PNB Housing Fin – Fast Growing HFC

Q2Fy23 concall highlights:

1. out of 52000cr retail book, 3000 cr affordable book. want to grow it. Affordable has good yield with low delinquency.
2. Non affordable to affordable ratio in retail to be 75:25 in future.
3. Have been able to arrest BT out on a sequential basis. Bt out q1 1350 n 1100 cr in q2.
4. Increase in provisooning: 243 cr. has 4 components. 80 cr actual.
5. credit cost of q2 on annualized basis: 1.54% it’s more compared to 0.94 in H1. for whole year it’s expected to be 1%.
6. Mr. Girish Kousigi Your priority for this company: aggressive on growth. To be seen in next few quarters. Getting into affordable segment in big way. Focus on bringing down GNPAs. To ensure profitability.
7. Answer to Omkara capital: Growth in book to comeback. because disbursement is already up. book will catch up. working to bring down gnpa. Plan for resolution on corporate book. There will be improvement going ahead qoq.
8. cost of borrowing: 7.32 % now. once we start to grow and asset quality improves our cost of borrowing will come down due to rating upgrade. but in the immediate quarters it should increase by 0.5-0.6%.But we are going to focus more on affordable segment where there is less competetion with higher yeild. so won’t be a problem to maintain the spreads. there is not much difference in terms of asset quality in affordable vs non affordable.
9. update on corporate book resolution: might take sime. working on it. 3-4 quarters we should see something. Corporate account resolution takes some time. Which is not the case in retail.
10. Retail book normalised credit cost from next year.
11. 2.6% spread is sustainable.2.2 % is threshold. it could be higher.
12. provisioning on corporate book gnpa: gnpa 1734 cr. 50% pcr on corporate gnpa. we are adequately covered in terms of provision.
13. Normalised credit cost on retail: 40-50 bps
14. ROA&ROE in normal conditions: 2.2 spread, nim of 3.2, ROE should also improve going ahead.
15. Going ahead we will be retail lending company only.
16. capital raising update: filing for rights issue to be done before ending 2022 around 2500 cr.once rights issue is done rating upgrade will happen. then we’ll get better rates.rights issue to be completed within q1fy24.
17. steps to take cost of fund down: it will come down. once our asset quality improves we’ll get better rates. so focus is on growth, asset quality and profitability. Cost of fund will automatically come down bcz of better rate once we reach there.
18. growth guidance: our book should grow by 10% this year. next year about 18%.

With the book cleaning going on and growth coming back this looks a rerating candidate. Mr Girish Kousigi from Can Fin homes joined the company. He has very good track record with can fin homes which has excellent npa numbers. If he can make PNBHF half of what canfin homes is rerating is on the cards.

Disclosure: Invested