PNB Housing is expanding its digital footprint, from sourcing to sanction, while enhancing digital interventions in underwriting, collections, and other functions. It has re-prioritised its IT initiatives, keeping in mind the evolving realities. The Company is at an advanced stage of implementing seamless solutions for customers, which will significantly reduce paperwork in sourcing new applications.
NEERAJ VYAS
Managing Director and CEO
DEAR SHAREHOLDERS,
Resilience is not just about the ability to withstand shocks, but is also about navigating through world-changing events with conviction. The novel coronavirus pandemic is one such event, which began as a global health crisis and has evolved into a full-blown economic one. It has put to test our collective strength as individuals and as businesses. It has also brought to the fore the undying spirit of humanity, to survive and thrive in the face of adversity.
The need of the hour is that of resolve and restraint. It is also a time to pause and reflect on what we have achieved and what we could accomplish against the backdrop of a new normal. As an organisation, PNB Housing has been undergoing a challenging period, largely due to the sluggish macro environment. However, we have managed to maintain a strong balance sheet with prudence and foresight. Our experienced leadership team, along with 1,549 dynamic and dedicated teammates, has worked relentlessly towards fulfilling homeownership dreams of millions of Indians and putting PNB Housing on a strong turf.
SURVIVE, SUSTAIN & SHIFT GEARS.
The Company adopted a 3S approach to ensure the health and safety of its employees, minimise the impact on business and scale up for future. The Business Continuity Plan (BCP) was invoked at the first sign of a nationwide lockdown to contain the virus spread. The IT team pre-empted operational issues and took steps to ensure a smooth transition to remote working for over 80% of our employees.
The first S is to Survive.
Anchored to its first Core Value ‘People First’, the Company accorded the highest priority to the health and safety of its employees. The HR team actively engaged with them to ensure their own and their family’s wellbeing. Online and behavioural trainings were initiated for employees and selected business partners. These initiatives have enabled the Company to resume normal operations, harnessing a highly energised workforce that has much sharper business acumen and strong motivation levels.
The second S is to Sustain.
PNB Housing has invested heavily to build a strong technology backbone and improve efficiency. This enabled the Company to maintain operational robustness even in a remote working environment, backed by the centralised Enterprise System Solution platform. The Company also implemented a cloud-based virtual system interface solution, thereby facilitating secured access to enterprise applications and data while working from home.
All business-critical activities like part-disbursements, customer service, recovery, liquidity management, treasury, EMI and CMS banking, deposit processing and vendor payments were performed without any interruptions. A service TAT of ~95% during the lockdown speaks volumes about the effectiveness of the Company’s customer engagement and reflects the second Core Value ‘Customer-centric’. The Company enhanced its collection efforts by utilising cross-functional teams like business and underwriting. Customers were offered alternate modes of payment to ensure convenience and ease.
In line with RBI guidelines, the Company offered a moratorium to eligible customers, but did not avail the same facility from its lenders, which attests to its robust liquidity position. It is the first HFC to take the external commercial borrowing route and raise US$75 million from Japan International Corporation Agency (JICA).
The third S is to Shift gears.
PNB Housing is expanding its digital footprint, from sourcing to sanction, while enhancing digital interventions in underwriting, collections, and other functions. It has re-prioritised its IT initiatives, keeping in mind the evolving realities. The Company is at an advanced stage of implementing seamless solutions for customers, which will significantly reduce paperwork in sourcing new applications. Meanwhile, underwriting policies for both retail and corporate lending have been tightened. In order to optimise operating expenses, the Company has imposed a hiring freeze, and kickstarted processes to rationalise branches and offices, and negotiate rents. 100% of the Company’s branches are now operational.
STABLE PERFORMANCE IN A VOLATILE ENVIRONMENT
Looking back at the last fiscal, the Indian economy experienced a broad-based slowdown due to a host of factors, such as weak consumption, sluggish manufacturing and tepid credit growth, among others. The banking and financial services industry witnessed its own share of challenges, with tight liquidity, mounting asset quality concerns and a slew of governance issues coming to the fore. The RBI announced a series of rate cuts to boost credit growth. However, the transmission of those rate cuts to credit markets remained sluggish, as banks were reluctant to pass on the benefits to borrowers.
Against this backdrop, PNB Housing registered a stable performance, shored up liquidity, remained well capitalised and managed to maintain asset quality at comfortable levels. In FY 2019-20, PNB Housing’s net interest income increased 12% y-o-y to ` 2,308.1 crores. Operating profit grew 7% y-o-y to ` 2,062 crores. However, profit after tax (PAT) fell to ` 646.24 crores (from ` 1,191.5 crores in FY 2018-19) due to higher provisioning on account of COVID-19.
