PNBHOUSINGNSEQ4 & FY 2022-23May 23, 2023

PNB Housing Finance Limited

7,764words

118turns

15analyst exchanges

2executives

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Management on call

Deepika Gupta Padhi

Head of Investor Relations and

Girish Kousgi

our

Key numbers — 40 extracted

36%

on both disbursements and book. If you look at disbursements over the last year, we have grown by 36% on the Retail side and book growth was 10%. So, Q4 FY23 disbursement was all-time high in the las

10%

at disbursements over the last year, we have grown by 36% on the Retail side and book growth was 10%. So, Q4 FY23 disbursement was all-time high in the last 14 quarters. On the GNPA side, if you hav

2.86%

st 14 quarters. On the GNPA side, if you have to look at the last quarter, the GNPA on Retail was 2.86% as on Q3FY23 and as of Q4 FY23 it is 2.57%. Net NPA was 1.96% last quarter and Q4 FY23 was 1.74

2.57%

ve to look at the last quarter, the GNPA on Retail was 2.86% as on Q3FY23 and as of Q4 FY23 it is 2.57%. Net NPA was 1.96% last quarter and Q4 FY23 was 1.74%. So, very clearly we can see that growth is

1.96%

ast quarter, the GNPA on Retail was 2.86% as on Q3FY23 and as of Q4 FY23 it is 2.57%. Net NPA was 1.96% last quarter and Q4 FY23 was 1.74%. So, very clearly we can see that growth is back. Disbursement

1.74%

.86% as on Q3FY23 and as of Q4 FY23 it is 2.57%. Net NPA was 1.96% last quarter and Q4 FY23 was 1.74%. So, very clearly we can see that growth is back. Disbursement even sequentially there Public

33%

hat growth is back. Disbursement even sequentially there Public was a growth of about 33% that is Q4FY23 over Q3FY23. And sequential book growth is 4.4% on Retail. So, very clearly growth

4.4%

Public was a growth of about 33% that is Q4FY23 over Q3FY23. And sequential book growth is 4.4% on Retail. So, very clearly growth is back both on disbursements and book and also in terms of

Rs.3800 crore

hat you have done in the last few quarters and if you look at the book as of Q4 end, it is around Rs.3800 crore. The same number last year was Rs.7,375 crore, so the book has degrown by 48.5%. In terms of se

Rs.7,375 crore

d if you look at the book as of Q4 end, it is around Rs.3800 crore. The same number last year was Rs.7,375 crore, so the book has degrown by 48.5%. In terms of sequentially, the book has degrown by 23% and that

48.5%

is around Rs.3800 crore. The same number last year was Rs.7,375 crore, so the book has degrown by 48.5%. In terms of sequentially, the book has degrown by 23% and that was as per our plan. In terms of

23%

.7,375 crore, so the book has degrown by 48.5%. In terms of sequentially, the book has degrown by 23% and that was as per our plan. In terms of NPA, last year the NPA was Rs.2,738 crores and this yea

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Guidance — 20 items

Girish Kousgi

opening

“Earlier, we were focusing on Super Prime so now we have shifted and we have changed the segment, so therefore there will be lift in yield which will improve the profitability and our focus has been to have an ideal mix of more skewed towards Salaried then self-employed.”

Girish Kousgi

opening

“Now this capital will be used for growth.”

Onkar Ghugardare

“With the capital raise just finished, where are the growth opportunities you are seeing and how you will be deploying that capital?”

Girish Kousgi

“So, we see a lot of opportunity and this capital will be used for growing business.”

Onkar Ghugardare

“I was asking about what kind of what kind of disbursement growth you are looking out for say next 2-3 years since you have recently ventured into Affordable as well and another thing is on ROE and ROA front, what's your target on this one?”

Girish Kousgi

“On Affordable, the growth will be higher because of the smaller base, but I think overall on Retail, we will be able to grow at about (22%+) on disbursement for the next 2 to 3 years’ time and on book, we will be able to grow at about 17% odd.”

Onkar Ghugardare

“And we can expect the gearing to remain here, right?”

Girish Kousgi

“So, typically if you look at any Housing Finance Company be it on Prime or on the Affordable side, the acceptable leverage is around 7.5x to 8x, but for us we will be pretty comfortable around 6x.”

Girish Kousgi

“Post-capital raise we will be at 4x, but we would have scope.”

Girish Kousgi

“So, this of course in terms of increase in interest rate, but as I mentioned, we are changing segment and there we will see an upside of yield, which will be at least 0.8% higher than the Super Prime.”

Risks & concerns — 15 flagged

Net interest income improved 57% year-on-year, though there is a decline of 19% quarter-on-quarter.

