The results are very saddening. 400Cr loss… NPA from 0.6 to 2.1%. And the management says this marks a positive turning point… In essence, they are low balling the measuring point to say they did better at a later stage. This is pretty much anti investor move. they gave no warnings about such provisioning during their showcase in investor meets or any interviews.
I cant trust this management anymore. Moved out with good loss, but its okay. I guess the quitting of top managment (CTO) also shows signs of some governance issues.
Lots of dubious activities going on in the company for almost a year. I decided to wait for some more clarity before checking out. Fingers crossed but doesn’t look good.
I believe some skeletons of the previous management are coming out now as the current management has excess emphasis on risk management. They are also speaking of now opening branches which goes against their core of being a digital lender.
All in all, its now clear why the entire management was changed and a new one which is well experienced and is well reputed has been brought. They are looking to put the house in order. Clearly as they stated 4-6 quarter is the time they need to put a solid foundation for the future and change its DNA.
My personal belief is that its a painful 4-6 quarters for this stock however the good thing is that management has not scaled down its future guidance. I am a long term investor in this stock and yes its a tough decision to still hold it but i still will be holding this stock for long term.
Plz give your views on results as well
Maybe you are right, but do you not think it is worth assessing the new management for a few quarters? I mean is it not concerning if the management conveniently releases a business update saying their AUM grew by 40% but leaves out this whole fiasco?
The results only confirm what many have been suspecting that there is a stress in the system, especially in microfinance (SME and retail) segments where default rates may have started picking up. We have seen that with Indusin, Poona and now IDFC first bank, all taking heavy provisioning as a risk management measure. This was the segment that was being chased by most of NBFCs seeking to grow their loan book forgetting that this is also the riskiest segment especially during high interest rates.
Not sure what’s going to happen to other NBFCs who have got heavy exposure to microfinance and I trust as part of good corporate governance and risk management practice they will also take similar steps.
Thanks to RBI’s proactive action of tightening liquidity taking steps to control credit bubble in the system otherwise we could be witnessing something worse.
The challenge with Poona is their smaller balance sheet as opposed to the bigger players, so 600 crores worth of provisioning will have a bigger hit for them.
I only hope that this is the end of provisioning and management doesn’t come up with additional one. Best case scenario, they don’t have to use this provisioning.
But in general I can’t find anything else wrong with Poona. They have got strong management, a committed promoter and deep pockets. With interest rates expected to be cut they will eventually come out of this rut sooner than later.
Very well stated video. To inform the investors is paramount. They cant wait until results to disclose.
I remember something like this that Tata Motors did really well.
During Covid, there was a severe shortage of chips for electronic components in cars. Internationally, the supply was at a 6 months lag to the demand. In those times, Suzuki stopped adding many electronic components silently from its model and replacing them with analogue for some models. Example of speedometers turning analogue in some models of budget cars.
In such times, Tata Motors released a press release, wherein it clearly stated that lack of supply of chips would constrain production of its cars and will lead to lower capacity utilisation and thus, lower production and results.
THAT was my first taste of true corporate governance and its strength. I took the hint and exited the stock by some amount to invest it in other stocks for few quarters.
Poonawalla, if had trustworthy coporate governance, it would have come up and told us the issues of risk when the management was change. But it hide and kept investors under blanket, which is no doubt, unacceptable.
However, giving them a chance is a personal choice. I wanted to share my experience.
Provisioning is a standard practice by lenders to strengthen their balance sheets. Expecting lenders to announce provisioning before the result will be a bad practice as without full context and commentary it can have unjustified impact on stock prices. It’s like expecting a lender to announce their operating margin or PAT before the actual results.
Even Indusin or Kotak have high corporate governance but did you see them disclosing higher provisioning before the actual results? IDFC first bank, also disclosed higher provisioning in their results.
Most of the well run lenders disclose who they are lending to and a prudent investor should do their homework to identify the risks. That’s why investing in lending sector is inherently tricky.
Stock has made 30% recovery to the original price before results so clearly provisioning was a non-event for marketing and investors chose to focus on rest of the quarter performance that apparently was exciting.
Board Meet On 31 Jan To consider and approve raising up to Rs. 10,000 Crores through the issuance of Non-Convertible Debt Securities on a private placement basis during FY 2025-26
