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PNB Housing Finance to re-enter corporate loans at appropriate time: CEO Hardayal Prasad

The loan book declined by 45% in the June quarter (Q1FY23) as compared to the year-ago period on account of sell-offs and accelerated prepayments.Premium
The loan book declined by 45% in the June quarter (Q1FY23) as compared to the year-ago period on account of sell-offs and accelerated prepayments.

  • State-owned Punjab National Bank-promoted HFC currently has a corporate loan book size of 6,006 crore, which may come down further by 1,000 crore, by the year-end, the MD and CEO of PNB Housing Finance said

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Hardayal Prasad, the Managing Director and Chief Executive Officer of PNB Housing Finance, has said that a 2,500-crore rights issue in the pipeline and healthy CRAR may provide a scope to the housing finance company to re-enter the high-yielding corporate loans that it stopped two years back.

State-owned Punjab National Bank-promoted housing finance company (HFC) currently has a corporate loan book size of 6,006 crore, which may come down further by 1,000 crore, by the year-end, the MD and CEO of PNB Housing Finance said.

The loan book shrinked by 45% in the June quarter (Q1FY23) as compared to the year-ago period on account of sell-offs and accelerated prepayments.

On the CRAR (capital to risk weighted assets ratio), the firm sits comfortably at 23.9% as of 30 June, 2022, as against 21.4% in the year-ago period (June last year) and 23.4% in the preceding quarter ended March 2022. 

CRAR is a measurement of a firm's available capital and is critical to ensuring an entity's ability to absorb losses.

The firm has improved its CRAR consistently from 18% by the end of March 2020 and from 18.7% by end of March last year.

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

He also said, “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."

The top company official added, "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."

The housing finance company will likely get 500 crore of the rights issue from PNB by December 2022 and the rest from other shareholders.

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

The firm faced headwinds in 2021 to raise the much-needed growth capital when it had to abort the 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 of India also denied permission to PNB for infusing equity into the firm, 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," Prasad added.

PNB Housing Finance's focus is accelerating retail loan growth, with assets under management (AUM) standing at 91% by end of the June quarter as compared to 85% from a year ago's 85%. It was up from 89% as against March 2022 quarter.

The retail loan asset size came in at 50,295 crore at end of Q1FY23, an increase of 1.7% from a year ago period. While the overall AUM stands at 64,850 crore.

PNB Housing clocked a slight blip in its net profit at 235 crore in June quarter as against 243 crore a year ago period, mainly on account of a seasonally weak quarter.

The official stated that the firm's focus is on the retail segment completely. Retail disbursements more than doubled to 3,395 crore in April-June quarter from 1,652 crore in the year-ago period.

With agency inputs

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