Poonawalla Fincorp shares down 15% in a year, will strong Q2 results boost the stock? Buy, sell or hold ? Experts' views

Poonawalla Fincorp shares will be in focus on Monday, 12 October, following the non-banking financial company's (NBFC) September-quarter results, announced on Friday, 9 October. The company reported a sharp increase in profitability, but analysts remain divided on the stock's outlook, setting up a potential debate for investors: Is the earnings recovery enough to drive a sustained rebound in the share price?

Poonawalla Fincorp reported a nearly five-fold year-on-year jump in consolidated profit for Q2 FY27, supported by higher interest income, strong assets under management (AUM) growth and improving asset quality. While Motilal Oswal Financial Services reiterated its ‘Buy’ rating with a target price of ₹570, Emkay Global Financial Services maintained a ‘Reduce’ rating with a target of ₹410.

The NBFC's consolidated profit surged to ₹375 crore in Q2 FY27 from ₹74 crore in the year-ago quarter. Total income increased to ₹2,625 crore from ₹1,543 crore, while interest income rose to ₹2,416 crore from ₹1,402 crore over the same period.

Poonawalla Fincorp's assets under management stood at ₹74,008 crore as of 30 September 2026. Its capital adequacy ratio was 18.68%, comfortably above the regulatory requirement of 15%, providing headroom to support future growth.

Despite the strong quarterly performance, the stock has struggled over the longer term. Poonawalla Fincorp shares closed 2.25% higher at ₹448.05 apiece on the BSE on Friday, but remained down 15.61% over the past year.

The September-quarter performance was supported by expanding margins, lower credit costs and strong AUM growth, according to brokerage reports from Motilal Oswal Financial Services and Emkay Global Financial Services.

Motilal Oswal said Poonawalla Fincorp's Q2 FY27 profit after tax stood at around ₹375 crore, broadly in line with its estimates. Net interest income rose approximately 81% year-on-year to ₹1,380 crore, while other income increased around 49% to ₹210 crore.

The brokerage highlighted a roughly 25-basis-point sequential expansion in calculated net interest margin (NIM) and a reduction in credit costs to around 2.15%, from 2.35% in the previous quarter. Pre-provision operating profit grew approximately 127% year-on-year to ₹880 crore.

Asset quality also improved, with the company reporting gross non-performing assets (GNPA) of 1.20% and net non-performing assets (NNPA) of 0.61%, according to Emkay Global. Six-month-on-book 30-plus-day delinquencies declined to 0.35%, excluding the gold loan portfolio, from 0.67% in Q1 FY27.

Total AUM grew 55.1% year-on-year to around ₹74,000 crore, with new products contributing approximately 28% of Q2 disbursements. The company is targeting medium-term AUM growth of 35–40% annually, driven by new businesses, distribution expansion and deeper digital cross-selling.

Motilal Oswal Financial Services reiterated its ‘Buy’ rating on Poonawalla Fincorp, with a target price of ₹570, implying an upside of around 27% from the brokerage's cited market price of ₹447.

The brokerage expects profitability to improve as higher lending yields, a favourable product mix and lower credit costs support earnings growth. It also sees operating leverage improving over the next two years as the company begins to benefit from investments in branches, collections and technology.

Management has indicated that incremental disbursement yields are around 200 basis points higher than the existing portfolio yield, which could support margins. The brokerage also highlighted the company's investments in artificial intelligence, with 84 enterprise AI projects in operation, aimed at improving productivity and reducing acquisition costs.

Motilal Oswal raised its FY27 and FY28 earnings-per-share estimates by around 3% each, factoring in stronger-than-expected margin expansion. It models AUM growth of around 44% annually over FY26–FY28 and expects a return on assets of 2.4% and return on equity of approximately 17% in FY28.

The stock trades at around 2.3 times its estimated FY28 price-to-book value, according to the brokerage. Motilal Oswal values the company at 2.7 times its estimated September 2028 per-share book value to arrive at its ₹570 target.

Emkay Global Financial Services, however, maintained its ‘Reduce’ rating on Poonawalla Fincorp, with a September 2027 target price of ₹410, implying downside from the stock's recent trading level.

The brokerage acknowledged the company's strong growth, noting that AUM had reached around ₹74,000 crore, up approximately 55% year-on-year. Profit after tax increased around 22% sequentially, while return on assets improved to 2.18% from 1.98% in Q1 FY27.

Emkay also highlighted improving asset quality, with GNPA declining 17 basis points sequentially to 1.20%. Credit costs eased to around 2.19%, supported by collection efficiency of approximately 99.5% and contained slippages. Net interest margin plus fees improved 16 basis points sequentially to 9.26%.

However, operating expenses relative to AUM edged up to 4.15%, reflecting continued investments in technology, collections and branch infrastructure. While management expects productivity gains and operating leverage to support profitability over time, Emkay retained a cautious stance on the stock's valuation.

The brokerage expects profitability to improve through stronger lending spreads and higher disbursement yields. It also noted that potential caps on insurance commissions under proposed regulations could be absorbed through core lending spreads and cross-selling opportunities.

Emkay marginally raised its FY27–FY29 earnings estimates by 1–2%, but retained its ‘Reduce’ rating and ₹410 target price, based on 1.8 times estimated FY28 price-to-book value.

The contrasting brokerage views underline the key question facing investors: whether Poonawalla Fincorp's strong growth and improving asset quality can translate into sustained returns for shareholders.

Motilal Oswal is more optimistic about the company's ability to expand margins, lower credit costs and benefit from operating leverage. Emkay, meanwhile, acknowledges the operational improvement but remains cautious about the stock's valuation.

Going forward, investors will need to track AUM growth, lending yields, credit costs, asset quality and the pace at which technology and branch investments translate into operating efficiencies.

For investors weighing whether to buy, sell or hold, the brokerage verdict is divided: Motilal Oswal favours a ‘Buy’ with a ₹570 target price, while Emkay Global recommends ‘Reduce’ with a ₹410 target. The difference highlights the importance of assessing both the company's improving fundamentals and the valuation risks before making an investment decision.

Dhanya Nagasundaram works as a Content Producer at LiveMint, specializing in news related to financial markets, stocks, and business. With over eight years of experience in journalism and content creation, she has honed her skills in data-driven reporting and market analysis. Her focus is on monitoring stock trends, initial public offerings (IPOs), corporate news, policy shifts, and larger economic trends that affect investors and market players. <br><br> At LiveMint, Dhanya consistently writes and produces articles that make complex financial topics accessible to readers. She keeps a close eye on equity markets, commodities, and macroeconomic indicators, assisting audiences in comprehending how global and domestic events influence investment perspectives. Her stories frequently underscore emerging trends within sectors, the IPO market, company earnings results, and market strategies pertinent to both retail and institutional investors. <br><br> Before her tenure at LiveMint, Dhanya accumulated a wealth of professional experience at various companies, including MintGenie, Informist, Cogenics, Chary Publications, KPMG, and the Royal Bank of Scotland. These positions allowed her to establish a solid foundation in financial research, reporting, and content creation. <br><br> Throughout her career, she has explored numerous subjects such as trading strategies, commodities, IPOs, wealth generation, corporate profits, and macroeconomic indicators. Her background in both financial journalism and corporate settings has given her the ability to tackle stories with analytical rigor while ensuring clarity for her audience. Through her contributions, Dhanya strives to deliver insightful, trustworthy, and investor-centric financial content.

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