Managing Director and CEO
The last few months have witnessed a devastating second wave of the pandemic, affecting India and many other countries, in ways that are more severe than the first. The human cost of the last few months is incalculable and across societies, there has been a deep impact. That said, things are improving rapidly with timely restrictions and widespread vaccination, leading to a gradual return to normalcy. We all hope that this happens sooner than later. On behalf of all of us at PNB Housing Finance, I would also like to pay my tribute to all healthcare professionals and frontline workers for their relentless and selfless efforts at this time, in service of the nation.
Naturally, such a worldwide crisis has seminal economic impact as well, with almost all economies going into decline, and recovery slated to be gradual one. The pandemic and the subsequent lockdowns also posed a new set of challenges for the entire housing finance industry, which was already struggling through liquidity constraints post the NBFC crisis of 2019.
Despite these unprecedented challenges, our people demonstrated exemplary grit and determination and countered the adversity with courage. Collectively, we ensured that the crisis brought out the best we had to offer, and were able to protect our business during these testing times. We adapted well and responded with a calibrated strategy.
Our multi-pronged approach began with activating the Business Continuity Plan. We ensured health and wellbeing of our employees and took steps for continuity and coordination even in a work-from-home scenario. As new businesses remained muted during the first quarter, the teams were mobilised to engage continuously with customers, resolve their queries and address any needs and concerns. We aligned our collections and operational strategy keeping in view the evolving cashflow situation of our customers, through regular follow-up and interaction. As a result, the retail loans under moratorium accounted for only 29% of our loan book. We significantly improved our focus on collections, and increased our tele and field collection efforts without inconveniencing customers.
Owing to the uncertainty and economic slowdown, disbursements in the first quarter were severely affected, resulting in degrowth of 43.9% compared to FY 2019-20. However, the housing sector received a fresh lease of life through timely intervention from the government and regulatory bodies through steps that benefited both developers and homebuyers. The rationalisation of home loan rates for retail customers and builders created an upswing in the last two quarters of the year. This was further aided by reduction of stamp duty, registration costs, capitals gains tax relief etc. by government leading to a sharp increase in disbursements in the second half of the year.
Increased digitisation at all levels will also be a core differentiator going forward. Our sustained investments in this area bore fruit, as we increased digital sourcing to 22% vs 9% a year ago. We also initiated steps to automate underwriting for Straight through processing.
In these trying times, we launched various initiatives to keep our costs under control and reduced borrowing costs in line with general interest rates. Our net interest income stood at ₹ 2,323 crores for the year as against ₹ 2,308 crores in FY2019-20. Operating profit stood at ₹ 2,069 crores against ₹ 2,062 crores in FY2019-20 on account of cost rationalisation. The Profit after tax grew by 44% to ₹ 930 crores as against ₹ 646 crores in FY2019-20 due to cost control, efficiency and productivity improvement measures initiated by the Company. Our asset quality was stressed with a gross NPA of approximately 4.4% on the loan book and approximately 3.95% on AUM. As a prudent measure our total provisions as a % of total assets increased from 2.6% a year ago, to 4.1% at the end of FY 2020-21.
Our liquidity is supported by a prudent mix of long-term and short-term borrowings and we plan to keep adequate liquid investments and unutilised lines to meet the gaps. Cash and cash equivalents were ₹ 6,969 crores as on March 31, 2021. Our leverage profile has improved with a gearing of 6.7x as on March 31, 2021 compared to 8.6x a year ago. Higher internal accruals and relatively lower risk weights for smaller ticket loans, formed a part of our portfolio rebalancing strategy which led to increase in our capital adequacy ratio (CRAR). Our CRAR is comfortably over regulatory limits at 18.73% with a Tier I adequacy of 15.5% as on March 31, 2021, as compared to 17.98% and 15.18% respectively a year ago.
We have realigned our strategy in favour of retail business as we have built significant expertise around self-employed and salaried customer segments, while reducing our exposure in the corporate segment. Smaller ticket loans today account for 96% of our disbursements. Our ‘Unnati’ loans are proving to be a niche, powered by a differentiated distribution network, underwriting capability and customer service.
