PNB Housing Finance Ltd

28 Pages·2017·2.42 MB·English

by  Sanika Vanjare

Ratings
PNB Housing Finance Ltd
Issuer Profile
July 2017
About CRISIL Issuer Profile
CRISIL Issuer Profile is part of CRISIL Ratings’ ongoing efforts to enhance lenders’ and investors’ understanding of
the credit risk profiles of large and regular issuers in India’s debt market and banking system.
Analytical Contacts:
Krishnan Sitaraman Ajit Velonie
Senior Director – CRISIL Ratings Director – Financial Sector Ratings & Structured Finance
Email: [email protected] Email: [email protected]
Subhasri Narayanan Kunal Mehra
Associate Director, LCG-Rating Finance Sector Sr. Rating Analyst – Financial Sector Ratings
Email: [email protected] Email: [email protected]
Contents Page
Company description...................................................................2
Shareholding pattern as on December 31, 2016...............................................2
Key milestones .......................................................................3
CRISIL rated debt instruments............................................................4
Rating history.........................................................................4
Key rating drivers......................................................................5
Board of directors .....................................................................6
Top management ......................................................................6
PNB housing’s organisation structure ......................................................7
Summary credit risk profile ..............................................................8
Detailed credit risk profile ...............................................................9
- Expectation of strong support from largest shareholder, PNB...............................9
- Market Position.................................................................10
- Asset Quality...................................................................11
- Resources .....................................................................12
- Capital Adequacy................................................................13
- Earnings ......................................................................14
- ALM and Liquidity ...............................................................15
- Management...................................................................16
Product and Process overview...........................................................17
- Product overview................................................................17
- Process overview................................................................18
- Loan underwriting and risk structure.................................................19
- Loan underwriting process ........................................................19
Collection process....................................................................20
PNB housing in comparison with other HFCs ................................................23
Key financials........................................................................24
1
Ratings
Company description
About the company
Incorporated in 1988, PNB Housing Finance Ltd (PNB Housing; rated 'CRISIL AA+/FAAA/Stable/CRISIL A1+'), a
deposit-taking housing finance company (HFC) registered with National Housing Bank (NHB), was promoted by
Punjab National Bank (PNB; rated 'CRISIL AAA/Negative'). In December 2009, PNB sold 49% stake in PNB
Housing and entered into a strategic partnership with Destimoney Enterprises Pvt Ltd (owned by NSR Partners).
During fiscal 2017, Destimoney Enterprises Limited transferred equity shares in PNB Housing to its holding
Company i.e. Quality Investments Holdings pursuant to in specie distribution of its assets as per winding up
scheme. The company has successfully completed an initial public offer (IPO) in November 2016 and raised Rs.
3000 crore which resulted in dilution of PNB's stake in PNB housing to around 39% (from 51% earlier); however, it
continues to remain the largest shareholder in PNB Housing. As on May 31, 2017, the market capitalisation of
PNB Housing stood at Rs 23060 crore
PNB Housing is amongst top five HFCs in India and is fastest growing. The company benefits from the strong
brand of PNB as well as from its customer-oriented business model which enables it to maintain strong growth. It
had a pan-India presence through a network of 63 branches as on March 31, 2017.
PNB Housing provides retail housing loans for construction, purchase, repair, and upgrade of houses, as well as
purchase of residential plots. It also provides loans against property (LAP) and loans for commercial property. On
the wholesale front, the company provides, construction finance, lease rental discounting (LRD) and Corporate
term loan (CTL) to developers.
