PNB Housing Fin - Fast Growing HFC

(Julian) #551

@saumya2010 You posts suggest that HDFC is struggling to achieve sales in the light of heavy competition. It seems to be affecting its sister concern Gruh Finance too.
Gruh Finance: We are working to sustain 20% loan growth: Sudhin Choksey, Gruh Finance - The Economic Times via @economictimes
As seen in the previous con call analysts were surprised how PNB housing could grow so fast, even during demonitisation and the first half of last year, when the entire sector slowed down. Sanjaya Gupta attributed it to a management which is always on its feet. Having established himself as the master of sales in Housing Finance, shareholders in this company, can continue to sleep soundly, as he continues to achieve 40% plus sales growth. Next year he teaches his ROE detractors a lesson. Next year you will have your ROE and businesses like growth, new management willing. You cannot ask for the moon in a commodity business.

(Susindar) #552

After 6 quarters of more than 8% QOQ growth rate, recent QOQ growth was less than 3% for PNBHF. Even PNBHF is feeling the pinch. I have got a feeling that good days for HF are behind us. Every Tom, Dick and Harry literally has a Housing Finance subsidiary now. The HF market is fully commodified. While the top line could grow, the bottom line will flatline due to pressure on margins, NPAs will increase and competition will persist till the stronger and niche survive and then growth may resume. Something similar to what is happening in PSU banks now.

(Julian) #553

We had similar growth during September to December 2016 quarter. Growth is to measured not with the previous quarter but the same quarter of the previous year. There is no growth slowdown for PNB housing. They have only around 80 odd branches (against 200 for Canfin) and 30% of the growth each year is contributed by the new branches. 20 odd branches are being added this year. India’s mortgage to GDP is among the lowest in the world. 85% of the market is cornered by the top 5 HFCs whose credit rating is a moat. There are 20 bidders for this company (there were only 2 for Canfin) which means there will be a bitter bidding war. Competition comes and goes. Sanjaya Gupta welcomes competition. In a previous con call he has said that the more the competition, the merrier. He has also said that his first prayer on waking up and and his last prayer before sleep, is that his competitors don’t fold up. This is a man who prays for his competition, as he welcomes them. No wonder bidders compete to get this one.

(Prasad) #554

Was there any news on non-binding bids received by PNBH?

(RamanTiwari) #555


Godrej is interested? That’s a new. Perhaps it would complement their realty business but still they are not in the financial space already and why would they enter now?

The last line is interesting… Both PNB and the govt looking for “right valuations”. Similar thing happened with Canfin Homes about the right valuations…

(hamed) #557

Godrej excites me, it would rerate the stock. The last line is a threat to bidders to up the bids else…Unlike canfin this one does not have deteriorating fundamentals and has more parties chasing than a shrewd HDFC.

(mrai74) #558

We have SIX competitors now

(Vishal Bharti) #559

This is a big positive for Bandhan shareholders!

(Julian) #560

Companies often sell in the stock market below their intrinsic business value.But when a company wishes to sell out completely, in a negotiated transaction, it invariably wants to - and usually can - receive full business value in whatever kind of currency, the value is to be delivered -Warren Buffett


If the reports are true, the no. of bidders is reducing, valuation being a main concern.
If PNB is able to reduce / recover NPA or at least feel optimistic that they can bounce back sooner or later in their core banking business, they may not be willing to give up PNB Housing at lower valuations.

(Julian) #562

Definitely PNB will bounce back, as they have already proved in the past, but their performance will still be shameful in comparison with their private counterparts. PNB housing is their masterpiece and the jewel in the crown. Instead of selling the house to save the furniture, they should increase their stake in PNB housing, by buying from the market, when the stock is selling cheap. Or they could do share buybacks. The market cap of PNB housing is more than its parent PNB. Years later the market cap of PNB housing will be many times more than PNB. Housing finance is 50% of the banking business and no bank can compete with HFCs. This being so, PNB should concentrate on increasing stake in PNB housing instead of foolishly surrendering their crown jewel for paltry gains. You should sell all unproductive assets in your bank, and never think of selling your crown jewels. This is public money and tax payers money that you are throwing away and you are accountable for that. Try to sell Air India or PNB and there will be no takers. Why? Because these assets are beyond redemption. Handing over PNB housing to a competitor like DHFL, will be suicidal, to your own business and lead to monopolistic situations, in a scenario, where 85% of the market is already cornered by the top 5 HFCs.

(atul1082) #563

Where will they get money from for using pnb HF?

