Poonawalla Fincorp shares surge after Q2 net profit jumps 407% to Rs 375 crore

Shares of Poonawalla Fincorp surged up to 8 per cent on Monday after the non-banking financial company reported a fourfold jump in second-quarter net profit, underpinned by strong retail credit demand and improved asset quality.

The lender posted a 406.8 per cent year-on-year increase in profit after tax to Rs 375 crore for the quarter ended 30 September, up from Rs 74 crore in the corresponding period last year. Following the filing, the company's shares touched an intraday high of Rs 484 on the stock exchanges, up from the previous close of Rs 447.30.

What drove the earnings jump

The earnings expansion was led by strong core income. Net interest income climbed 80.6 per cent year-on-year to Rs 1,380 crore, compared with Rs 764 crore in the second quarter of the previous financial year.

Total interest income increased 72.3 per cent to Rs 2,416 crore, rising from Rs 1,402 crore a year earlier. Interest expenses rose at a slower pace of 62.2 per cent to Rs 1,035 crore, compared to Rs 638 crore in the prior-year period, allowing lending margins to widen.

The results highlight the ongoing strength of India's non-banking financial sector, where disciplined retail lending and domestic economic stability continue to fuel balance-sheet expansion without compromising on credit standards.

Asset quality and branch expansion

Asset quality showed steady refinement during the quarter. Gross non-performing assets dropped by 17 basis points from the previous quarter and declined 39 basis points compared with the same period last year. The company confirmed that it did not undertake any accelerated write-offs during the quarter.

Distribution also expanded, with the company's dedicated gold loan branch network reaching 550 locations. Sourcing was supported across direct selling agents, digital channels, tele-calling and direct field staff.

Arvind Kapil, managing director and chief executive officer of Poonawalla Fincorp, noted that disciplined expansion in assets under management had been matched by fee income and net interest margin gains. Continuous asset quality improvement lowered credit costs and lifted the company's return on assets, supported by internal technology and artificial intelligence applications, Kapil said.

Market reaction and outlook

The company's performance drew positive assessments across brokerage desks, though views diverged on future valuation multiples. Motilal Oswal Financial Services reiterated a 'buy' rating with a target price of Rs 570 per share, citing steady asset growth, improving loan yields, and operating leverage.

In contrast, Emkay Research retained a 'reduce' rating with a target price of Rs 410, anticipating potential pressure from proposed caps on insurance distribution commissions.

While Poonawalla Fincorp shares had dropped about 12 per cent over the past twelve months, the stock has gained 186 per cent over a five-year horizon, tracking the wider expansion of formal retail credit across India's financial system.