India Ratings and Research (Ind-Ra) has upgraded PNB Housing Finance Limited’s non-convertible debentures (NCDs) to ‘IND AA+’ from ‘IND AA’ with a stable outlook. The NCD limit has been split into bank loans and NCDs, with a corresponding ‘IND AA+’ rating assigned to the bank loans.
Key Rating Drivers
- Significant Player in Housing Finance Space: PNBHF is a major housing finance player with an AUM of INR 674 billion, focusing on retail loans and boasting over three decades of operational experience.
- Completion of Granularisation of Book: The company has successfully reduced its wholesale book, demonstrating a focus on home loans and a decrease in credit cost volatility.
- Robust Capital Buffers: Post a substantial equity infusion of INR 25 billion, PNBHF’s tangible net worth increased, providing a solid base for growth and maintaining strong Tier I ratios.
- Improvement in Asset Quality: A significant reduction in credit cost, write-offs, and recoveries have led to improvements in both retail and corporate asset quality.
- Diversified Resource Profile: PNBHF has diverse funding sources, including deposits, banking lines, and external commercial borrowings, ensuring flexibility and stability in its resource profile.
- Low-ticket Granular Mortgage Portfolio: The company’s focus on a low-ticket, granular mortgage portfolio has contributed to improved profitability, with a return on assets of 2.2% in 1HFY24.
Important Questions Related to Exams
What prompted the upgrade of PNB Housing Finance’s NCD ratings by India Ratings, and what is the new rating assigned?
- Highlight three key factors contributing to PNBHF’s significant position in the housing finance sector according to India Ratings.
- Explain the measures taken by PNB Housing Finance in the granularisation of its loan book and the impact on credit cost volatility.
Discuss the key drivers that have led to the improvement in PNBHF’s asset quality, as mentioned by India Ratings.
Please provide your answers in the comment section!!