Poonawalla Fincorp sells housing unit to TPG at an attractive price

Poonawalla Fincorp (PFL) is selling 100% of it’s housing subsidiary Poonawalla Housing Finance Limited (PHFL) to TPG.

  • Consideration is Rs 3,900 cr
  • PHFL reported financials for FY 22
    • Revenues of Rs 470 cr
    • Net Worth at Rs 1082 crore
  • Above implies a valuation of 8.3x on trailing revenues and 3.6x on Net Worth. (This is reasonably attractive from PFL’s perspective)
  • PHFL as at March 22 end, had 46,000 customers with an average ticket size of Rs 11 lakh. This implies a per customer acquisition cost of Rs 8.5 lakh which is again quite attactive to PFL.

Reason for the sale –

  • The value unlocking of the housing finance subsidiary, which was one of the stated objectives in PFL’s Vision 2025 statement.
  • Allows Company to focus towards tech led growth in consumer and MSME financing. (How housing finance doesn’t qualify in that is difficult to comment. Maybe it’s because of longer tenure in home loans vis-a-vis other consumer loans)

Some other important predictions made by PFL in the subject press release –

  • The company aspires to achieve AUM growth of 35-40% y-o-y over the next 3 years.
  • It will work towards achieving consistent RoA in the range of 4% to 4.5%.
  • Net NPAs are expected to remain below 1%.

All the above 3 are more like targets and not promises (note use of words “aspires”, “work towards”, “expected”). Something to keep in mind while analysing the Company.

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