— Vinay Gupta

The spread on loans as of Q4 is 2.65%, there is a decline on a sequential basis, however, again there was one-off under the securitization in Q3.

— Vinay Gupta

The company has also increased its lending rates by 30 basis points at the end of March, the impact of that will come in the first quarter of next financial year, which will help us in offsetting some of this decline.

— Vinay Gupta

That is because we used to have a lot of stress in terms of customer attrition.

— Girish Kousgi

Gearing currently is at 4.9x, but with the capital coming in there would be some pressure on gearing.

— Vinay Gupta

So, I think, to degrow Corporate book was a decision which we had taken because we wanted to resolve GNPA, bring it down to comfortable levels before we could restart so this was by design and therefore you will see Corporate book going down since last few quarters.

— Girish Kousgi

So, similarly, there would be some pressure on the ROE with the new capital coming in but with the improvement in ROA, we are sure that we'll be able to sustain the current ROE.

— Vinay Gupta

It was 92% and now the Retail is 94% so it's not much of a difference, and the decline in the Corporate book appears to be from a non performing account.

— Ashwini Agarwal

So, there is some repricing and there is some run off which happens on the securitized book and that is slightly uneven this quarter there was a higher impact of repricing.

— Vinay Gupta

So, that led to some impact of 10 bps- 15 bps over there.

— Vinay Gupta

So, this is an overall impact of around 20 bps.

— Vinay Gupta

Securitized book does not get mark-to-market, but you have to take into account the impact of repricing and any prepayments that happens on our securitize book.

— Vinay Gupta

So, we do not see much of a challenge in terms of resolutions and credit cost for this year what we had guided that is 0.6% is largely on the Retail side.

— Girish Kousgi

So, there is no additional stress which we are envisaging in this book and I think it has been reached to a Stage-where we can say that all the risk which was built up to the COVID has been settled and normalized.

— Neeraj Manchanda

So, from the zero DPD or 1 to 30 DPD, we do not see any significant risk arising from that book.

— Neeraj Manchanda

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Q&A — 15 exchanges

Yes, I would like to know what is the status on the restructured book as on March ‘23 and how much is the provision that we are holding against the restructured book?

Neeraj Manchanda

As on 31st March 2023, we are having a restructured book of Rs.1,870 crore. And we are carrying the provision of around 12% to 13% in our book. These are primarily your wholesale assets, right? No. These are COVID restructured retail accounts and many of those accounts have already started making the payment, they've gone back to the paying stream. Public

With the capital raise just finished, where are the growth opportunities you are seeing and how you will be deploying that capital?

Girish Kousgi

So, basically, capital what we have raised is for growth, we see a lot of opportunity both on Prime and Affordable. Prime is business what we've been doing for a long time and in Prime what you have done because of 2-3 reasons we want to move segment – One is from Super Prime to Prime. That is because we used to have a lot of stress in terms of customer attrition. Therefore, we are now in the process of moving from Super Prime to Prime and in Prime we see a lot of opportunity not just in terms of growth, but also in terms of building book at a higher yield number one. Number 2, we have just st

Two questions from my side. So, one on the yields, even if you look at the yields adjusted for one-off securitization in Q3, it has actually fallen by almost 20 basis points sequentially. So, I was just wondering when we look at the industry trend, it is generally improving and it was quite surprising for us it is declining. So, what is happening on the yield side Sir in Q4?

Girish Kousgi

So, if you look at the yields, we have passed on the higher rates to the customers end of Quarter 4 and also the beginning of Quarter 1 this year. So, this of course in terms of increase in interest rate, but as I mentioned, we are changing segment and there we will see an upside of yield, which will be at least 0.8% higher than the Super Prime. So, which means that we will be able to maintain yield on Prime side at around (10%+) and an Affordable 12%. So, if we compare it with Quarter 3, of course, yes, there has been a slight drop in yield but I think this is something which will get correct

Yes, I wanted to understand in the Investor Presentation, Slide #10, you have mentioned that there is a Rs.1,500 crore that is write-off and resolution, what is the actual write-off here and what is the resolution over here?

Vinay Gupta

That split we have not shared. It has been a mix of both resolution and the write-off that we have done during the year. This is what we have shared on the page as well. So, going forward, how much will we be disbursing in the Corporate? Will we not be growing the Corporate book at all or we will be growing a little bit over there, what would be an ideal Retail versus Wholesale going forward? So, I think, to degrow Corporate book was a decision which we had taken because we wanted to resolve GNPA, bring it down to comfortable levels before we could restart so this was by design and therefore y

I just wanted to know strategically between the Prime and the Super Prime segment, what is the customer difference that you see, that's question number one. And then in terms of what kind of credit cost differences would you see between the 2 segments because you're getting an 80 bps higher yield and then to grow your businesses, would you especially because you have thrust on Affordable Housing is just taking off, would you need more OPEX going forward? Those are my questions, Sir.

