Adar Poonawalla-backed multibagger stock can rally up to 25%: Motilal Oswal

On the back of a stronger management force post-acquisition, better credit-quality customers and realigning of its product suite to generate superior risk-adjusted returns, domestic brokerage Motilal Oswal
 initiated coverage on NBFC Poonawala Fincorp (PFL) with a buy rating.

Motilal Oswal’s target price of Rs 350 suggests that the multi-bagger stock has the potential to surge another 25% from its current market price of Rs 280. The stock has given returns to the tune of 43% year-to-date (YTD) while it has rallied 444% in the last three years.

With huge growth opportunities for consumer and small business finance, the brokerage said that post-acquisition, PFL’s management has strengthened its foundation notably by investing in technology (aiding infrastructure/processes), distribution and talent.

“With new promoters on board, PFL’s access to liabilities rose multifold and it was able to achieve credit rating upgrades that resulted in a significant decline in the cost of borrowings (down ~190bp over last 12 months) with better and more diversified liability mix,” Motilal Oswal said in a report.

The brokerage expects positive results of the transformed company to become visible within the next three-to-six months.

“PFL has laid down a robust foundation for sustainable profitability through initiatives that will lead to lower operating costs (as a % of AUM), higher business volumes and robust asset quality,” it said.

It expects an asset under management (AUM)/PAT CAGR of 37%/~65% over FY22-FY25E, respectively and a return on assets/return on equity of 4.8%/~12% in FY25E.

Poonawala Fincorp is an NBFC which focuses on consumer and small business finance via products like personal loans, loans to professionals, business loans, SME loans, LAP, pre-owned car finance, medical equipment loans and auto lease. The NBFC is the erstwhile

Source: economictimes.indiatimes

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