Won’t take any exposure on the corporate side for FY20-21: PNB Housing

Our retail loans have moved up from 78% to 82% and the corporates have cut down to 18%, says Neeraj Vyas, MD & CEO.

You have incurred a loss of Rs 242 crore this quarter on account of higher provisions. Excluding provisions, the PAT stands at Rs 122 crore, which is also lower than the Street expectations. Apart from Covid-19, what were the other factors that hit your profitability?
Covid provision that we made this quarter is Rs 471 crore. If you take the Covid provision out from the Q4 result, I would have ended at Rs 122 net profit; that is the first thing. If I take the impact on the entire year, my net profit would have been Rs 1,010 crore. So obviously what you are saying is that the net profit is not equal to what was last year. If you look at my disbursements, the disbursements also were almost half of what we did previous financial year. Now one issue for that was our conscious decision not to disburse on the corporate side or not to sanction on the corporate side. So if you take my overall disbursement, it is only the retail disbursement which has happened during FY19-20; that is almost a negligible amount of disbursement.

So when you are not doing any business on the corporate side, the profit would be lower. Even on the retail side, during the first quarter, we were very good. In the second quarter, except for one month, we were very aggressive. After that as a matter of strategy, the disbursement in retail also were brought down and if you see my H1 disbursement and H2 disbursement, retail was almost negligible because if you see my 2019 capital, I was almost at 13.9% or 14%, which is a regulatory requirement; 13% that point in time.

So any disbursement without the capital raise plan would have resulted in breaching regulatory capital. So now after that I started myself into balance sheet management and if you see, we have made a primary assignment of almost Rss 9,000 crore of retail book and with that I have been able to manage my balance sheet. If you see my result as of 31 March, I am very comfortable in my capital adequacy ratio at 17.98%. So these were the reasons for less than the expected number of disbursals and consequently if you are not doing business, the profit to the extent of that will go down.

Your focus area for this company is in the retail segment and the company has consciously de-grown in the corporate segment. So will you continue to trim your exposure to corporates and how low do you see this portion of your business dropping to?
We will continue to not do any corporate for this financial year. Our focus would be retail only. We will be growing our book in retail. If you see the asset management level, our retail loans have moved up from 78% to 82% and the corporates have cut down to 18%. So we will follow that same strategy and we will do more retail in middle income housing that you call mass housing as we. Typically house prices are roughly around Rs 75-90 lakh and a loan of Rs 62-75 lakh. This is what our focus would be. Of course we have a product called Unnati which is nothing but an affordable product; so that will continue. That is not a big product but we will continue to do that in affordable housing. So this would be the strategy for the purpose of business for 2021. It is very clear that we will not be taking any exposure on the corporate side.

The asset quality trends given borrower profiles remain weak and the real estate sector also continues to be under immense stress. What is the increase in NPA that you anticipate over the next few quarters?
If you see my provision numbers, we have taken care of whatever stress might come. I am required to classify my book into three stages; stage-1 where there is no problem, stage-2 where you are seeing some stress and stage-3 is NPA as we call it. In stage-1, we had three accounts which were showing some kind of stress and therefore we moved these accounts from stage-1 to stage-2 deliberately and provided for that. So if you see, my stage-2 accounts are around Rs 900 crore and out of that, 30% provision is available. So on Rs 900 crore, I have provided for 30% and as you say, the stress does not move directly from stage-1 to stage-2; it moves from stage-2 to stage-3. But the kind of provision we have provided and the account that we have renewed; both kinds of movements can happen from stage-2 to stage-3 and from stage-2 to stage-1.

While these accounts are weak, there is a possibility. We are talking to the promoter and they are also working towards a resolution. Let us see how we move. But as far as the provisions are concerned, if you see my corporate book, we have provided 100% provision for our corporate book and for retail it is 90%. So overall, it is a 95% provision coverage ratio we are working on; so provisions are sufficient. If any unforeseen shocks are available, we will take a call at the appropriate time but simultaneously the resolution strategies are also on one of the bad accounts we had. We were trying to do the resolution but nothing was coming. We went on to SARFAESI; there were two parcels of land. One parcel has been sold out and we got 25%. We are trying to sell out the second parcel also.

Update us on the housing demand that you foresee. What would be your strategy in the post-Covid era?
Even during the lockdown we got a lot of enquiries and applications from the retail customer. So I feel demand will remain. I would not say affordable housing because if I say affordable housing probably the message goes that it is only Rs 25 lakh; I would use the word mass housing. As I described to you, a house costing around Rs 75 to 90 lakh and the loan amount not exceeding Rs 75 lakh; in that, the demand will be there and based on our experience, in the month of April during the lockdown itself, we got 1,300 loan applications.

In the month of May, we got almost around 3,000 applications and in the month of May, out of new home loans, while the amount is very low it is still just to show you the flavour of the way the market is behaving. We have been able to disburse more than Rs 200 crore out of the new loans where you have the lockdown. Movements are not there; it is difficult to register your mortgage, registration offices are not open. But wherever it was available, wherever the customer movement was possible and wherever our branches were working; if not full strength, at least 50% of the strength we have been able to do sanctions and able to disburse also more than Rs 200 crore. So I do not think there would be a problem with the demand in this group; the premium segments there would be an issue with the demand. There would be issues with the pricing also.

So demand would not be a problem and as I mentioned that will continue. So retail would be our focus area. We will try to achieve our business of almost around Rs 2,000 crore per month going maybe September or October onwards provided that things get normalised and Covid is under control; not fully under control but the movement is permitted and offices get opened.