"Our focus on affordable & emerging market segments will help us maintain asset quality," says Girish Kousgi, MD & CEO, PNB Housing Finance

"Despite a sharp rise in interest rates, we have achieved an improvement in asset quality. Looking ahead, we are optimistic that our focus on the affordable and emerging market segments will help us maintain our asset quality and sustain the current margin levels, said Girish Kousgi, MD & CEO, PNB Housing Finance in an exclusive e-mail interaction with Zee Business' Sirali Gupta.

With over 21 years of experience in the financial sector, Kousgi holds an Executive Master’s Diploma in Business Administration from the Indian Institute of Commerce and Trade. Kousgi also serves as a director on the board of PNB Housing Finance's subsidiaries, namely PHFL Home Loans and Services Limited and PEHEL Foundation. He was appointed to the Board with effect from October 21, 2022.

Edited excerpts:

PNB Housing Finance's board recently approved a fundraising of Rs 10,000 crore, could you tell us how the company plans to utilise the proposed fundraising?
This is an enabling resolution to borrow funds through NCDs in a year. The company will utilise these funds to fuel business growth in strategic focus areas.

What are your company's current debt levels and strategies for managing debt in the future?
We have significantly strengthened our funding position. In FY24, we raised Rs 1,451 crore through Non-Convertible Debentures (NCDs) and Rs 10,100 crore via Commercial Papers (CPs). Additionally, we secured Rs 3,000 crore from the National Housing Bank (NHB). As of March 31, 2024, our debt securities stood at Rs 7,852 crore, up from Rs 3,994 crore the previous year.

Our strategy for managing debt focuses on borrowing from multiple sources and maintaining a balanced mix of short-term and long-term borrowings. This approach ensures liquidity and financial stability, allowing us to support our growth initiatives in the retail segment while optimising our cost of funds.

How have post-COVID interest rate changes impacted your business and what does the road ahead look like amid expectations of rate cuts?
Post-COVID interest rate changes have been an upward cycle, but our efforts to balance both the asset and liabilities sides helped us achieve net interest margins of 3.5 per cent in FY24. Despite a sharp rise in interest rates over the past year and a half, we have achieved an improvement in asset quality. Looking ahead, we are optimistic that our focus on the affordable and emerging market segments will help us maintain our asset quality and sustain the current margin levels.

Do you have any plans to expand your product offerings or to enter new markets shortly?
We leverage our expertise in the retail segment and are uniquely positioned to cater to customers across segments. We are strategically focused on expanding our offering in this segment with 'Roshni' in the last quarter of FY23. Roshni is designed to cater specifically to the needs of individuals seeking affordable home loan solutions.

Further, we started off the new financial year with the launch of our new emerging markets category to capitalise on the high-yielding segments. Specialised teams for sales, credit, collections, and operations have been set up, along with dedicated 50 branches for catering to customers in this segment.

Looking ahead, we plan to build our book by focusing on both affordable and emerging segments. We expect these segments to contribute 40 per cent of our incremental business, with the remaining 60 per cent coming from the prime segment. We also plan to expand our branch network to meet the evolving requirements of our business.

Our strategy is to leverage our strong parentage, extensive branch network, and tech-driven operational efficiency to meet the evolving needs of our customers and capture growth opportunities in these high-potential markets.

Any specific areas you plan to focus on for future growth?
We are looking to grow our retail book by 17 per cent in this fiscal year and will focus on expanding our distribution network in the high-yielding segments, including affordable and emerging markets. We also plan to resume our corporate finance business later in the year. Further, we will continue to invest in our core technology foundation by implementing and leveraging cloud workloads and amplification of micro capabilities and services for seamless digital integrations.

Many experts are talking about a long-term uptrend in real estate. Do you see any such signs in your business? Has there been a significant jump in loan inquiries/applications to support this view?
In FY24, we recorded 14 per cent growth in our retail segment, which now represents 97 per cent of our total loan assets, up from 94 per cent as of FY23. Additionally, our focus on the affordable segment has been fruitful, with Rs 1,790 crore in loan assets built within just 15 months of operation. These developments align with the broader optimism in the real estate sector. We have seen a substantial increase in loan inquiries and applications, indicating strong market demand. This uptrend is not just a short-term spike but a sign of sustained interest and confidence in real estate.

Crisil expects unsecured retail loans to grow relatively slower following RBI’s risk weight guidelines. Will this have an impact on your business? How?
PNB Housing is in the business of secured lending, adequately covered by either residential collateral or commercial collateral retail loans, hence the impact of RBI’s risk weight guidelines does not apply to us. We are committed to expanding our retail business, driven by a leadership team with focused retail experience at the helm. With multiple priorities driving our retail business, we reported a 14 per cent growth in the retail loan book during FY24, now contributing 97 per cent of our portfolio. We also strengthened our distribution footprint to 300 branches/outreaches across the country at this time.

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