PNB Housing plans to re-enter corporate loans after two years hiatus

A Rs 2,500-crore rights issue in the pipeline and healthy CRAR may provide leeway to PNB Housing Finance to re-enter the high-yielding corporate loans that it stopped two years back, a top company official said.

The Punjab National Bank-promoted housing finance company (HFC) presently has a corporate loan book size of Rs 6,006 crore which may come down further by Rs 1,000 crore by December, Hardayal Prasad, the Managing Director and Chief Executive Officer of PNB Housing Finance, said.

The loan book declined by 45 per cent in the first quarter of 2022-23 compared to the year-ago period on account of sell-offs and accelerated prepayments.

On the CRAR (capital to risk weighted assets ratio), the company sits comfortably at 23.9 per cent as of June 30, 2022, as against 21.4 per cent in the year-ago period (June 2021) and 23.4 per cent

in the preceding quarter ended March 2022. CRAR is a measurement of a company's available capital and is critical to ensuring an entity's ability to absorb losses.

The company has improved its CRAR consistently from 18 per cent by the end of March 2020 and from 18.7 per cent by end of March 2021.

"My exposure to corporate loans is of Rs 6,006 crore right now and these are strong loans other than the NPAs. It may come down by another Rs 1,000 crore by December.

"We have still not decided to go ahead with corporate loans, but at some point in time, we will decide. The reason I stopped this business is that these kinds of loans carry 100 per cent risk weightage and if you have 100 per cent risk, then I need more capital.

"If I start doing it, I will consume that capital which could have gone to retail loan. What we are saying is that despite the fact that we have increased our CRAR, we would not like to do it unless we get the capital," Prasad told PTI in an interview.

The company is expected to get Rs 500 crore of the rights issue from PNB by December this year and the rest from other shareholders.

It closed one corporate account worth Rs 353 crore in Q1FY23, sold one account of Rs 187 crore to ARC (asset reconstruction company), and write-off two corporate accounts worth Rs 425 crore among others.

PNB Housing Finance faced headwinds last year to raise the much-needed growth capital when it had to abort the Rs 4,000 crore equity capital infusion from a clutch of investors including the present shareholder Carlyle group and former HDFC Bank honcho Aditya Puri.

Besides, the Reserve Bank also denied permission to PNB for infusing equity into the company, which has finally been granted this time.

"We will need approval from Sebi for the rights issue. The draft letter of offer is in the final stages which we will submit to Sebi as quickly as possible. And once we have the capital, we will be in a position to go ahead and actually start doing businesses where risk weightage is 100 per cent be it a corporate loan, loan against property (LAP) or other such loans. That's where we will go ahead...And all these are high-yielding loans," said the official.

The company's focus is accelerating retail loan growth, with assets under management (AUM) standing at 91 per cent by end of the quarter ended June 2022 as against 85 per cent from a year ago's 85 per cent. It was up from 89 per cent against March 2022 quarter.

Its retail loan asset size stood at Rs 50,295 crore at end of Q1FY23, up by 1.7 per cent from a year ago period. While the overall AUM stands at Rs 64,850 crore.

PNB Housing witnessed a slight blip in its net profit at Rs 235 crore in the April-June quarter of 2022-23, as against Rs 243 crore a year ago period, mainly on account of a seasonally weak quarter.

Prasad said the company's focus is on the retail segment completely. Retail disbursements more than doubled to Rs 3,395 crore in June quarter from Rs 1,652 crore in Q1FY22.