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Exclusive interview of Sanjaya Gupta, Managing Director of PNB Housing Finance Limited

PNB Housing

Palash Roy: RBI has reduced policy rate by over 100 bps in the last calendar year, but why are the lenders not passing it on?

Sanjaya Gupta: Let me tell you that half of it has already been transferred to the end-users through the base rate reduction. What happens is that the banks and housing finance companies have a basket of borrowings, and overnight the rates in the basket of borrowing do not change because much of those borrowings are long-term and are at fixed rate. So as we grow, incremental borrowing more and more, that is how the blend of borrowing increase cost comes down. Hence it always takes a little bit of a lag before policy rates get translated to the end-customer.

PR: When this rate-cut is fully passed on the end-consumer, do you think the beleaguered real-estate sector will get a boost?

SG: I think so, and I think it is more of a sentiment that is working against the housing sector than any other thing. The best part is that we are seeing a lot of delivery happening. We are seeing prices are stable, they have also corrected in the metropolitan cities. And the best thing that I like for the customer is that there are wide choices of houses that are available today, and it is the opportune time to make a choice and buy a home.

PR: What is your outlook on interest rates for the year 2016?


SG: I think they are going to remain stable. I am very worried about the oil economies. No doubt we are importers, so we benefit from the lowering of prices, but we should not forget that about 39 countries are dependent on oil export, and it can translate that we might have a CAD sort of a gap because our exports will find it very difficult to get absorbed in these economies. They are large economies and oil-based economies. So I think bottom-fishing has happened, so at best a correction may happen, of let’s say 15-20 bps (basis points), and that’s about it.

PR: Do you have plans for any innovative products/funding options at the project financing levels or developer funding?

SR: We keep doing developer funding. We are one of the vibrant players in the market, but the penetration of developer funding to our entire portfolio lingers around 7-8 per cent. What we do and what we specialise in doing is funding projects which are of mass nature, which are not typically, I would say, luxury or bottom of the pyramid, but they are of mid-segment, where  huge volumes have been seen even these times.
We will continue to have focus on that sector.

PR: And in home loan segment, do you plan to come up with any unique or innovative product?

SG: Let me tell you it’s a very matured market, it’s a crowded market. We keep doing innovations, tweaking here and there. What real difference PNB Housing has made is that we are very good in underwriting self-employed people, and you will be surprised that more than 70 per cent of new housing gets generated by self-employed people, and only about 20-22 per cent of self-employed people get a formal sector lending, and we specialise in it. Month-on-month about 30 per cent of our home loans are done for this category. So I think that’s a very big innovation and a very big initiative that we have done to broaden the market. So while other lenders and much respected large  players are only concentrating on salaried segment, we are concentrating on both salaried and self-employed segment. Also we monitor our turnaround time, we monitor our efficiencies, and believe you me we do about 35 per cent home loans month-on-month in this segment. This is a strategy for this company, and we have built very specialised underwriting hubs, underwriters have been trained, nurtured, and  they are able to deliver home loans for self- employed people in a very efficient manner.


PR: How has been the current financial year for your company?

SG: Too premature! Still a quarter left. But we do estimate incremental disbursements by about 30-35 per cent.

PR: Where do you expect to close FY16?

SG: Well, I think we are going to cross a PAT (Profit after Tax) figure of about Rs.310 crore, which would be about 50 per cent up over last year.

PR: How has been the credit offtake so far this year?


SG: Well, for us it has been exceptionally good. We would be reporting an annualised growth rate of 50-60 per cent in this financial year. But overall as I have been looking at lots of reports, and it is not looking good. I think the large players will hardly report a 15-18 per cent annualised growth.

PR: What about the non-performing assets?

SG: NPAs are stable. There is nothing to worry.

PR: How do you manage to do that?

SG: Well, as I said, there is nothing wrong with the economy. NPAs generally mushroom when the economy is bad. Economy is very strong. We are not seeing any deterioration in the asset quality at all.


PR: Real estate sector is going through its worst phase in terms of sales. What, according to you, are the reasons behind this?

SG: I think there has been enough and plenty of negative talks about the sector, and there has always been a myth that housing has been overpriced. I think there has to be some real, concrete, focused deliberations to find out what are the reasons. I don’t think the pricing of units are the only reason. I think more important is the sentiment. People have to start talking positively, and it’s high time we start doing that. Too much of negative talk has really spoiled the market.

PR: Which are the cities from where you are witnessing good loan demand?

SG: How it happens is that six large cities of the country give us the bulk 60 per cent of the business. But the growth rate comes from the secondary cities or the Tier-2 cities. So, for example, our growth rate in Ahmedabad is fantastic. Nagpur, Raipur, Bhopal, Indore, Trivandrum, Kochi, Chandigarh and places like this is from where the growth rate is coming

PR: What is the total loan portfolio of PNB HF? How much of it is home loans and how much is project financing?


SG: Well, I think, our total portfolio by December would be crossing something around RS.25,OOOOcrore. I expect that it might be a shade lower. Out of which only 8 per cent is construction finance. The rest is home loan or loan against property to individual customers.

PR: Do you see a huge business opportunity for lenders like you from the Government’s policy of ‘Housing for All by 2022’?

SG: Certainly! If we see that when it takes off and we wish that it takes off, then there is a huge opportunity in the waiting.

PR: When is your IPO (Initial Public Offering)expected, and how much amount would be raised through this?

SG: Well, we are into it but I can’t tell you the size. We have not yet decided, that the board has to decide, the shareholders have to decide. Neither can I say about the timing. We are adequately capitalised as of now. We just finished our RS.1,OOO-crore rights issue in August 2015


PR: So, it is not expected in this financial year?

SG: Certainly not! This fiscal only one quarter is left.

PR: Where would this fund be deployed?

SG: See, today we require capital only to augment our growth and our distribution. These are the two main reasons. Otherwise infrastructure, the operational robustness, technology, offices, people, everything is now done. The company is ready to really become a large player. As I say we would be reaching about Rs.25,OOO crore by Q3, and we just have 39 branches in 26 locations, we are adding eight more in this fiscal. So, we would be at about 34 locations with about 45-46 branches. We need to grow in our distribution.

PR: What are the branch expansion plans for the next financial year?


SG: The planning is yet to be done, but certainly we will add seven-eight more new locations, and seven-eight more branches in the cities where we are already there. So, about 15-16 more branches will come up.

PR: What is your wish for 2016?

SG: Well, I would just say that everybody should be happy, they should buy their own homes, and the country at large should be very confident of the economy, and we should all vote together for growth.

PR: Five years from now, by 2020 where do you see PNB Housing Finance?

SG: 2020 is far away! if I am alive by another five years, I’ll say about Rs.1,00,000 crore of loan-book, and a deposit base of about Rs.30,000crore.


PR: And lastly, where do you see yourself among the HFCs (housing finance companies)?

SG: We are the fifth largest already, and the players who are above us are all very resillient, and fast-growing companies. As far as the position goes, I don’t say I would be number 2,3 or 4, but yes to maintain our position and to do sensible housing finance for a long period to come without incurring credit losses and NPAs, that is what the leadership is to this company. Leadership alone doesn’t come because of the balance-sheet size. It comes from the aroma of maturity of an organisation.

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