Poonawalla Fincorp’s rating upgraded to AAA by Care Ratings

Poonawalla Fincorp

India, October 1, 2022: Care Ratings Ltd (Care) has upgraded the long-term rating of Poonawalla Fincorp Limited (PFL) and its subsidiary, Poonawalla Housing Finance Limited (PHFL) to “CARE AAA (Triple A), Stable”. This rating is applicable for bank loan facilities, non-convertible debentures, market linked debentures and subordinated debt.

Mr. Adar Poonawalla, Chairman, PFL stated, “The financial services business has been identified to be of strategic importance for Cyrus Poonawalla Group. The current rating upgrade by CARE to AAA (Triple A) reaffirms the strength of the organization and its leadership along with the financial and operational excellence. This is an important milestone in our journey towards becoming a leader in financial services and is a testimony of our commitment towards building a strong institution.”

Commenting on the upgrade, Mr. Abhay Bhutada, MD, PFL, said, “This upgrade reflects our relentless focus on executing our stated strategy and building a strong foundation for a long-term sustainable leadership in the industry. This upgraded rating would further strengthen our liability franchise and accelerate our growth journey in line with our vision and mission. We stay committed to be amongst the top 3 NBFCs in consumer and MSME segments through tech-enabled growth in a customer centric manner and create value for all stakeholders”

The complete details of the rating upgrade can be found in the appended annexure.

About Poonawalla Fincorp

Poonawalla Fincorp Limited (Formerly known as Magma Fincorp Limited) is a Cyrus Poonawalla group promoted non-deposit taking systemically important non-banking finance company (ND-SI-NBFC), registered with the Reserve Bank of India (RBI). The Company started operations nearly three decades back and is listed on the BSE Limited (BSE) and the National Stock Exchange in India (NSE). Consequent to the capital raise of Rs 3,456 Crore in May’21, the Company is now part of the Cyrus Poonawalla Group with majority stake owned by Rising Sun Holdings Private Limited, a company owned and controlled by Mr. Adar Poonawalla.

The Company’s new identity “P” stands for Passion, Principles, Purpose, People and Possibilities. Poonawalla Fincorp Limited (“PFL”) has a widespread coverage with 231 branches across 21 States. The Company along with its subsidiary has AUM of ₹17,660 crore and employs more than 5,000 people. Its financial services offerings include pre-owned car finance, personal loans, loan to professionals, business loans, SME LAP, supply chain finance, medical equipment, consumer loans and affordable home loans.

For more information, please log on to: www.poonawallafincorp.com

Facilities/InstrumentsAmount (₹ crore)Rating1Rating Action

Long-term bank facilities
12,655.65(Enhanced from 9,655.65)CARE AAA; Stable (Triple A; Outlook: Stable)Revised from CARE AA+; Stable (Double A Plus; Outlook: Stable)

Long-term / Short-term bank facilities

344.35
CARE AAA; Stable / CARE A1+(Triple A; Outlook: Stable/ A One Plus)Revised from CARE AA+; Stable / CARE A1+(Double A Plus; Outlook: Stable / A One Plus)
Short-term bank facilities200.00CARE A1+(A One Plus)Reaffirmed

Total bank facilities
13,200.00(₹ Thirteen thousand two hundred croresonly)
Facilities/InstrumentsAmount (₹ crore)Rating1Rating Action

Long-term bank facilities
12,655.65(Enhanced from 9,655.65)CARE AAA; Stable (Triple A; Outlook: Stable)Revised from CARE AA+; Stable (Double A Plus; Outlook: Stable)

Long-term / Short-term bank facilities

344.35
CARE AAA; Stable / CARE A1+(Triple A; Outlook: Stable/ A One Plus)Revised from CARE AA+; Stable / CARE A1+(Double A Plus; Outlook: Stable / A One Plus)
Short-term bank facilities200.00CARE A1+(A One Plus)Reaffirmed

Total bank facilities
13,200.00(₹ Thirteen thousand two hundred croresonly)
Perpetual debt79.10CARE AA+; Stable (Double A Plus; Outlook: Stable)Revised from CARE AA; Stable (Double A; Outlook: Stable)
Subordinate debt230.00CARE AAA; Stable (Triple A; Outlook: Stable)Revised from CARE AA+; Stable (Double A Plus; Outlook: Stable)

Market-linked debentures-proposed

250.00
CARE PP-MLD AAA; Stable(Principal Protected-Market-linked debentures Triple A; Outlook: Stable)Revised from CARE PP-MLD AA+; Stable (Principal Protected-Market Linked Debentures Double A Plus; Outlook:Stable)
Non-convertible debentures189.88CARE AAA; Stable (Triple A; Outlook: Stable)Revised from CARE AA+; Stable (Double A Plus; Outlook: Stable)
Proposed Non-convertible debentures4,251.02(Enhanced from 2459.50)CARE AAA; Stable (Triple A; Outlook: Stable)Revised from CARE AA+; Stable (Double A Plus; Outlook: Stable)
Total long-term instruments5,000.00(₹ Five thousand crore only)

Commercial paper
3,000.00(Enhanced from 1,000.00)CARE A1+(A One Plus)
Reaffirmed
Total short-term instruments3,000.00(₹ Three thousand crore only)

Details of instruments/facilities in Annexure-1.

Detailed rationale and key rating drivers

The rating reflects the expectation of strong support from the Cyrus Poonawalla Group, and the healthy financial flexibility of the Group to provide this support. This is derived from the fact that the promoter, i.e., the Cyrus Poonawalla Group holds 61.49% stake through their core investment company (CIC), Rising Sun Holdings Private Limited (RSHPL) with Mr Adar Poonawalla, as the Chairman of the Board. Furthermore, during FY21 and FY22, the group’s flagship company, Serum Institute of India Pvt Ltd (SIIPL; CARE AAA; Stable/ CARE A1+) invested around ₹5000 crores in RSHPL through compulsorily convertible cumulative preference shares. This capital was used to infuse funds in various businesses of the group including Poonawalla Fincorp Ltd (PFL), with RSHPL making equity infusion of ₹3,206 crore in PFL in May 2021. This sizeable investment made in the acquisition of PFL reflects the strategic importance of the financial services business to the group and expectation of timely need-based financial support.

Over the past 12-18 months, apart from significant capital infusion from the group, PFL has been strengthening its systems and processes across all functions including digitisation of its entire customer life cycle. PFL has also revamped its underwriting norms and monitoring mechanisms, in an attempt to make loan book more robust. The company has also modified some of the vintage products of erstwhile Magma Fincorp; PFL is now underwriting business for retail consumer and small businesses in urban and semi-urban locations with higher CIBIL score and better creditworthiness. PFL’s well-diversified loan book coupled with increased focus on risk management, aggressive write-off policy and digitisation is expected to enable it to efficiently manage its asset quality going forward. Furthermore, the group had appointed seasoned professionals across all major functions and product segments to run the day-to-day activities who have now stabilised in their roles.

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