PNB Housing Finance Managing Director Ajai Kumar Shukla tells Kshipra Petkar about his priorities, including plans to scale the affordable housing business and revive growth through construction finance. Excerpts:
What are the key areas you have identified that the firm needs to focus on?
One area where we can do more work is scaling up the affordable housing business. We have opened a good number of branches in this segment and plan to scale them in the near future.
There were some attrition challenges in the affordable segment, but the team is filling those gaps. I’m confident that by the end of March, they will be addressed. We have already made some tweaks in policies, adjusted ticket sizes, and refined market and geographic segmentation.
What is your NIM outlook?
After the recent 25 bps repo rate cut, the impact is gradually flowing through the system. We don’t expect further rate cuts. We continue to guide for NIMs in the 3.6–3.7% range and are confident of maintaining this.
We are also entering revised policy-led segments such as construction finance and emerging developer funding, where margins are better. This will help us sustain and potentially improve our margins.
What will be the ticket size in construction and emerging developer funding?
The average ticket size will be around Rs 60–70 crore. Depending on the developer’s profile, we may go up to Rs 100–150 crore. We will only work with established developers who have strong market standing and repayment history.
Our focus will primarily be on southern and western markets—cities such as Bengaluru, Hyderabad, Chennai, Ahmedabad, and Mumbai.
We are targeting yields of around 12–12.5%. Emerging developer funding may offer slightly higher yields on a case-by-case basis, while construction finance yields may be closer to 12%, depending on risk profiling.
Targeting AUM Growth
With these initiatives, how much AUM growth do you expect?
We are guiding towards reaching Rs 1 lakh crore in AUM by the end of FY27, and we are confident of achieving that. At any point, the two new verticals will not exceed 8–10% of total AUM. This year, we expect around 4–5%, gradually rising to 8–10% over the next three years.
Any guidance on NPAs for the financial year-end?
Our current GNPA is 1.04%. We expect to remain within the same corridor—between 1% and 1.04%. We don’t foresee any spike and will maintain our existing guidance.
These are riskier segments. What measures are you taking for underwriting and governance?
The key risk in construction finance is not underwriting—it is monitoring. Losses typically occur due to poor monitoring and fund diversion. Our focus is on ensuring that funds are used strictly for their intended purpose, with strong monitoring mechanisms as the cornerstone.
Reducing Borrowing Costs
Your cost of borrowing has declined. Is this due to renegotiation with banks?
Yes. Our incremental cost has come down from 7.5% in Q3 to around 7.2%. We continue to negotiate actively. We are currently AA-rated, and a potential upgrade to AAA would further reduce borrowing costs.
The investor presentation mentions “de-risking in geographical presence”. Is this due to asset quality issues or something else?
In certain pockets of the southern market, particularly Tamil Nadu, there was a government ordinance related primarily to microfinance. When such news emerges, borrowers often assume it applies to all lending segments. This initially created some confusion, but clarification came later. There were some recovery challenges, but these have now been resolved