Poonawalla Fincorp is aiming to build a loan book of ₹50,000 crore in the next five years, chairman Adar Poonawalla tells Saloni Shukla. While the lender has banking aspirations, Poonawalla says it will wait for at least two-three years to see how regulations evolve.
How was the journey so far for Poonawalla Fincorp?
About three-and-a-half years ago, we started Poonawalla Finance, which was a privately held NBFC, through which we wanted to give loans to professionals, small business loans, personal loans and much more. At that time, the financial sector had a huge vacuum with so many NBFCs walking out of the market due to asset-liability mismatches, and so many other issues. Since we took over Magma group, we went through an entire operational and management rejig. We stopped working in certain geographies which were inadequate, we gave up high NPA products which had issues with collections like agri, CV & tractor loans, we wrote off bad loans, and products, reduced branches from 300 to 115. We are now ‘AAA-stable’ accredited.
I would like to put to rest all the rumours circulating and extend my long-term commitment to all stakeholders and shareholders of Poonawalla Fincorp. We have sold the housing finance business to TPG. We don’t intend to take out this money from Poonawalla Fincorp and there will be no buyback – the transaction once complete will ensure that we are well capitalised for the next five years to grow to an AUM (assets under management) of ₹50,000 crore without having to infuse additional capital.
What will be the key growth drivers for Poonawalla Fincorp?
Going forward, we will only focus on organic growth in our current and proposed line of business. We will continue to build a strong retail franchise in consumer and MSME financing. We are already doing ₹1,200 crore of organic business per month. We are offering secured SME loan mortgage products like loan against property, with monthly disbursement of ₹150 crore within nine months of launch. We are a pan-India player in consumer finance. We are disbursing ₹200 crore per month through pre-owned car loans, about ₹500 crore through small personal loans, ₹200 crore of business loans and another ₹100 crores as loans for professionals.
Do you have banking aspirations for the group?
We have always toyed with this idea of either merging with a bank or applying for a banking licence. I think, to be a bank, we need some more time, to be of a certain size, have certain other disciplines. I would never rule it out but in the next two-three years it doesn’t make sense for us. But maybe in five or six years’ time, who knows what’s possible, if the regulations are almost the same.
If the government decides that a good group which does not require borrowings for its main business like we do. Serum Institute (of the group) is a debt-free company, in fact it throws up so much cash. Then yes, we could either look at applying for one or for merging with another bank. Applying for a bank licence is much better because we don’t want to deal with legacy issues of any other entity. If we are worthy and we fulfil all the parameters, we will definitely consider it.
You don’t envisage yourself re-entering the housing finance market any time soon?
Once the deal goes through, we will sign a non-compete (agreement) for at least the next five years for the housing loan product. However, we will continue to disburse loans against property in Poonawalla Fincorp.
If you see the returns that you get from the housing finance business versus what we are getting here, you can’t compare the two. Our standalone NIM (net interest margin) is closer to 10%, versus getting 1-2% in the housing market. And in housing, we have got to compete with banks which even Poonawalla can’t compete with.
Are you looking at inorganic opportunities where you want a strategic investor to come onboard?
At this stage the answer is no because we got the deal with TPG and the cash. Had we not, maybe in a year we would have run a process to raise capital. We will have close to ₹3,150 crore from the sale of the housing business after paying taxes. We are levered less than two times; this will bring us less than 1.5 times leverage. At the moment we will look to close this deal which will take three months. Then we can see what to do with the capital, but right now we are focused on growing the business.