Poonawalla Fincorp: Doubling Down on Growth and AI in Q3 FY26

Poonawalla Fincorp Limited, a prominent non-deposit taking systemically important NBFC in India, has reported a stellar performance for the quarter ended December 31, 2025. The company, focusing on consumer and MSME finance, showcased robust growth across key financial metrics, underscoring its disciplined execution and the strengthening of its core franchise. This quarter's results highlight a strategic pivot towards technology-driven efficiency and a diversified product portfolio, setting a strong foundation for sustainable profitability.

The company's Assets Under Management (AUM) surged to ₹55,017 crore, marking an impressive 77.6% year-on-year growth and a 15.3% increase quarter-on-quarter. This substantial expansion was mirrored in the Net Interest Income (NII), which grew by 60.6% year-on-year to ₹1,080 crore. The Profit After Tax (PAT) more than doubled quarter-on-quarter, reaching ₹150 crore from ₹74 crore in the previous quarter, reflecting a remarkable 102.5% QoQ growth. This robust financial performance led to an improved Return on Assets (ROA) of 1.20% for the quarter.

Financial Highlights: A Snapshot of Q3 FY26 Performance

*Note: CAR and Leverage are as of Dec 31, 2025, Sep 25, Dec 24 respectively.

Strategic Pillars: New Products and AI Integration

The company's growth narrative is strongly supported by its focus on new product launches and extensive AI integration. Significant investments in branches, technology, and management depth have facilitated the successful incubation and scaling of multiple new products. These offerings, including Prime Personal Loan, Gold Loan, Consumer Durable Loan, Commercial Vehicle Loan, Education Loan, and Shopkeeper Loan, collectively contributed 11% to the AUM and 20% to total disbursements in Q3 FY26. The management noted a 25% quarter-on-quarter disbursement growth from new products, indicating strong market acceptance and momentum.

For instance, the Gold Loan business is rapidly expanding, with plans to launch 400 branches by March-26, primarily in Tier-II and Tier-III markets. The Consumer Durable business is on track to reach 12,000+ dealer points by March-26, leveraging a seamless digital journey. The Education Loan segment, launched just nine months ago, has already logged over 16,000 files and aims to expand its consultant network beyond 500-plus by FY26 end.

AI and digital strategy are central to Poonawalla Fincorp's operational transformation. The company has implemented 57 cutting-edge AI projects, with 30 already live, aimed at enhancing productivity, reinforcing governance, and streamlining customer and employee journeys. Key AI initiatives include BuildBuddy for accelerating application development, DartGenie for natural language data insights, AI-driven risk hindsight for personal loans, and a central KYC AI platform that reduces manual intervention by approximately 15%. A multilingual AI-driven conversational agent is also set to go live by March'26, further enhancing customer service and operational efficiency.

Asset Quality and Funding Strategy

Poonawalla Fincorp has maintained a strong focus on asset quality, with Gross NPA improving to 1.51% in Q3 FY26 from 1.59% in Q2 FY26, and Net NPA standing at 0.80%. The company's Stage-1 assets increased to 97.4% of on-book assets, reflecting prudent underwriting and effective risk management. The management emphasized its objective to achieve best-in-class credit costs through a balanced and mature portfolio mix, with products like gold loans, education loans, salaried personal loans, and loans against property expected to constitute 50-60% of the portfolio over time, given their lower inherent risk profiles.

In terms of funding, the company's cost of borrowing reduced to 7.65% in Q3 FY26, a 4 basis point reduction from the previous quarter. This was achieved through a diversified liability profile, with Non-Convertible Debentures (NCDs) contributing significantly, increasing to 30-33% of total borrowings by December 2025. The company also raised ₹4,517 crore through secured NCDs during Q3 FY26. With a Capital Adequacy Ratio of 18.17% (Tier-1 at 17.15%) and a liquidity buffer of ₹6,488 crore, Poonawalla Fincorp remains well-capitalized and liquid, providing ample headroom for its ambitious growth plans.

Outlook and Management Commentary

Mr. Arvind Kapil, Managing Director and CEO, highlighted that the results signify a strong step-up in performance, driven by disciplined execution and a strengthening core franchise. He noted the doubling of PAT quarter-on-quarter and the moderation in credit costs, underscoring improving asset quality and risk outcomes. The company aims to continue growing its AUM at a CAGR of 35-40% over the next couple of years and plans a capital raise of up to ₹5,500 crore to support these aspirations.

Poonawalla Fincorp's strategic investments in distribution, technology, and multi-product infrastructure are now structurally embedding operating leverage into the business model. As AUM scales, incremental growth is expected to be absorbed without a proportional increase in costs, leading to declining marginal costs and expanding operating margins. The company's commitment to a credit-first, compliance-first approach, coupled with its AI and digital transformation, positions it for sustained, predictable, and profitable growth in the dynamic Indian financial landscape.