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Shares of Poonawalla Fincorp are up the most since May this year after brokerage firm Motilal Oswal initiated coverage on the stock with a buy rating and a price target of Rs 350.

Motilal Oswal's price target implies a potential upside of close to 28 percent from Friday's closing levels.

The brokerage believes that the company's scalability will be aided by the direct, digital and partnership (DDP) model, that they follow. Poonawalla has already partnered with various fin-techs and consumer technology firms.

Analysts at Motilal Oswal also observed that there has been an upgrade in the company's credit ratings and a significant improvement in its liability franchise.

Poonawalla Fincorp is likely to have best-in-class asset quality due to its conservative portfolio guardrails, according to Motilal Oswal.

The brokerage is anticipating a compounded annual growth rate (CAGR) in assets under management (AUM) of 37 percent and a net profit CAGR of 65 percent until financial year 2025. Courtesy the low leverage, the company's Return on Assets (RoA) are likely to be at 4.8 percent and Return on Equity (RoE) to be 12 percent until the financial year 2025 period.

Poonawala Fincorp is an NBFC engaged in consumer and small business financing in personal loans loans to professionals, business loans, SME loans, pre-owned car finance, medical equipment loans and auto lease segments.

It operates across 21 States with a lean branch network and standalone assets under management of Rs132 billion as of September 2022. The NBFC, formerly known as Magma Fincorp, was acquired by the Poonawalla Group in May 2021 for Rs 35 billion.

The Adar Poonawalla-controlled non-banking finance company 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 are trading 11.6 percent higher at Rs 274.65.