Poonawalla Fincorp: Navigating Growth with a 'Risk-First, AI-First' Strategy in Q2 FY26

Poonawalla Fincorp Limited has reported a robust performance for the second quarter of Fiscal Year 2026, showcasing significant growth driven by strategic investments in new products and an aggressive digital transformation agenda. The company's Assets Under Management (AUM) surged by an impressive 68% year-on-year and 15.6% quarter-on-quarter, reaching ₹47,701 crore as of September 30, 2025. This growth trajectory is underpinned by a 'risk-first and governance-first' approach, aiming for long-term predictable and sustainable profitability.

The quarter saw total disbursements grow by approximately 16% quarter-on-quarter, nearly doubling on a year-on-year basis. New product offerings played a pivotal role, contributing 17% to total disbursements in Q2 FY26, up from 11% in the previous quarter. The company's Net Interest Income (NII), including fees and other income, also demonstrated healthy growth, rising by 40.3% year-on-year and 17.8% quarter-on-quarter to ₹905 crore. Despite ongoing investments in new businesses, the Operating Profit (PPoP) increased by 38% year-on-year and 19% quarter-on-quarter to ₹387 crore, reflecting operational efficiencies.

Diversified Growth Across New Product Verticals

Poonawalla Fincorp's strategic expansion into new product categories has been a key driver of its recent success. The company launched several new offerings, including PL Prime, Education Loan, Commercial Vehicle Loan, Consumer Durable Loan, Shopkeeper Loan, and Gold Loan, aiming for a diversified portfolio across secured and unsecured segments. These products are gaining significant traction, with new product disbursements reaching approximately ₹750 crore in September 2025.

For instance, the PL Prime Digital 24x7, launched in August 2024, has seen average monthly disbursals of approximately ₹400 crore, with about 26% processed through a fully straight-through digital journey. The Gold Loan segment is rapidly expanding its physical presence, with 160 branches operational and a target of 400 by March 2026, primarily in Tier 2 and Tier 3 markets. Consumer Durable Loans have expanded to over 10,000 dealer distribution points across 190 locations, with a target of 12,000 by year-end. The Commercial Vehicle Loan business has commenced across 49 locations in 12 states, onboarding over 450 channel partners.

Financial Performance Snapshot (Q2 FY26 vs. Q1 FY26)

Strengthening Asset Quality and Digital Capabilities

The company's asset quality has shown marked improvement, with Gross NPA reducing by 25 basis points to 1.59% and Net NPA standing at 0.81%. Stage 1 assets rose to 97.1%, indicating a strong foundation for future credit cost management. The Provisioning Coverage Ratio (PCR) stood at 49.65%. This improvement is a direct result of prudent underwriting and effective risk management practices, including a comprehensive multi-bureau strategy and dynamic monitoring mechanisms.

Poonawalla Fincorp is aggressively pursuing an 'AI-first' strategy, with 45 AI projects underway, 16 of which are already live. These initiatives span across various functions, from taxation and speech analytics to fraud control and customer service. The goal is to leverage AI and machine learning to enhance data integrity, reduce errors, improve decision-making, and ultimately deliver a superior customer experience. The digital transformation also includes automating loan servicing, regulatory reporting, and EMI payments, which are expected to be fully implemented within the next two quarters.

AUM Mix by Product (Q2 FY26)

Strategic Funding and Future Outlook

The company's liability strategy focuses on optimizing borrowing costs and diversifying its funding mix. The cost of borrowing decreased from 8.04% in Q1 FY26 to 7.69% in Q2 FY26. This was significantly aided by an increased contribution from Non-Convertible Debentures (NCDs), which now constitute 27% of total borrowings, up from 7% in September 2024. The company aims to further increase NCD contribution to 30-35% on a steady-state basis, enhancing long-term capital funding stability.

An equity infusion of approximately ₹1,500 crore by the promoter through a preferential issue further strengthens the company's financial position and reinforces confidence in its long-term potential. With a healthy capital adequacy ratio of 20.85% and a low debt-to-equity ratio of 3.64x, Poonawalla Fincorp has ample headroom for growth. The management remains confident in its ability to achieve best-in-class credit costs and sustain profitability, driven by its strategic initiatives and robust operational framework.