PNB Housing Finance Ltd (PNBHOUSING) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day and welcome to PNB Housing Finance Limited Q2 and H1 FY26-27 Earnings Call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing "*" then "0" on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Chaitanya Yadav, National Head Corporate Planning and Investor Relations. Thank you, and over to you, sir.
Chaitanya Yadav (PNB Housing Finance Ltd): Thank you, Iqra. Good evening and welcome everyone. We are here to discuss PNB Housing Finance Q2 and first half financial year '26-'27 results. You must have seen our business and financial numbers in the presentation and the press release shared with the Indian stock exchanges, and are also available on our website. With me, we have our management team led by Mr. Ajay Kumar Shukla, Managing Director and CEO of the company. We will begin this call with the performance update by the management team, followed by an interactive Q&A session. Please note, this call may contain forward-looking statements, which exemplify our judgment and future expectations concerning the development of the business. These forward-looking statements involve risks and uncertainties that may cause actual development and results to differ materially from our expectations. PNB Housing Finance undertakes no obligation to publicly revise any forward-looking statements to reflect future events or circumstances. A detailed disclaimer is on slide number 45 of the investor presentation. With this, I will hand over the call to our MD & CEO, Mr. Ajay Kumar Shukla. Over to you, sir.
Ajay Kumar Shukla (PNB Housing Finance Ltd): Thank you, thank you, Chaitanya. Good evening, everyone, and welcome to PNB Housing Finance Q2 and H1 Financial Year '27 Earning Call. Thank you for taking the time to join us today. We are delighted to share that CRISIL has upgraded our credit rating to AAA with a stable outlook. This is a- with this upgrade, we are now AAA by all four leading domestic rating agencies: CRISIL, ICRA,
Ajay Kumar Shukla (PNB Housing Finance Ltd): and India Rating. This achievement reflects the strength of our balance sheet, prudent risk management, strong asset quality and the consistency of our operating performance. Before discussing our operational performance for the quarter, let me begin by sharing some perspective on the industry environment and the key trends shaping the housing finance sector. The recent 25 bps repo rate hike by RBI and clear policy guidance reinforce confidence in the housing finance sector's medium-term prospects. While broader macroeconomic developments may influence growth trends periodically, the sector continues to benefit from strong structural drivers, including urbanization, improving infrastructure, rising incomes, favorable demographics and increasing homeownership aspirations. These factors continue to support resilient housing demand and a healthy growth. Industry prospects also remain encouraging. ICRA expects affordable housing finance companies to deliver AUM growth of 19% to 21% in FY '25, supported by robust demand, expanding distribution reach and the significant opportunity presented by India's underpenetrated housing finance market. Coming to PNB Housing Finance, Q2 FY '25 was a landmark quarter for the company. Some of the key highlights for the quarter are as follows: Overall disbursements grew 60% YoY to INR 9,609 crores. This includes pool buyout of INR 838 crore. Retail disbursements reached an all-time high of INR 9,250 crores, registering a growth of 54% YoY. Loan book grew by 19% YoY, in line with our guidance, led by strong disbursements. GNPA improved to 0.91% versus 0.95% in Q1 FY '25. Spread improved to 2.43% as 2.12% in Q1 '25. ROA and ROE improved to 2.53% and 12.33%, respectively. At segment level, the affordable business witnessed a strong revival, following the strategic initiatives undertaken over the past few quarters, with disbursement growth of 40% YoY to INR 1,149 crore. The emerging market business delivered another strong quarter with disbursement growing 36% YoY to INR 2,882 crore. Our prime business continued its steady momentum, with disbursement reaching INR 4,380 crore, up by 44% YoY. Corporate disbursements stood at INR 360 crore for Q2 FY '25 versus INR 215 crore in Q1 FY '25. This translated to an overall loan book of INR 95,079 crore as on 30th September '24, representing growth of 19% YoY. Our retail loan portfolio also grew by 19% YoY to INR 94,391 crore. Within retail portfolio, the affordable and emerging market segment continue to be our key growth engines, representing YoY book growth of 45% and 22%, respectively, and together, contributing 41% of overall retail portfolio. We remain on track to increase this contribution to 45% by the end of FY '24-'25. Let me also update you all on our 4 