“We are maintaining liquidity of above 3 months to take care of unforeseen circumstances,” Neeraj Vyas, MD and CEO, PNB Housing Finance
Neeraj Vyas was recently elevated from an independent director to managing director and chief executive officer (MD & CEO) of PNB Housing. He spells out a strategy to shield the housing financier from jolts as seen in the past.
He reiterates that the promoter, Punjab National Bank
(PNB), and Carlyle have shelved their plans to sell their stake in the company. "PNB will not let their stake fall below 26 per cent," Vyas added. PNB Housing is due to roll out its rights issue of Rs 1,700 crore, which will find participation from PNB and Carlyle.
As for the business strategy, a key part will be to have a well-diversified liabilities franchise with greater dependence on medium- to long-term money. "We are maintaining liquidity of more than three months to take care of unforeseen needs," said Vyas. The other important aspect where course correction is already underway is reducing the share of commercial papers (CPs), which was at over 30 per cent in mid-2018. Going forward, CPs will at best account for 6-7 per cent of the total borrowings. Public deposits will remain an integral part of liabilities with its share increasing to 20 per from the current 17 per cent level. Vyas is aware that long-term money comes at a cost, which could dent the bottom line and he is willing to take that hit given the ensuing liquidity comfort.
As for RBI’s draft guidelines for NBFCs including HFCs, he says they are relatively less stringent compared to existing norms. As per draft norms, even loans to builders as housing loans are included as housing loans to compute the 51 per cent threshold for pure housing loans. “A ratio of 75:25 is the split we will try to maintain for housing and non-housing loans,” he added. Equally comforting is his guidance that PNB Housing will not resort to huge pools of asset securitisation as seen in the last 12 – 18 months. “For liquidity and balance sheet management purposes we had to go for securitisation. Now we are comfortable. In first half of FY21, there are no securitisation plans. In the second half, need be, will securitise the non-housing loan book,” he said.
Contrary to the perception, Vyas says housing demand isn’t an issue, particularly in the affordable and mass housing segments with loan size of up to Rs 75 lakhs. “In April, we got 1,200 loan applications. In May, the number went up to 3,000 and in June over 4,000 and we could disburse more than Rs 500 crore per month in loans sanctioned in FY20,” he says. Post November, monthly disbursements may increase to Rs 1,000 – 1,500 crore.
The problem, though is prevalent in the premium housing segment where some developers who have borrowed for premium housing are changing their business plan and cash flow models. “They are not going ahead building premium homes; rather building mass homes,” he said.
Nearly 50 – 60 per cent loan applications are received from the salaried class, while 30-40 per cent are self-employed. Lately, the lender has turned cautious sanctioning loans from applicants from construction, gem and jewellery, hospitality and aviation. “Unless the fixed obligation to income ratio is balanced, we are cautious sanctioning loans to customers in these segments,” he said.
As for asset quality concerns, Vyas feels the stress will show up only after the moratorium is lifted in September. For PNB Housing, accounts under moratorium has reduced from 40 per cent in the first phase to 25 per cent in the second phase, with 98 per cent collection efficiency minus the moratorium book.