The Company had two options in the current exceptional situations i.e. softer and harder and we decided to take the harder option and made adequate general provisions including for COVID-19. Adjusting for the COVID-19 provisions, the PAT for FY 2019-20 would have been ~` 1,010 crores. It was a strategy that the Company thought would be more prudent in order to mitigate the risk, focus on long-term strategy and strengthen the balance sheet.
Asset quality remained stable, with a gross NPA of ~2.29% on AUM and ~2.75% on the loan book, as the Company continued to shift its portfolio mix towards the retail segment, with a focus on salaried and self-employed segment. Both CRAR and gearing improved with the calibrated focus taken towards retail disbursement. The Company’s CRAR increased to 17.98% with Tier-I at 15.18% (vs. 13.98% with Tier-I at 11% as on March 31, 2019), much above the minimum regulatory Tier-I requirement of 10%. Gearing stood at 8.53x (vs. 9.59x as on March 31, 2019). The Company remains committed to bringing down gearing even further.
PNB Housing is a 100% secured mortgage business, with an emphasis on mass housing. The Company operates through 105 branches, 28 outreaches and 23 hubs across 64 cities.
COMMITTED TO RESPONSIBLE GROWTH
PNB Housing’s commitment to responsible growth is absolute, embodying the third Core Value ‘Ethical standards’. The Company shares its successes with its communities, is a great place to work for its employees, and drives operational excellence from within. A major milestone of the year was the incorporation of the Company’s dedicated CSR arm, the Pehel Foundation. The Foundation has identified its key intervention areas including skill enhancement of construction workers, holistic welfare of their children, and social security linkages; primary and higher education; healthcare infrastructure; female health and hygiene; mental health and wellness, among others. Through the Foundation, the Company aims to make a meaningful and sustainable difference to the society.
PNB Housing also endeavoured to play a role in the nation’s fight against the pandemic. The Company has taken incremental measures to support migrant workers, who have been hit hard by the virus-induced lockdown. The Company contributed ` 2.04 crores to further pertinent medical research and support different relief funds.
Anchored to its Core Values, PNB Housing strives to provide an environment where all people can undertake their work with pride and a stronger sense of ethics and fairness. The Company has a comprehensive set of learning and development tools, available through a digital platform, to help employees reach their potential. By pursuing operational excellence, the Company is becoming more efficient and transparent. Continuous deployment of technology-led improvements across internal and external processes, makes it easier for the Company’s employees to seamlessly work with each other and to service customers, while adhering to the highest levels of information security and corporate governance.
A key achievement in the year was the receipt of the ISO 27001:2013 certification, one of the highest security standards in India. ISO 27001:2013 encompasses a risk-based approach to information security, requiring organisations to identify threats and select appropriate controls to tackle them. I strongly believe that our sense of social responsibility, robust business productivity, time-tested operational foundation and integrated security strategy will enable the Company to deliver sustainable value for all its stakeholders over the long term.
LOOKING AHEAD
It would be premature to ascertain the fallout of the pandemic at this point, as the situation remains fluid. However, one thing can be said with a fair degree of certainty – the long-term fundamentals of the Indian economy overall and the housing market in particular remain intact. Mortgage market in India remains significantly under penetrated and offers tremendous grow potential on the back of rapid urbanisation and the push of the Government in the mass housing segment.
PNB Housing, with its wide distribution network, focus on retail segment, diversified borrowing mix, strong balance sheet, robust capitalisation and liquidity, is well positioned to make the most of the vast opportunity landscape. Further, with operating leverage playing out, as reflected in the improving cost-to-income ratio, the Company will continue to deliver sustainable, profitable growth, going forward.
PNB Housing is a 100% secured mortgage business, with an emphasis on mass housing. The Company operates through 105 branches, 28 outreaches and 23 hubs across 64 cities.
The Company will continue to focus on lower risk weighted retail loans serving both salaried and self-employed segment. With social distancing becoming the norm, and leading to behavioural changes over time, going forward, PNB Housing expects more customers to reach out to the Company through the e-medium, leading to an increase in sourcing through digital channels. The Company will continue to sell down its corporate book and is in discussion with a few banks, to this end.
PNB Housing is assured of the full support of its promoter, Punjab National Bank, in addressing any uncertainty arising out of the changed operating environment.
In sum, the near term priorities of the Company remain clear: de-risking the balance sheet, monitoring asset quality and profitability, and improving operational efficiency. PNB Housing will continue to focus on doing fewer things, but will remain committed to doing them really well, in alignment with the Company’s purpose. We aspire to be the most trusted housing finance company while helping people realise their long-cherished dreams of owning a home.
I am confident that the Company’s strategy of focus, consolidation and digital transformation is right, indeed essential, for the current times. We still have a long way to go before a sense of normalcy prevails, but we have our plans chalked out.
On behalf of my colleagues across the Company, I thank you for your continued support and investment in PNB Housing. I hope this report provides you with the desired insights about PNB Housing’s inherent strength and preparedness for the future.
Warm regards,
NEERAJ VYAS
Managing Director and CEO