The agency has also revised its outlook on the said instruments from 'positive' to 'stable'.

Acuité Ratings said that the rating upgrade reflects significant improvement in the overall business volumes as seen by Poonawalla Fincorp’s disbursement levels and AUM growth since Q2 FY23.

The rating action also draws comfort from gradual amelioration in asset quality with gross NPA/gross stage-3 and net NPA/net stage-3 at 1.36 and 0.72 percent, respectively, as on 30 September 2023, as against 1.77 percent and 0.94 percent, respectively, as on 30 September 2022. Furthermore, the earnings profile of the company witnessed positive trend with PAT levels improving to Rs 585 crore for FY2023 as against Rs 293 crore for FY2022.

The rating also takes into account the strong promoter group viz. Cyrus Poonawalla group, whose flagship company, Serum Institute of India Private Limited exhibits very strong financial flexibility. PFL’s credit profile further derives strength from its long and established presence of nearly three decades (erstwhile Magma Fincorp) in retail financing and sequential uptick in disbursements coupled with business transformation initiatives such as realigning product mix, revised credit policies, digital focus etc.

These strengths are partially offset by limited seasoning of the new portfolio and relatively moderate scale of operations as compared to the large NBFCs.

While Acuité takes cognizance of various structural and business transformation initiatives undertaken, PFL’s ability to grow its AUM in a sustained manner while maintaining healthy asset quality & profitability will remain a key rating monitorable.

Poonawalla Fincorp (PFL) is a non-deposit-taking systemically important non-banking finance company, registered with the Reserve Bank of India as an investment and credit company (NBFC-ICC). PFL has various product offerings aimed at the retail consumer and MSME segments including personal loans, pre-owned car loans, business loans and loan against property.