PNB HFC plans to sell ~2K-cr corporate loans

PNB Housing Finance (PNB HFC) plans to sell corporate loans worth up to ~2,000 crore in the current financial year (2020-21) to further release capital and use the same for growing retail home loan book.

PNB HFC is in talks with banks for offloading a part of corporate loan book, and expects to finalise the deal in next few weeks, said Neeraj Vyas, managing director and chief executive officer of the housing finance company.

The company plans to focus on the lower risk-weighted retail assets business and bring down the share of corporate loans in its assets under management (AUMS).

Its AUM stood at ~83,346 crore in March 2020, down from ~84,722 crore in March 2019.

The share of corporate loans in its AUM declined to 18 per cent in FY20 from 21 per cent in FY19. The corporate finance disbursements shrank 84 per cent YOY to ~1,515 crore during FY20.

“The capital raised through the sale of corporate loans would be deployed into retail lending. Retail loans attract lower risk weights (between 35-50 per cent) as against 100 per cent for corporate portfolio. Thus retail segment consumes less capital,” Vyas told Business Standard.

Its stock closed 3.67 per cent down at ~212.90 per share on BSE on Monday.

The lender’s asset quality came under pressure during FY20 with retail book gross non-performing assets (GNPAS) at 1.25 per cent and corporate book GNPAS at 8.18 per cent. It sold corporate finance portfolio worth ~2,307 crore to help it improve capital

adequacy ratio. It also sold retail loans worth ~9,311 crore through securitization.

Its capital adequacy was 17.98 per cent in March 2020, up from 13.98 per cent in March 2019. For FY20, Tier I capital was 15.18 per cent and Tier II capital was 2.80 per cent.

The company has not declared dividend for FY19-20 in order to conserve capital.

Vyas said while it can grow business in this financial year with the current capital base, the company would not like to sit on the fence. The company needs the comfort of capital.

It would also explore the option of raising capital through a rights issue. The time is not right for qualified institutional placement (QIP) and preferential issue, he said in a call with analysts.

On March 3, PNB HFC’S board had given the go-ahead to raise up to ~1,700 crore in equity capital through QIP.

Referring to liquidity, Vyas said the lender had enough liquidity (about ~10,000 crore) to meet three months’ repayment obligations.

The board has also approved the issuance of secured and unsecured non-convertible debentures outstanding up to of ~45,000 crore in tranches on a private placement during a period of one year.

The board also gave nod for raising up to $750 million by way of the external commercial borrowings (ECB) in one or more tranches. The company has already utilised the facility up to $600 and has headroom to raise $150 million more. It could also raise more under the facility depending on the repayments for money raised earlier, Vyas said.

The incremental market borrowing in FY20 was ~21,870 crore. Its outstanding borrowings stood at ~58,475 crore as on March 31. It booked a net loss of ~263.12 crore in the quarter ended March 31, against a net profit of ~371.12 crore in the yearago period because of a sharp rise in provisions for impairment of financial instruments and write-offs. In FY20, its net profit fell to ~682.31 crore.