We are cautious while disbursing loans, says Sanjaya Gupta

Sanjaya Gupta, managing director, PNB Housing Finance, in an interview with Swati Khandelwal of Zee Business, speaks about the reasons for fall in disbursement, liquidity crunch and commercial papers (CPs) that are set to mature, among others. Edited Excerpts:

PNB Housing Finance has posted sound results for the September quarter in which profit went up by 33%. In the period, the loan segment saw a growth of 43%, while disbursement stood just at 14%. Is there any problem related to liquidity with the company?

Backflows are responsible for loan growth, but our assets under management (AUM) grew 43% and the loan asset on the balance-sheet rose 37%. In fact, retail disbursement was high in the quarter. But we remained cautious while disbursing especially in LRD (lease related discounting) product, which has been brought down to zero. LRD is rate sensitive and the second quarter was quite volatile in terms of rates. This is a reason that our disbursement growth was low, but will come back in shape as soon as there is an end in the volatility in rates.

Construction finance formed 90% of your portfolio with loan against property (LAP) chipping in the rest of the growth. Do you think that concern over housing finance companies is a reason for the fall in disbursement?

No. But I would like to say that we had no role in this slowdown. We are in the practice of acquiring good credits, underwrite it, and deliver and service them. Our wholesale book, that has three components -- construction finance, LRD and corporate loans, has 0% NPA at present. Besides, we have sound NPAs in our retail and housing segments. But we remain cautious while disbursing, especially when there is liquidity crunch and volatility in interest rates.

Reports suggest that commercial papers (CPs) of around Rs 16,000 crore are set to mature by November-December 2018 and your company has an exposure of about Rs 600 crore in it. Are these numbers are correct and can you see some pressure on your business?

October has been good for us and we have no remaining rollovers till December 31, 2018. In fact, we have sailed through that situation.

There is a liquidity crunch in the market. Is there any specific issue related to it and can you see risk in terms of asset-liability mismatch?

There is no problem at our end, as we have tide over with the problem for the year. In addition, we are also borrowing in one-three year bucket and our deposits that stand around 18-19% of our resources also falls under the same bucket on an average. I feel that we will be able to bridge this existing gap of one-three years in next 3-4 months. Thus, one must not be concerned in relation to it. In fact, we are negotiating for several bank lines and several bank lines have been sanctioned. The ECB window of around $550 million is also available with us and we have received three-four sanctions of those. This means that we will be able to match that bucket in the next 3-4 months.

You said that you can't see any problem in the 0-1 year bucket but what is your view on 1-3 years bucket?

Liquidity is the prime raw material in the sector and its absence leads to problems. However, the steps being taken by the government and the Reserve Bank of India will help in ending the problem. But we will have to concentrate towards the corporate bond market and wholesale debt market as it had a contribution of 30-35% resources, but the segment has contracted by around 52% in the past nine months. I feel that the government and the regulator should work to revive the bond market as we can't depend only on banks.

We have seen a pressure on your margins as it went down by 29 basis points. What is your view on this decline in the upcoming quarters?

Net interest margin (NIM) compression was due to two reasons. The first is related to the labour, which went up by 2.1 times, and the second thing is related to the liquidity of Rs 4,000 to Rs 4,500 crore we were managing in our balance sheet since January 2018. Excessive liquidity can lead to a compression on NIM or yield, as you are not investing in the market at the rate at which it was borrowed. However, liquidity is an essential thing at present. But we have a strong gross margin of 3.15% at present.

You have announced certain market borrowing plans. What is your outlook on the loan book and market share?

We will be borrowing only from banks, ECB and National Housing Bank in the ongoing quarter. We concentrate on the utilisation of the capacities that were built in previous years instead of the market shares. In addition, we are not in a mood to take any new risk at present and will continue with the works that we have been doing till date.