Shareholding Pattern as on March 31, 2017
39%
Punjab National Bank
38%
Quality Investments Holdings
15%
Foreign Institutional Investor
(FII)/Foreign Portfolio Investors (FPI)
5%
Mutual Funds/Financial Institutions
(FI)/Bodies corporate/Banks/Insurance Companies
3%
Retail & Others
2
Key milestones
 AUM cross Rs.41000 crore as on March 31, 2017
 Raised Rs.3000 crore from the IPO in November 2016 and listing on NSE & BSE
2017  Raised ECB of USD 150 million from Asian Development Bank (ADB) in June 2016
 Raised third and final tranche of rights issue of Rs.300 crore
 Deposits cross Rs.7000 crore as on March 31, 2016
2016
 AUM cross Rs.27000 crore as on March 31,2016
 Raised Rs.500 crore through green bonds from IFC
 Raised second tranche of rights issue of Rs.300 crore
 AUM cross Rs.16800 crore as on March 31, 2015
 Deposits cross Rs.4800 crore as on March 31, 2015
2015  In February 2015, NSR Partners sold its stake in Destimoney to a new strategic
investor, the Carlyle Group
 Raised ECB of USD 100 million from International Finance Corporation (IFC)
 Raised first tranche of rights issue of Rs.400 crore
2014
 AUM cross Rs.10000 crore as on March 31, 2014
 Deposits cross Rs.1500 crore as on March 31, 2014
PNB Housing celebrates its silver jubilee year; starts reaping benefits of project
2013
Kshitij –AUM reach Rs.6620 crore as on March 31, 2013
2012 Destimoney’s stake increases to 49% on conversion of CCDs into equity
 PNB Housing initiates ‘Kshitij’ – a business process transformation and
reengineering (BPR) project
2010  Destimoney infuses Rs.137 crore capital into PNB Housing in the form of
compulsorily convertible debentures (CCDs)
2009 PNB sells 26% stake in PNB Housing to Destimoney
2006
Assets under management (AUM) cross Rs.1000 crore
1988
Incorporated as a wholly owned subsidiary of PNB
3
Ratings
CRISIL rated debt instruments
CRISIL has been rating PNB Housing's debt instruments since 1995. The rated debt instruments are:
Table 1: PNB Housing's CRISIL-rated debt instrument details
Instruments Rs. Crore Rating
Non-convertible Debentures 4600 CRISIL AA+/Stable
Bonds 1100 CRISIL AA+/Stable
Lower Tier-II Bonds 500 CRISIL AA+/Stable
Long-Term Bank Facilities 4000 CRISIL AA+/Stable
Commercial Paper Programme 1000 CRISIL A1+
Fixed Deposit Programme 8500 FAAA/Stable
Rating history
Date Rating Outlook Rating Action
June 2017 CRISIL AA+/FAAA/CRISIL A1+ Stable Revision in outlook
March 2016 CRISIL AA+/FAAA/CRISIL A1+ Negative Revision in outlook
Rating upgrade on long-term debt
December 2013 CRISIL AA+/FAAA/CRISIL A1+ Stable
instruments and fixed deposit programme
July 2013 CRISIL AA/FAA+/CRISIL A1+ Positive Revision in outlook
Rating downgrade on long-term debt
February 2010 CRISIL AA/FAA+/CRISIL A1+ Stable
instruments and fixed deposit programme
Ratings on long-term debt instruments and
fixed deposit programme placed on
December 2009 CRISIL AA+/FAAA/CRISIL A1+ -
'Ratings Watch with Developing
Implications'
April 2009 CRISIL AA+/FAAA/CRISIL A1+ Negative Revision in outlook
Rating upgrade on long-term debt
September 2004 CRISIL AA+/FAAA/CRISIL A1+ Stable
instruments and fixed deposit programme
September 2003 CRISIL AA/FAA+/CRISIL A1+ Stable -
August 2002 CRISIL AA/FAA+ - -
July 2002 FAA+ - Rating upgrade on fixed deposit programme
October 2000 FAA- - Rating upgrade on fixed deposit programme
December 1999 FA+ - Rating upgrade on fixed deposit programme
Rating downgrade on fixed deposit
December 1998 FA- -
programme
September 1995 FA - -
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Key rating drivers
Strengths
 Expectation of support from PNB
 Comfortable capitalisation with healthy cushion against asset-side risks
 Well-diversified resource profile
 Comfortable asset quality metrics; impact of seasoning to be monitored
Weaknesses
 Average profitability metrics
Rating sensitivity factors
 Extent of ownership by, and support from, PNB
 Changes in CRISIL's view on PNB's credit risk profile
 Changes in PNB housing's asset quality and profitability
 Changes in PNB Housing's capitalisation
Outlook: Stable
CRISIL believes that PNB Housing will continue to maintain its capitalization metrics with a healthy cover for any
asset-side risks along with gradual improvement in the market share. Further, PNB Housing is expected to
continue to draw benefits from PNB support over the medium term.