Girish Kousgi

So, if you look at Super Prime and Primes, let's say set of institutions, which would focus on CAT-A developer projects for Retail funding and CAT-A corporates were funding to their employees that is basically Super Prime. So, in Prime, what we focus is CAT-B and CAT-C developers for Retail funding and CAT-B and CAT-C employer- employees for lending. So, basically here we have an upside in terms of yield which is 75 to 80 bps. This also would include large chunk from the government sector, be it Central or State Government. In terms of GNPA, a the difference between Super Prime and Prime is no

A couple of questions from my side. One is this additional capital, what does that do to your credit rating and potentially to your borrowing costs and the other thing is that if you look at the higher equity and therefore lower gearing, what do you think would be the Fiscal ‘24 delivered ROA and especially the ROE given higher equity so these are my two questions.

Girish Kousgi

If you look at the last couple of quarter performance, I think very clearly it is evident that there is a significant improvement in growth, significant improvement on the asset quality and this is also true in terms of Corporate book in terms of GNPA. With a capital raise it will definitely help us and we have been engaging with the rating agencies and also bankers. This will have multiple positive impact. One is A) because of performance, on business, on the asset quality, pre-capital raise. So, we are engaging with rating agencies. So, this should positively have a Public relook in terms of

Couple of questions firstly can you share the quantum of disbursement in the Affordable segment then what are the average yields that we are having in that book?

Girish Kousgi

So, actually we just started Affordable business in Quarter 4 so we just started. So, we will start seeing meaningful numbers from this quarter, but just to quote a number we did Rs.137 crores in Quarter 4 and from this quarter onwards now you will see good scale up on Affordable. And what are the yields that we are charging on the segment? Public It is about 11.5% - 11.6%. Secondly, can you also quantify the improvement in cost of funds that we are likely to see after this capital raise then credit rating improving and availability of funding as you mentioned that from NHB and other sources w

I had data keeping question if you could please share the list of the restructured book into Stage- one, two and three?

Neeraj Manchanda

So, as I told you on the Retail side we have got an Rs.1,870 odd crore restructure for Retail out of that around Rs.300 crore is into the (90+) otherwise it is all standard. And how would the performance of this book be I mean would this be predominantly zero DPD or if you could just share some color on the performer? It has already been a COVID restructured loan and COVID has gone by and now it has been more than two years and many of the accounts have come back to the repayment stream and all the assets are backed by security coverage which is also good. So, there is no additional stress whi

Actually, we want to further bring down opex. So, I think it is good feedback, but yes we are working on cost optimization. We want to bring down opex from this level to the extent possible. We take your feedback, but yes our endeavor is to bring down from the current level as well.

Management

What was the incremental cost of funding for the quarter?

Vinay Gupta

Average Cost of Borrowing for the Q4 FY23 is around 7.75% and the incremental cost of borrowing is around 8.05%. Sorry the incremental that you would have done or the repricing that would have happened would be at what rate did you say that that 8% because I am just saying that the incremental that you did? 8%-8.1%.

So, on the coverage side this quarter we saw the drop in coverage so in a steady state this is where do you see the coverage issue settling?

Vinay Gupta

Coverage as Mr. Girish explained it was primarily on account of Corporate. So, there we are only left with two accounts where also the resolution is in progress. So, on Retail our coverage is around 32% and it has been consistently at that level and we would like to maintain it at that particular levels. And sir once again circling back to the yield question so you did highlighted that the repricing on the securitization book as like 15-20 basis point or maybe 10-15 basis point of yield Public compression this quarter, but generally a rising rate scenario your securitized pool will get reprice

You mentioned strategic growth plan do you have anything else in mind other than Affordable housing when you mention the word strategic?

Girish Kousgi

No, I mentioned that we will be growing both in Prime and Affordable business. So, this capital will help us to grow at a much faster pace because the market offers that kind of opportunity today. So, we will be growing pretty aggressively keeping of course asset quality in mind. You know on both Prime and Affordable I mentioned on the Corporate business we would do strategically just to help us in terms of Retail growth. No, I was referring to slide 3 where you said that proceeds would be utilize to fund strategic growth plan and I was wondering are you hinted at some inorganic? Public The sa

Just to kind of reconfirm so restructured number that you have shared Retail Rs.1,870 crores and there is no wholesale account which has been restructured at least in one which is under restructuring now in Corporate account which is under restructuring now. So, that is one thing I kind of wanted to confirm, the second thing again on the restructured book for the benefit of everyone is there any Retail account which is still under moratorium or everyone has exited moratorium and resumed repayment and thirdly I mean a couple of days back or rather yesterday, when we had one of the larger HFC is

