Poonawalla Fincorp share price still has 40% upside potential as growth potential not priced in, UBS says

Shares of Poonawalla Fincorp Ltd. are in focus on Thursday, February 26, as brokerage firm UBS initiated coverage on the stock.

UBS has initiated coverage with a 'buy' rating and has a price target of ₹640 per share on Poonawalla Fincorp. This implies a potential upside of 38.9% from its previous close of ₹460.5 apiece.

The brokerage said that a strong management and promoter-driven AAA credit rating are key positives for the stock, further adding that the loan against property and gold loans are going to be the anchor products for the firm going forward.

Poonawalla Fincorp's return on assets (RoA) are likely to reach 2% by the financial year 2028, supported by healthier margins and lower cost, UBS wrote in its note.

At 2.4 times its September 2027 estimated price-to-book value (assuming capital is raised), market is not fully capturing Poonawalla Fincorp's potential growth trajectory and expansion in its RoA, UBS said.

UBS wrote further that any delayed equity raising and weaker-than-expected asset quality are the key risks for the stock.

Earlier this month, Poonawalla Fincorp said its finance committee has approved the issue of secured, redeemable, rated and listed non-convertible debentures (NCDs) worth up to ₹1,000 crore via a private placement.

The company said it is looking at raising 1 lakh NCDs with a face value of ₹1 lakh each, aggregating to ₹1,000 crore. The debentures would be issued in a dematerialised form and are proposed to list on the Bombay Stock Exchange (BSE).

Of the nine analysts that have coverage on the stock, four each have 'buy' and 'sell' ratings while one has a 'hold' rating.

Shares of Poonawalla Fincorp ended the previous session 1.6% lower at ₹460.5 apiece. The stock has risen 13.9% in the past month and 62.75% in the past year.

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