PNB Housing: We will be able to grow book by about 17-18% in next 2 years: Girish Kousgi, PNB Housing
How is the momentum on the ground at this point of time, there was this talk that there might be a bit of plateau-ing of demand growth and credit growth going forward, what has been the reading so far in the month of April, May and now June?
If you look at demand, it is very good since last couple of years. The quarter 4 for us was the highest of a quarter in last three and a half years in terms of disbursement growth, in terms of book growth and also in terms of collections. So I think market is pretty robust, market is good. Typically, if you see quarter one will be slightly muted compared to quarter 4 of any given year. Otherwise, if you look at demand, it is pretty good. Wanted to also understand the outlook when it comes to your share in the housing finance space because that has declined to 4.5% from 6.6% in March 20. Your AUM growth is also a bit muted. What are the projections on these two parameters and what really led to this decline?
If you look at for next couple of years, we will be able to grow book by about 17-18%. In terms of disbursement, it will be about 22%. I think that is the guidance what we would like to give.
If you look at the internals of your book, it looks like the corporate book has declined by 50%. I understand part of it was intentional and part of it was on account of write-offs, ARC sales etc. as well. But going forward, what is the mix you expect in retail versus corporates?
It was a conscious call to bring down the corporate book since we saw stress in that book and therefore, now if you see, we have really resolved quite a few cases in last few quarters. And today if you look at the corporate NPA we have just two accounts. And out of two accounts, one account constitutes to almost about 92% which is backed by a leading developer in the country. So we are pretty much comfortable on that. And even on the other account, we have a resolution in place.
So I think more or less corporate in terms of working on resolution is almost sorted. We still have a book of close to Rs 3800 crores. So we want to run down that book and then think of restarting but that will take time. We are not in a hurry. As of now, the focus is completely going to be on growing the retail book. We are into prime business. We just started Roshni which is affordable business last quarter. That will gain a lot of traction in this year. So the focus for next two quarters is going to be on retail.
Now that interest rates are turning benign, what typically happens to HFCs in terms of the NIMS because in a rising interest rate environment, banks, they make more money because their deposits get re-priced later on? What happens to NBFCs in a benign interest rate cycle? Do you take advantage or are you at a disadvantage?
I think typically when you see, when the interest rates are going up, it will help NBFCs and HFCs in terms of improving their spread and NIM. And there will be a lag effect. And when the rate goes down, obviously, because what happens is that in terms of absolute revenue, it is going to be less when the rate goes down.
And it is quite opposite when the rate goes up. So when the interest rate goes up, obviously, it is going to help NBFCs and HFCs but the rate should not go up drastically as well because if it goes up drastically, it will have an impact on the default percentage.
Do you think the entire consumer, the entire HFC space is getting extremely competitive because you have got SBI, which has unleashed a price war. PNB has got fantastic rates now. Private companies like HDFC they are also giving very competitive rates. Do you think this is a business where growth would be there but competition will keep the NIMs under pressure?
Actually, if you look at competition, competition is there since many years, many decades. I think there was heightened activity in terms of banks competing more with HFCs and NBFCs during and immediately after Covid. So we saw maximum competition from banks in quarter 3 and quarter 4 of FY20. I think that is when there was severe competition. Even during that time, when there was a flight of book from HFCs and NBFC to banks, HFCs and NBFCs did well, not just on asset quality, even in terms of disbursements and growth. So I think competition is there. It will be there. But I think we have different segments, different geographies to operate. And the market is quite large. So we do not see that as a major threat.
With the cleanup of balance sheet, asset quality as well has improved. What is your outlook with respect to credit costs? How are you looking at slippages?
If you look at our GNPA, one year back, it was about 8.12%. Now it is 3.83%. So the drop is more than 50%. And this is true both in terms of corporate as well as retail. Now in terms of GNPA, especially on retail because now our focus is largely on retail and corporate is more or less sorted, I think in next, let us say, 4 to 5 quarters time, our GNPA would be comparable with some of the best companies in the industry.
Just give us a sense with respect to how this will pan out with respect to your net interest margins at the end of the day. What could be the return on asset that would be sustainable?
In terms of NIM, for a company like PNB Housing, it will be around 3.5%. And we have just now got into affordable. I think once we start building up that book, there we will see a lot of traction from this year onwards because we just started last quarter. I think that should definitely aid in terms of lifting the NIM from the current level. Otherwise, on a steady state for next few quarters, I think NIM of 3.5% and spread of 2.5% should hold. And with affordable kicking in, I think there should be slight improvement from the current levels.
Given the fact you just did a rights issue, I am guessing there is no other fund raise on the cards? You are pretty much okay in terms of capital at this point of time for the year.
Yes. We just did a rights issue now and now our CAR is 30%. So this is going to be used for growth and we do not have any requirement of raising capital in next few years.
