. We have done consolidation of branches, we have done consolidation of manpower, we are focusing on digital-led model, and we do not do any kind of cash collection.
So, we have a centralised model wherein sourcing is through digital as well as through DSA model. So, it is a digital cum phygital but more focused towards the digital so that is the reason we have less opex at the time of sourcing, less opex in terms of the overall underwriting and that is the reason again we go for a digital collection as well. So, overall, it is giving us a lot of confidence that going further also we will be able to reduce the opex.
Now, you have maintained the best-in-class asset quality with consistently improving over the years. Can we expect a further improvement given your growth plans because sometimes growth comes at a risk of asset quality pressure?
It is a risk-adjusted approach. We are not focusing on new to credit customer or riskier segment. We have a lot of database. We are lending to bureau-tested customer with a cash flow. So, we do not see any challenge in the segment which we are targeting and that is the reason we are confident while achieving the growth, there will not be any asset quality issue. The new book is performing really well. There is a reduction of GNPA if you see from 1.44% to 1.16%, net NPA from 0.78% to 0.59%. So, going further also you can expect further improvement in terms of asset quality.
One question which everyone has been talking about is the clarification from you on the fact that you have transformed the model of digital lending at the company and given consistent performance for so many quarters and you are now moving higher up at the group level as well. What prompted this transition from your current role?
See, change of MD was not a sudden but in fact well-thought-out decision proposed by me. After having successfully transformed this three-decade-old company which was almost like a sick unit Magma Fincorp, one of the most prominent NBFCs of the country, the platform is well-set for the next leg.
I have been a serial entrepreneur and I have built up capital. It was my own NBFC, which was into digital lending, which I sold to Mr Adar Poonawalla in 2019. Technically, we have transferred team, technology, and loan book, then we co-founded together Poonawalla Finance which was unlisted NBFC of the group.
Poonawalla Finance, we built a book of more than Rs 2,000 crore in two-year. We built team and technology there. So that is the main reason behind this transformation and we wanted to grow at a pan-India level, then we acquired Magma and we renamed to Poonawalla Fincorp.
If you see this decision, the reason was I never wanted to focus on day-to-day operation after building this for the last couple of years. This tap capital, then Poonawalla Finance, then Poonawalla Fincorp, over a period of this seven-eight years I have always built the digital lending, different products, different geography, different-different strategies.
We have experimented at tap level at Poonawalla Finance level which played very well here in Poonawalla Fincorp. So, rather at a personal level, instead of getting involved with day-to-day operation, though our chairman was not ready and Mr Adar Poonawalla was not ready to accept this change, I have convinced him that I will continue as NED.
I also convinced the board that I will continue as an NED so that I do not have to do a day-to-day operation. And I am confident that the platform is well set for the new managing director to take it ahead with existing strong management team as the transformation is fully done with all the post-acquisition issues resolved during my tenure itself as MD and there is nothing to worry, I can clarify this.
Since I am continuing as a non-executive director of Poonawalla Fincorp to give strategic insights and continue to guide the team here. Further, I am also being elevated at the group level to support strategic, financial and investment decision at the group level.
So, can you update us on the co-branded credit card launch? What is the timeline?
We have received all the approvals and maybe in next two to three weeks we will be able to launch the co-branded credit card. IndusInd Bank is our co-brand partner.
