Shares of Poonawalla Fincorp posted the biggest gain since May this year after brokerage Motilal Oswal reported on the stock with a buy rating and a price target of Rs 350.

Motilal Oswal’s price target implies a possible upside of almost 28% from Friday’s close.

The broker believes the company’s scalability will benefit from the direct, digital and partnership (DDP) model they follow. Poonawalla already has partnerships with various fintech and consumer technology companies.

Analysts at Motilal Oswal also observed that the company’s credit rating had been upgraded, and its liability franchise had significantly improved.

Motilal Oswal said Poonawalla Fincorp is likely to have top-notch asset quality due to its conservative portfolio guardrails.

The brokerage expects assets under management (AUM) to grow at a compound annual growth rate (CAGR) of 37% and net profit at a compound annual growth rate (CAGR) of 65% by fiscal 2025. Due to low leverage, the company’s return on assets (RoA) could be 4.8%, and the return on equity (RoE) could be 12% through FY2025.

Poonawala Fincorp is an NBFC engaged in consumer and small business financing in the areas of Professional Personal Loans, Business Loans, SME Loans, Used Car Financing, Medical Equipment Loans and Car Leasing.

It operates in 21 states with a lean branch network and Rs 132 billion in standalone assets as of September 2022. The NBFC, formerly known as Magma Fincorp, was acquired by the Poonawalla Group for Rs 35 billion in May 2021.

The Adar Poonawalla-controlled NBFC recently approved the sale of its housing subsidiary, Poonawalla Housing Finance Ltd, to TPG (Perseus SG Pte Ltd, an entity affiliated with TPG Global, LLC) for Rs 3,900 crore.

Shares of Poonawalla Fincorp rose 11.6% to Rs 274.65.