PNB will invest up to Rs 600 crore in PNB Housing Finance: Neeraj Vyas, MD & CEO

Neeraj Vyas, MD & CEO, PNB Housing Finance, talks about the strategy that the firm will adopt to mitigate the impact of COVID on its business, liquidity situation, NPA levels, PNB’s plan to invest in the firm and plans related to create a digital platform among others during an interview with Swati Khandelwal, Zee Business. Edited Excerpts: 

Q: What strategy will be adopted to mitigate the impact of the pandemic on the business?

A: The effect has been on the entire market and you have seen that. The disbursement figure shows that we have done a business of roughly Rs 600 crore in the first quarter. So the pandemic has had an impact, in fact, April and May were washed out amid lockdown but the fillers that we are receiving from the ground are quite good and I feel that the rate we are making of Rs 500-600 crore per month will be maintained in the upcoming three months. We have received a report that says that a lot of enquiries is coming and this gives us a sense that September-onwards it will cross Rs 100 crore mark. But of all these enquiries that are coming to us, we are focusing on retail only, especially where property value is around Rs 1 crore and loan requirements of Rs 50-75 lakhs. We will focus on retail segment only as we have decided to not go for a corporate loan for time being, in fact, we didn’t do it last year as well and it will not be done this year too. We have set a target of doing retail business of Rs 13,000 crore this year and the market is sending signals that it is not a difficult task and we will achieve it at an ease. 

Q: Let us know about the liquidity situation of the company and how you are managing it? Also, tell us about the current borrowing portfolio?

A: As far as liquidity is concerned then we are getting a lot of support from National Housing Bank (NHB). It is sanctioning funds to us. We are talking with the banks, generally, we start a discussion with the banks after the audited balance sheet is released, depending upon the business that we will do, we apply to the banks, accordingly. The special liquidity has been sanctioned for us. The liquidity source is varied. However, the debt market hasn’t picked up yet because a mutual fund is not coming in it at all. Otherwise, we are getting liquidity support and as on the date when I am talking with you we have a comfortable liquidity position of Rs 5,000 crore

Liquidity comes as a co-added cost and whatever liquidity fund you invest in the market will get you a return of up to 2.50% to 3%. So, it is a cost. But amid the current market situation, it is better to be safe rather than taking the risk on that side. 

Q: If we have a look at other housing finance companies then PNB Housing Finance’s NPA level is the lowest. Do you think that you will be able to maintain the level or there can be some concerns in that aspect?

A: We are also concerned, the way the market is because people have taken moratorium and we are tracking the things closely. But the good thing is that the moratorium that stood at 49% under Moratorium-I, i.e. March-April-May, in our retail book has come down to 29% in the Moratorium-II. Those, who took moratorium-I but did not carry the same in moratorium-II are being tracked separately and there our collection efficiency is more than 90%. This is a good thing but this was an unprecedented problem and no one would have thought that such a situation will prop up. We are looking it closely and some incentives have been provided to the staffs as well and have taken some initiatives where we can educate the customers through SMS and emails and informing them that if you default after the moratorium period comes to an end then it will impact your CIBIL score, which will reduce your eligibility of getting new loans. So all these initiatives are going on but definitely we will have to keep a close watch after the moratorium is lifted on August 31, 2020, but our efforts are on. Hopefully, going by the trend, as I said that we have a collection efficiency of 95% plus, we will be able to control it. 

Q: PNB also had plans to invest in the PNB Housing Finance. What is the update on it and what is the timeline by which the investment will reach you? Also, let us know how the amount will be used?

A: Till now, the talks were going on with the PNB and positive talks were on with the bank. We were also telling to everyone that he talks are on with PNB but if you have seen July 30, 2020, notifications on PNB at the stock exchanges then PNB in its notification at the exchanges has notified that its board has approved an in-principal sanction to contribute up to Rs 600 crore. So, the PNB’s sanction has come but it has some technicalities like it should be approved by the RBI and the government. PNB will approach them. Simultaneously, we are initiating the process, our internal process in which we will have to approach to our board for an equity raise plan. In the context of the total timeline, then we will receive the money in the next 12-14 weeks from today. 

When it comes to how the money will be used then I would like to say that we will try to improve our performance and ratings. There was a concern that our equity raising plan has stretched too long and we were not able to raise equity last year. So, the concern will be addressed. Improvement in the rating will benefit us on the liability side as our cost of borrowing will come down. Reduction in the cost of borrowing will increase our margin and to some extent, we will pass on the benefit to our customers, which means the rate of interest will come down. 

Q: You have also decided to launch a digital platform. So let us know about it and the kind of investment that will be made and the kind of digital platform that will be created?

A: During the lockdown, we experienced that people were not able to move out due to social distancing norms. There is a slight hitch in getting out even after the lockdown has ended as there are chances of getting infected. In fact, during the lockdown, we were accepting almost every application through emails and this is something that inspired us to create an application form where the customers can sit at their homes and complete the KYC, upload all the documents and sign the application digitally. So, we have developed the application and it is being tested in a closed user group and the results are good till date. We have an intention in which almost every application that we receive in the retail segment from the tax-saving customers - who can upload the application through net including the KYC documents – digitally as it will help us in underwriting the end-to-end process digitally. It will greatly benefit the customers as they will not have to move and will not have to contact anyone.

Even our staff members will not have to move, who go out to collect the KYC documents or the customers are supposed to visit the branches. We have set a target to acquire at least 7% to 10% applications through the digital platform annually. This will hugely benefit both the customer as well as the company by reducing paper handling. At the same time, it will also reduce the TAT (Turn Around Time) between the application to sanction. So, both will be benefitted with it. The company will be benefitted in terms of reducing the TAT as well as the customer who can apply by sitting at the home, which can be signed digitally. 

Q: What kind of focus you will have geography-wise and where maximum demand is visible?

A: As far as geography is concerned then 40% of our business comes from Wes, while 30% comes from North and South. East region is also included in North because we don’t have enough business from the East and also don’t have such a huge presence in the region. So, we will focus on the same ratio. Apart from focusing on the tier-I cities like Pune and Bangalore, we also have a focus on tier-II cities. If you have a look at a project, named Unnati, which comes under the affordable housing and we are getting good results in the segment in tier-I onwards. So, we will have a focus there as well but it will not be restricted to just ‘Unnati'.

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We will also concentrate on mass housing about which I have said that the house should be around Rs 1 crore with loan eligibility of about Rs 75 lakhs and we are receiving enquiries about it from other then tier-I cities. So, we will focus on tier-I cities because a lot of houses are required there. But we are also present in tier-II cities and are receiving many enquiries from these cities and we will have a focus on these cities as well with mass housing and Unnati. We will not go to small cities because we are not present there. We are present in the unique cities and we will concentrate there only.