PNB Housing Finance announces reworked business plan for FY 21

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Published: July 10, 2020 12:01 AM

However, led by government measures there are early signs of real estate sector bottoming out after 7 years of muted performance,” the company said.

PNB Housing said that Covid-19 and the resultant lockdown have been telling on its disbursements in Q4FY20 and Q1FY21.PNB Housing said that Covid-19 and the resultant lockdown have been telling on its disbursements in Q4FY20 and Q1FY21.

The board of PNB Housing Finance has approved a reworked business plan for FY21, in light of the outbreak of Covid-19, which has forced a rethink on strategies by businesses. Interestingly, the development of a fresh business plan comes months after the appointment of former State Bank of India executive Neeraj Vyas as interim MD & CEO of the company.

PNB Housing said that Covid-19 and the resultant lockdown have been telling on its disbursements in Q4FY20 and Q1FY21. “However, the numbers are visibly improving month-on-month but on an overall basis the disbursements are expected to degrow during the year. The focus will be on the mass housing lower risk weighted retail segment,” the company said in a release. In the mass housing segment, PNB Housing will also disburse loans in the high-yielding Unnati segment (individual housing), with an average ticket size of around `17 lakh. This segment will account for 10-15% of the total disbursements planned for FY21.

Assets under management (AUM) are expected to maintain a trajectory similar to that seen in FY20. Retail loans are expected to further increase beyond 85% of the total AUM as on March 31, 2021. At the end of March 2020, 82% of the lender’s AUM consisted of retail loans. It posted a Rs 242-crore loss in Q4FY20.

The company will focus on maintaining spreads between 210-220 basis points (bps), with no plans of any major securitisation of retail loans during the year. Inclusive of fees and other operating income, the gross margin is expected to be in the range of 300-315 bps.

The operating expenses are expected to fall by 5-10% in absolute terms as compared to FY20. “The company had built adequate provisions during FY 2019-20 and hence the credit cost is expected to be lower during the year compared to FY 2019-20 subject to uncertainty which might arise due to Covid-19.

However, led by government measures there are early signs of real estate sector bottoming out after 7 years of muted performance,” the company said.

PNB Housing is actively looking to further sell down its corporate assets and make the balance sheet more asset-light. With a focus on lower risk-weighted retail loans, cost rationalisation and contained credit costs, the return on asset is expected to be in the range of 140-160 bps, with an average gearing of around 7 times during the year after a planned capital raise of up to Rs 1,700 crore.

Punjab National Bank (PNB), the promoter of PNB Housing, has stated its objectives of maintaining a minimum stake of 26% in the company, continuing to be the promoter and providing brand support. Its current shareholding is 32.65%. PNB Housing has approached its promoter for their participation in the fund-raise and is awaiting their response.

In Q1FY21, PNB Housing disbursed close to Rs 800 crore of loans and maintained cash and bank balances of around Rs 7,000 crore as on June 30. “Further, there is a healthy pipeline of fresh borrowing which the company is actively progressing with multiple lenders,” it said. As on June 30, the retail loans under phase 2 of the moratorium accounted for about 29% of the retail AUM. On an overall basis, 39% of the AUM is under moratorium.

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