strategic initiatives that we highlighted during Q1 earnings call. We disbursed INR 107 crore under emerging developer finance in H1 '25 and INR 241 crore of affordable business from selected prime and emerging branches. As announced in Q1 '25, we launched our micro housing business during Q2 '25, and have already disbursed INR 71 crore under this initiative. Additionally, we completed a pool buyout of INR 986 crore during H1 '25, further supporting growth in our earning assets. These initiatives are expected to accelerate the scale of our loan book, while enhancing portfolio yield and maintain portfolio quality. Under PMAY, we undertook an extensive awareness campaign through PMAY Yatra across key markets in Gujarat, Madhya Pradesh, Maharashtra, Rajasthan, Tamil Nadu and Uttar Pradesh. This initiative has helped thousands of families better understand better understand the benefits of
Ajay Kumar Shukla (PNB Housing Finance Ltd): and navigate their home ownership journey with greater ease. We further strengthen our affordable housing outreach through the inauguration of India's first PMAY nodal branch in Siliguri and Kanpur. Till date, we have facilitated we have facilitated benefits for over 8,000 PMAY under Urban 2.0 beneficiaries and with another 1,200 applications submitted to for approval. Going forward, we intend to scale the impact of this initiative through our extensive network of more than 400 branches across India. Our corporate loan book is today at 689 crore as on 30th September 2026. During the quarter, we successfully completed Voice AI POC for bucket tax calling with very promising results. We also completed POCs for AI powered policy and knowledge assistants, as well as intelligent document processing, where AI help in classification, summarization, cross validation and extraction/population of data. Apart from core business functions, we also successfully completed agentic AI POC for our employee hiring. The next couple of quarters will now be focused upon translating these successful POCs into production deployment, and redefining our customer journey by leveraging Gen AI and Agentic AI across various functions. On traditional AI front, we continue to strengthen our robust machine learning ecosystem. We have developed an end-to-end collection solution suite right from early warning system to signal to bounce prediction to settlement prediction, and prioritization. The solution suite covers the entire collection life cycle. As far as geographical presence is concerned, our distribution network is today at 404 branches across India as on 30th September 2026, which include 234 affordable branches which we call Roshni, 88 emerging market branches, and 81 prime branches. The extensive reach gave us a strong foothold in Tier 2 and Tier 3 markets, where we continue to witness significant growth opportunities and strong customer demand. Asset quality continues to strengthen during the quarter with GNPA improving to 0.91% as compared to 0.95% during Quarter 1 '27. During Q2 '27, we recovered 75 crore from written off pool, resulting in a negative credit cost of 19 bps. Our retail written off pool has now reduced to approximately 320 crore, reflecting sustained progress in recoveries and portfolio clean up efforts. Coming to margins, our spread increased by 31 bps sequentially to 2.43%, excluding one-off spread would be 12 bps higher that is 2.24%. NIM improved by 17 bps sequentially to 3.67, excluding one-off NIM would be flat sequentially around 3.49%. Our portfolio yield improved to 9.74% in Q2 from 9.48% in Q1 '27. Cost of borrowing also improved by 5 bps to 7.31% in Q2 '27. The incremental cost of borrowing also improved by 15 bps to 7.26%. On profitability front, profit after tax for the quarter grew by 6% YoY to 617 crore, translating into a ROA of 2.53% and ROE of 12.53%. Our capital position remains strong with a capital adequacy ratio of 27.03% and Tier 1 capital ratio of 26.62% as of September 30, 2026. As we look ahead, we remain confident in the opportunities before us. Our strategy remained focused on driving profitable growth, increasing the share of high yield retail segment, strengthening portfolio quality, leveraging technology to improve productivity and customer experience, and building a resilient and scalable franchise. With a strong balance sheet, improving operating efficiencies, accelerating digital transformation and disciplined risk management, we believe PNB Housing Finance is well positioned to deliver sustainable growth and create long-term value for all stakeholders. Before I conclude, I would like to extend my heartfelt wishes to all our stakeholders for a joyous and prosperous Diwali. Now I will handover the call to our CFO to discuss the financial performance in greater detail before we open the floor for questions. Thank you so much.
