Rs 1,800-cr fund infusion in pipeline; to be used to repay high-cost borrowings: PNB Housing CEO

By: |
November 4, 2020 4:43 PM

With a consistent attempt to bring down the corporate lending portfolio and increase the retail lending, PNB Housing Finance is now focussing on the tier-II and III cities as well, besides its top 7-10 markets.

The company's total corporate lending book stands at Rs 14,331 crore, which is 18 per cent of its AUM.

With about Rs 1,800 crore equity fund raise in the pipeline, PNB Housing Finance plans to repay its high-cost borrowings and will ask its lenders to sweeten the lending rates as the firm is working consistently to improve profitability parameters besides enhancing the value proposition for the investors, its MD and CEO Hardayal Prasad said.

PNB Housing Finance’s board has okayed to raise up to Rs 1,800 crore through a preferential or rights of shares. Of this, promoter Punjab National Bank (PNB) has already given its nod to infuse Rs 600 crore.

Prasad said there is a large number of investors, of whom almost 84-85 per cent are institutional investors, who are all interested in the company.

“But, we are also getting inquiries from many other players who feel that they have the ability to invest in the company directly. So, as far as the interest of our investors are concerned, it is high for the company and the franchise that has been built,” Prasad told PTI in an interview.

He added that there is a strong retail book and second-highest deposit book also. “There is a massive amount of interest in the company.”

On asked how PNB Housing Finance plans to utilise this expected capital, he said the company will mainly repay its high-cost borrowings to improve on the profitability.

“First of all, I have a large borrowing. The moment I have it (the capital), I will repay the high-cost borrowing. And, I also have a very large undrawn limit. We have bank limit that we are not utilising,” Prasad said.

The company has a complete projection of how the capital will be deployed and how the book will build and based on that, capital conservation and other things will be done, he added.

The firm is expected to get Rs 600 crore from PNB after the requisite regulatory approvals, while the rest of Rs 1,200 crore is planned to be raised within this calender year, he said.

PNB Housing Finance registered a profit of Rs 313 crore in the second quarter ended September 30, which was down 15 per cent year-on-year. The fall was mainly on account of limiting its exposure to corporate lending, migration of some loans to banks as well as impact due to the COVID-19 pandemic.

However, it improved on its net interest margin (NIM), a key gauge of profitability for lending institutions, to 3.5 per cent during the second quarter of 2020-21 from 3.2 per cent in the year-ago period due to consistently working on various factors.

“A huge amount of stuff has been done to improve NIM. The yields are good, whereas the cost of borrowings have come down significantly, those were some of the important things. We have not been able to take full advantage of the lower repo rates. We are pressing on all our lenders to look at the rates once again,” Prasad said.

He also said that going forward, wherever it is required, the company will pre-pay the high-cost deposits that are there. “These are all the measures that will help us. These things will help us in reducing our borrowing costs. And, with the capital augmentation, I think we will be able to further bring it down (borrowing cost).”

He said the company is working consistently to reduce the borrowing cost.

The firm’s average cost of borrowings stood at 8.1 per cent as of September 30, 2020. In 2019-20, the average cost of borrowings was at 8.2 per cent.

However, in the preceding two financial years, the average cost of borrowings were down, standing at 8 per cent in 2018-19 and 7.7 per cent in 2017-18.

On the asset front, the company brought down its gross non-performing assets (NPAs), as a percentage of loans to 2.59 per cent from 2.76 per cent from a year ago, while the net NPAs fell to 1.46 per cent from 1.67 per cent.

However, the PNB Housing chief said the company is not happy with these levels of NPA and would like to bring it down further.

He said the gross NPAs would have moved further but for the intervention of the Supreme Court order (in keeping accounts standard during March-August, which otherwise would have slipped into NPA).

PNB Housing Finance had gross NPAs at 2.20 per cent calculated on assets under management (AUM) at the end of September 2020.

“The problem on the NPA is on the corporate book size, which is almost about 7.6 per cent, and we have brought it down. And, on the retail book, it is just 1.23 per cent. I think we are still not happy with 1.23 per cent. We still feel that we want to bring it below 1 per cent,” Prasad added.

The company’s total corporate lending book stands at Rs 14,331 crore, which is 18 per cent of its AUM.

With a consistent attempt to bring down the corporate lending portfolio and increase the retail lending, PNB Housing Finance is now focussing on the tier-II and III cities as well, besides its top 7-10 markets.

It is now focussing on retail business with 82 per cent of its AUM of Rs 81,221 crore, as retail lending at the end of the second quarter of 2020-21.

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