Poonawalla Fincorp trumps Federal Bank in market valuation

Mumbai: Poonawalla Fincorp‘s market capitalisation ended above that of private lender Federal Bank after the shares of Pune-based non-bank lender advanced for the third day on Wednesday.

Adar Poonawalla-led Poonawalla Fincorp closed at ₹348.15 apiece on the BSE on Wednesday, up 0.61% from the previous close. Shares of Kochi-based Federal Bank closed at ₹123.85, down 1.43% from the previous close.

At Wednesday’s closing price, Poonawalla Fincorp commands a market capitalisation of ₹26,740.04 crore. In comparison, Federal Bank’s market capitalisation stood at ₹26,207.39 crore.

Analysts see a nearly 30% upside potential in Poonawalla Fincorp‘s shares from the current levels even as shares trade at a huge premium to most of its rivals in the banking and NBFC space. They said this is because of expectations of strong growth prospects following the finance company’s takeover by the Poonawala group. Poonawala Fincorp was earlier called Magma Fincorp.

“Growth trajectory to stay robust with top-notch profitability metrics,” said JM Financial in a client note after its fourth-quarter earnings. “In our view, its quality focus, strong balance sheet and long growth trajectory are underappreciated at current valuations (partly due to low reported ROEs given low leverage) even as we build the gains from HFC sale into our estimates.”

The company’s cost of funds continues to be one of its core strengths, said JM Financial.

The brokerage expects the benefits of the ‘AAA’ rating likely to flow through that will help Poonawalla Fincorp maintain NIMs above 10% for FY24. “Credit costs are also expected to be lower with asset quality further improved,” said JM Financial.

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