Our focus is on three major areas that comprise Strengthening the Core, Digital Drive and Accelerate Growth. This agenda consists of seven focus areas around management, capital, risk management, cost optimisation, digital drive, retail focused lending and affordable housing segment growth that will help grow business, strengthen risk management, increase profits and create value for all stakeholders. This, along with our focused approach towards affordable customer segments will be our agenda over the edium-term and help the organisation become strong.
The Company is fast evolving as a technology-led company in the housing finance segment. Digitisation and innovation are two attributes that are transforming us from being just a lender to a digital solutions provider for customers. With the introduction of new-age technologies such as Artificial Intelligence, Machine Learning, Robotic Process Automation across the value chain, we are achieving improved process control and efficiency. We have leveraged technology by launching a digital acquisition platform ‘ACE’, our flagship mobile app for contactless applications and onboarding.
Our customer-centricity is a core differentiator, and is central to the diverse home and non-home loan product portfolio that we offer to our customers. Our values-based approach and high governance standards enable us to put customer interest before our own. We continue to sharpen this focus through proactive upskilling initiatives for our workforce. We are leveraging advanced analytics and new age technologies to accelerate an organisation-wide digital transformation, with the intent of improving our customer service and value proposition. Apart from our digital onboarding platform, technology has redefined the way our CRM works and has improved TAT during the year.
We provide our customers with an omnichannel and seamless experience, through branches, customer care centers, mobile application, social media etc. Our efforts are augmented using advanced analytical tools and predictive analytics to forecast customer needs for better customer service.
Care for the community is an integral part of our ethos and culture. During the year, our CSR activities saw us contribute ₹ 24.68 crores to improve the lives of 2.5 lakh+ beneficiaries. These contributions extended from skilling programmes and creches for their children to investments in healthcare and access to formal education. As part of our efforts to facilitate inclusive growth, we worked tirelessly with construction workers, an important stakeholder in our ecosystem whose well-being and growth we are committed to.
Besides, we also have programmes that cover water conservation, research and innovation for betterment of lives. I am delighted that our CSR arm, Pehel Foundation, has commenced a longterm infrastructure project for water conservation in water-stressed areas of Rajasthan, which is the first of many similar initiatives.
During the pandemic, we contributed our efforts to contain the spread of the virus. It included installation of medical equipment such as ‘CT in-a-Box’ at a major hospital, which helped prevent the spread of viral infections within the hospital, protecting patients and staff. We also extended assistance to leading medical institutions to support their Research & Development in the areas of reusable PPE material.
Notwithstanding the headwinds caused by the pandemic, I feel the challenges faced by residential real estate in 2020 have, in fact, become the catalyst in providing stimuli to the industry for sustained growth. The importance of owning a home got underscored from a consumer standpoint and will spur demand. At the same time, the Reserve Bank of India is leading the way to recovery by holding policy rates at historically low levels to initiate a cycle of consumption-led growth.
The Government’s impetus on affordable housing and the emergency credit line guarantee scheme will continue to spur demand for home loans. The extension of the co-lending model by the RBI will further help expand leverage capacities of the HFCs and create better operating metrics for the sector.
We have embarked upon a transformational journey called “Project IGNITE” with a global consulting firm, to reposition business, strengthen underwriting and collections and optimise costs. The measures undertaken will increase our digital footprints, drive efficiencies, enhance productivity, and augment growth to improve ROA and ROE.
In the ‘new normal’ characterised by rapid behavioural changes, we expect significant traction for our business and business model. Over the years, we have continuously evolved to meet the changing profile and needs of our customers, including millennials who are looking to buy homes early in life, and believe in empowering customers with better options and choices.
We are confident that with our strategic realignment and an experienced team, we are poised for growth phase in the years to come.
On behalf of our employees, the entire management team and the Board, I thank you for your continued and unwavering support. I am confident that we are positioned to create significant value for all stakeholders in times to come.