Upside scenario:
* Sustained improvement in the market position and earnings while asset quality is maintained
Downside scenario:
*Deterioration in asset quality and earnings
*Significant weakening of the credit risk profile of PNB, or less-than-expected support from the bank
5
Ratings
Board of directors
Name Designation
Shri Sunil Mehta MD and CEO, PNB Chairperson (PNB Nominee)
Dr. Ram S Sangapure Executive Director, PNB Director (PNB Nominee)
Mr. Sunil Kaul Director (Carlyle Group Nominee)
Mr. Shital Kumar Jain Independent Director
Mr Ashwani Kumar Gupta Independent Director
Mr. R Chandrasekaran Independent Director
Prof. (Dr) Gourav Vallabh Independent Director
Mr. Nilesh S Vikamsey Independent Director
Mr. Sanjaya Gupta Managing Director
Top management
Name Designation Experience in Years
Mr. Sanjaya Gupta Managing Director 29 years
Mr. Shaji Varghese Business Head 22 years
Mr. Ajay Gupta Chief Risk Officer 27 years
Mr. Nitant Desai Chief Operations and Technology Officer 33 years
Mr. Anshul Bhargava Chief People Officer 25 years
Mr. Jayesh Jain Chief Financial Officer 15 years
Mr. Sanjay Jain Company Secretary and Head Compliance 29 years
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CSO Zone HUB Branch
D D
A A
G G
AD CSR Zonal
G
HR & L & D al HR anager -
n M
HR Zo Manager Service Deposit
PNB housing’s organisation structure Managing director Centralized Finance & Company Secretary nternal AuditBusinessOperations & ITAccounts& Compliance Accounts,Treasury & RecoveryTaxation Corporate Planning& Expense ProcessingCF - OpsBranch Customer Product & MktgCF-SalesCOPs & CPCITService & OperationsCF - UWInvestor RelationsProcess & QualityContact CenterAnalytics Zonal Business HeadInternal Auditor Zonal ITCF- Sales Zonal Recovery ManagerZonal Customer Service & Zonal Accounts Operations Manager Regional Business Head Regional Recovery Manager Branch Business Head Customer Relationship Manager veryArea Sales ManagerCustomer Service Manager - Loans - Deposit Matrix ReportingS+1 ReportingS+2 Reporting
Risk IManagement LegalTechnicalCredit UnderwritingFCU onal Credit Manager Zonal Technical Manager Internal Legal Counsel Zonal Fraud Control Regional Credit Manager Regional Technical ManagerACM/BCM Internal Legal Counsel Regional FraudControl Incharge - Reco
Z
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Ratings
Summary credit risk profile
Parent Support
 PNB Housing continues to benefit from the expectation of support from its largest shareholder, PNB given the
increasing strategic importance of PNB Housing to PNB and the latter’s high moral obligation towards PNB Housing.
Business risk profile Financial risk profile
Market position Capital adequacy
 Fifth-largest player among HFCs; however, market  Comfortable capitalisation with net worth and Tier-I
share in overall housing finance is moderate capital adequacy ratio (CAR) of Rs. 5577 crore and
16.5%, respectively, as on March 31, 2017
 AUM grew by 51% (y-o-y) to Rs. 41492 crore as on
March 31, 2017,; company to maintain higher-than-  The company raised Rs. 3000 crore through the IPO in
industry average growth over the medium term November 2016, and this will support its strong
growth plans in the medium -term
 AUM comprised of housing loans of 60%, LAP of 22%,
construction finance of 11% and corporate term loan  Gearing decreased to 6.9 times as on March 31, 2017
of 7% as on March 31, 2017 given the infusion through the IPO. Over the medium-
term, gearing is expected to remain below 10 times on
 Portfolio is well diversified across India; with
a steady state basis
northern, western and southern India contributing
around 36%, 34% and 30%, respectively, as on March  Comfortable net worth coverage of net non-
31, 2017 performing assets (NPAs) provides cushion against
asset-side risks
Asset Quality Earnings
 PNB Housing has robust credit underwriting,  Average earnings profile with return on assets (RoA) of
monitoring, and collection processes 1.4% in fiscal 2017. Profitability to remain lower than
industry average over the near -term because of
 Two-year lagged gross NPAs have remained low at
continued investment in infrastructure, manpower
0.5% as on March 31, 2017, supported by improved
and systems to support scale-up of operations
systems and processes
 Profitability expected to improve gradually to around
 Impact of seasoning, however, remains to be seen 1.5% over the medium -term, supported by enhanced
given the strong growth over the past four years,
operating efficiencies with ramp-up of operations
especially in the non-housing portfolio
 Net interest margins (NIMs) expected to remain stable
 Ability to maintain asset quality while increasing scale despite high proportion of non-housing loans, given
remains a monitorable the increased focus on highly competitive salaried
customer segment for growth in the housing loan
segment
Resources Liquidity
 Well-diversified resource profile comprising bank  Comfortable asset-liability management (ALM) profile
loans, bonds debentures, fixed deposits, NHB with positive cumulative mismatches in maturity
refinance and external commercial borrowings. buckets of up to one year as on March 31, 2017.
 Second largest deposit base among HFCs  Policy of maintaining unutilised bank lines/liquid
 Significant increase in focus on relatively stable fixed investments for cash outflows over the next two
deposits (28% of borrowings) over the past two years to months
lend stability and diversify the investor profile  Adequate unutilised bank lines of Rs. 568 crore as on
March 31, 2017
 Better than peers’ cost of borrowing
Management
 Management has strong domain knowledge and established track record; instrumental in transformation
of PNB Housing into a professionally managed company
 Project Kshitij: Embarked on a high-growth strategy by revamping the organisation through an extensive
BPR exercise
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