Poonawalla Fincorp share price gains over 3% on appointment of HDFC Bank’s Arvind Kapil as MD & CEO

Poonawalla Fincorp share price gained over 3% in early trade on Tuesday after the company announced the appointment of retail banking veteran Arvind Kapil as its new Managing Director & Chief Executive Officer for a five-year term starting June 24.

Poonawalla Fincorp shares rose as much as 3.65% to ₹487.00 apiece on the BSE.

Kapil is currently serving as Group Head - Mortgages at HDFC Bank and comes with over 25 years of experience with the largest private lender in handling a bouquet of retail products.

He will replace current MD & CEO Abhay Bhutada, who will move to Poonawalla Group, and remain a non-executive director in the company, as per a regulatory filing.

Analysts expect the leadership transition to pivot to a phygital approach (branch + digital) with a wider product offering to target a larger customer base. 

“With the backing of the Poonawalla Group, AAA credit rating, guidance of Keki Mistry, and a retail banking veteran in Arvind Kapil at the helm of affairs, the right ingredients are in place to establish a successful retail lending franchise,” said Avinash Singh, Senior Research Analyst at Emkay Global Financial Services.

However, he believes the pivot in the business model will likely drive growth and profitability moderation in the near term.

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Though this management transition is a positive development for the company, the brokerage firm reiterated its ‘Reduce’ rating on the stock owing to its rich valuation, with an unchanged Dec-24E target price of ₹440 per share, implying FY26E P/B of 3.1x.

Analysts at JM Financial believe the leadership change at Poonawalla Fincorp sets the company on a steady path for the next leg of growth and profitability expansion. 

“Kapil’s experience in building out market-leading, high-quality retail franchise such as HDFC Bank across secured as well as unsecured asset classes (Personal loans, auto, etc.) should see Poonawalla Fincorp emerging as a strong contender for a pole position in the retail lending space over the medium term,” JM Financial said in a report. 

Importantly, Kapil’s experience and execution track record in a bank-led framework will ensure that Poonawalla Fincorp is now steered in a “bank-like manner” (pertinent given RBI’s increased focus on NBFC processes), it added.

“Its strong capital position, low-cost liabilities advantage and long growth runway (given small size), place Poonawalla Fincorp in an enviable position. As details on the new strategic direction of the company emerge over the next few quarters, Poonawalla Fincorp will continue to trade at rich multiples in our view,” JM Financial said.

It maintained a ‘Buy’ rating on the stock with an unchanged target price of ₹620 per share. 

Poonawalla Fincorp shares have risen over 10% in 2024 so far, while the stock is up more than 67% in one year.

At 9:50 am, Poonawalla Fincorp shares were trading 2.33% higher at ₹480.80 apiece on the BSE.

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