Vinay Gupta (PNB Housing Finance Ltd): Thank you, sir, and with that overview, let me now take you through
Vinay Gupta (PNB Housing Finance Ltd): financial highlights for the quarter. Led by strong loan book growth during the quarter, our net interest income grew 15% year-on-year and gross margin increased 16% year-on-year. Our portfolio yields continued to improve and is now at 9.74% in Q2, increase of 26 basis points sequentially. Incremental yields have also improved by 18 basis points to 9.64%. Cost of borrowing improved sequentially by 5 basis points to 7.31, while incremental cost of borrowing improved by 15 basis points to 7.26%. Better liquidity position in July, incremental borrowing through NHB and IRS deals done on fixed rate deals led to lower cost of borrowing in Q2. As a result, our spread expanded to 2.43% and NIM improved to 3.67% during the quarter. The reported yield, spread and NIM includes one-time recovery of charges on prepayment of one legacy corporate account. Adjusting for this one-off item, yield, spread and NIM would have stood at 9.56%, 2.24% and 3.49% respectively. With higher incremental yield versus book yield and rising interest rate scenario, we feel that spread and NIM should further improve from here on. Following the recent 25 bps policy rate hike, we anticipate a modest increase in our borrowing cost. To offset this impact, we are also evaluating increase in our retail lending rates by 10 to 15 basis points and corporate lending rates by 15 to 20 basis points. This will be effective from 1st of November. As a result, we expect the overall impact on NIMs to remain broadly neutral to positive. Operating expenses increased by 20% year-on-year to 260 crores in Q2 from 217 crores in Q2 of FY '26, largely in line with the growth in business volumes and driven primarily by investments in manpower addition with the affordable vertical. Despite the scale up in investments, our opex to ATA ratio remains well contained at 1.03% during the quarter. Reflecting strong business momentum and disciplined cost management, our PPOP, pre-provision operating profit, grew 16% year-on-year to 749 crores. Moving to asset quality, our gross NPA improved further to 0.91% as of Q2 FY '27, reflecting the continued strength of our underwriting and collection processes. Company continues to deliver healthy recovery from its written-off pool, recovering 75 crores during the quarter. Consequently, we reported a negative credit cost of 19 basis points during the quarter. Profit after tax for the quarter grew 66% year-on-year to 617 crores. ROA stood at 2.53% and ROE at 12.33%. Reflecting the strength of our balance sheet, capital adequa- adequacy ratio remains strong at 27.03%, including a Tier 1 capital ratio of 26.62%. Our net worth stood at 20,250 crores while book value of shares increased to 776 rupees. As we move forward, we remain focused on disciplined execution of our strategic priorities, underpinned by strong fundamentals and differentiated strengths of our franchise. With a strong capital base, healthy asset quality and improving profitability, we are confident in our ability to deliver sustainable growth and long-term value creation. With that, I conclude my remarks. Thank you for your continued support, and now I hand it over back to Chaitanya.
Chaitanya Yadav (PNB Housing Finance Ltd): Thank you, Vineet. Now we can open the floor for the Q&A.
Moderator: Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.
Moderator: The first question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead.
Abhijit Tibrewal (Motilal Oswal): Yeah. Good evening, everyone, and thank you for taking my questions. So, the first thing I wanted to understand are two clarifications on what, we have reported in this quarter. First is if you could explain this one-off charges that you've spoken about, that we have collected from this legacy corporate account. So, so what exactly it is, what is the nature of charges that we have collected and how does it get accounted for in the interest income? And the second thing is in in this quarter sir, you've also spoken about this portfolio buyouts that you've done over 1H. So, like one is, I mean, what is the intent behind doing that and the second is in which product segments, basically home loan, LAP or basically the different segment that you have, prime, emerging, affordable, where exactly are you evaluating this portfolio buyouts?
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