Neeraj Manchanda

First of all, these are the Retail restructured numbers under the COVID this thing. In Corporate we have only Rs.108 crore and there is no delinquency nothing we see there. It is performing absolutely fine and perfect. In this Rs.1,800 odd crore number we have told already that Rs.300 odd is NPA and as we already discussed earlier I think whether probably you have missed out it has been made a part of non-normal kind of a business scenario what we have it has already been many, many months this normalization has come back. The allocation of this portfolio in Stage- 2 or Stage-1 is actually dep

Sir, just a few clarifications regarding the yield for Q4. So, firstly want to understand that where do you book this income or reversal from securitization because if I see your slide number 19 so there you have some difference in your reported yield versus yield ex-securitization, but I do not see any line item in your Slide #21 which is P&L which shows some income from the income on derecognize item so just want to understand where do you book this income from securitization?

Vinay Gupta

It is interest income only we have not shown it separately under the P&L line, but it is a separate line which is there. It is in interest income you book it on? Yes. Public And secondly sir in Slide #19 only so if I look at your yield excluding securitization so it seems to have dropped by 20 bps QoQ so excluding securitization, so just want to understand what you like to do? So, again, this is not excluding securitization it is excluding one-off in securitization which is a spread movement which we have explained MCLR versus our rate change movement. So, that is what we are calling at one-of

Thank you everyone for joining us on the call. If you have any questions and unanswered please feel free to get in touch with Investor Relations. The transcript and audio of this call will be uploaded on our website, that is www.pnbhousing.com. Thank you.

Management

Speaking time

Girish Kousgi

Vinay Gupta

Moderator

Renish

Nidhesh

Ashwini Agarwal

Neeraj Manchanda

Onkar Ghugardare

Rajesh

Abhijit Tibrewal

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Opening remarks

Deepika Gupta Padhi

Thank you Faizan. Good evening and welcome everyone. We are here to discuss PNB Housing Finance Q4 & FY'22-23 Results. You must have seen our business and financial numbers in the Presentation and the Press Release shared with the Indian Stock Exchanges and also available on our website. With me, we have our entire management team across verticals, led by Mr. Girish Kousgi – our Managing Director & CEO of PNB Housing Finance. We will begin this call with the “Performance Update” by the MD and CEO along with the financial performance by our CFO – Mr. Vinay Gupta followed by an Interactive Q&A Session. Please note, this call may contain forward-looking statements, which exemplify our judgment and future expectations concerning the development of our business. These forward-looking statements involve risks and uncertainties that may cause actual developments and results to differ materially from our expectations. PNB Housing Finance undertakes no obligation to publicly revise any forward-

Girish Kousgi

Good evening to all the investors. Happy to share we had an eventful Quarter 4 and the whole year was pretty good compared to last year. Broadly, I'll be covering on the growth, especially on the Prime, then asset quality on the Retail side, Corporate book and performance both on A) in terms of resolution and B) also in terms of GNPA and net NPA, capital raise and Affordable business which we have started recently. In terms of growth, very clearly there was a growth in Retail side on both disbursements and book. If you look at disbursements over the last year, we have grown by 36% on the Retail side and book growth was 10%. So, Q4 FY23 disbursement was all-time high in the last 14 quarters. On the GNPA side, if you have to look at the last quarter, the GNPA on Retail was 2.86% as on Q3FY23 and as of Q4 FY23 it is 2.57%. Net NPA was 1.96% last quarter and Q4 FY23 was 1.74%. So, very clearly we can see that growth is back. Disbursement even sequentially there Public was a growth of about

Vinay Gupta

Good evening all. I will cover the “Financial Performance” for the quarter and full year ended FY22-23. First of all, with respect to Q4 FY23: Overall that PAT that was delivered is Rs.279 crores, which is a growth of 65% year-on-year and 4% on a quarter-on-quarter basis. Net interest income improved 57% year-on-year, though there is a decline of 19% quarter-on-quarter. However, there was a one-off in Q3 under the securitization income due to margin true-up on account of increase in yield. Excluding that NII declined by 6% quarter-on-quarter. Pre-provision operating profit improved 32% year-on-year and operating expenditure increased 23% year-on-year. The spread on loans as of Q4 is 2.65%, there is a decline on a sequential basis, however, again there was one-off under the securitization in Q3. Excluding that it is more or less comparable from what we have seen in Q3. The company has also increased its lending rates by 30 basis points at the end of March, the impact of that will come i

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