(Julian) #564

A casual look at PNBs balance sheet shows that they are taking capital every year. Where did they get this money? The debt equity ratio of this greedy one is almost 20 which is 7 lakh crore of borrowings. Why did they go for such insane borrowings? Only to lend to uncreditworthy borrowers? Why do you need such reckless borrowing and needless capital consumption, when you have such a great subsidiary, led by none other than Sanjaya Gupta. All they needed to do, was to sit and relax and let PNB housing bring in the moolah. However they became overactive in the banking business and became the laughing stock of the world. Their best achievement was to give birth to PNB housing. They have 2 lakh crore of investments. And you are asking me to show the :moneybag:.

(Julian) #565

The bidders are reposing a lot of trust on the senior management of the housing finance company and want them to continue after the stake sale process is completed.”

(Julian) #566

(Julian) #567

Last conference call titbits: Sanjaya Gupta is the MD of PNB Housing.
Nidhesh Jain: Secondly sir the expected change in shareholding, do you expect any change in the
employee morale or the change in the management level?
Sanjaya Gupta: Do you find a difference in my tone. Well that’s the leader of the Company. Whenever M&A happens the top brass get shunted out first, but this is a performing top brass. So, will people come for the management team or will they come for all offices that we have on rent and pay an OPEX and do not know how to run it because our technology is
different, our target operating model is different, our go-to market strategies are different. So, it can be a spacecraft without an astronaut.
Aayushi Mohta: My question is how are you managing 38% growth in individual housing loans like what sets you apart?
Sanjaya Gupta: One is that we work hard, so we get our growth. Second is our growth is backed by our expansion program of distribution, so we create capacity and capacity creation is not
only infrastructure, it has people training skills, vendors, technology, everything and we
have added last year itself 21 branches, this year already we have added one more
branch, yes, additional cost do come, but is also the engine of growth of this Company.
Just to comment on your question, our new branches and the definition of new is any
branch which is opened from 16-17, they are contributing about 30% of incremental
Aayushi Mohta: What is your competitive advantage, because there are so many other players also in the same segment?
Sanjaya Gupta: One is our communication, our turnaround time, our technology, our people, our
product, which are marked to the market and we are one financial institution which even
advertises its turnaround time on a website and every week the entire leadership team
across the Company that means, the central support office (CSO) and our 21-hubs,
analyze our quality vectors for about half a day every week of what has happened in
the previous week and we do take corrective action. Our Enterprise System Solution,
which is known as Kastle cuts across the organization right from lead management to
retirement of loans, asset/liability management, loan appraisal, property documents,
digitization of document, etc., So, we together have common faith in God but we only
trust data. Point of truth comes from a system, our MIS are generated from the system
through a BI tool, so there is no human intervention, we believe in them and we monitor
our processes very well.
Aayushi Mohta: But if you see loan book growth of say other housing finance companies, they are not growing at such a pace, so just wanted to understand that?
Sanjaya Gupta: You have to have faith in our growth and our portfolio quality now for last 32 quarters is consistent. So, we are doing things in a wise manner with I would say tactical sharpness and head on our shoulders. That is the difference.
Aayushi Mohta: Do you kind of see similar growth going forward as well?
Sanjaya Gupta: If the macroeconomic situation is stable, I do not see why we cannot penetrate deeper into the inherent demand, internally, I always say that housing finance is like a
toothpaste, so every Indian family at least in the urban center uses this service twice in
a life time. So, we are on the top of the mind recall or in the list of preferences. It is all
about organization, how they are positioning. Service is a cornerstone of a promise to
our customers and communications. We do not sell discarded products at a discount.
We are at least 25 bps more expensive but we are not costly.

Aayushi Mohta: But sir if you see for instance RERA, it did kind of slowed down the loan book growth of other companies also. So, how did you sort of manage that, your growth has not slowed
down at all?
Sanjaya Gupta: I think RERA is a very positive thing and it will bring back the confidence of a home buyer in the real estate sector. Let me again emphasize that organized developers are
not the only source of supply, that may be true in a place like Bombay or Delhi, but it is
not even true in Bangalore or Hyderabad or Pune, or Lucknow or Calcutta or other places. So, they have other sources and it is all about how focused you are and how I would say nimble-footed you are to change your gears.

(Julian) #568

No capital raising this financial year -Sanjaya Gupta on capital raising in the latest concall

Miyush Gandhi: Sir, just wanted your thoughts on the capital, we consumed a lot of capital this quarter, we might probably need to raise something. If you could just share your thoughts at what level you will look to raise and how much, anything that you can just speak your

Sanjaya Gupta: So, the thing is, as I keep saying, we are prudent capital I would say users. Our balance sheet, P&L does not irrigate other subsidiaries or associated business. Hence, our
steady state level as per the Board policy is 10x to 11x for go-to market. I am talking about gearing and at about 12x hit the capital market. So, still there is headroom to grow. Plus, this year because of the liquidity crunch we will be using securitization and we only do true sales to manage liquidity. And as a strategic intent we will have 7%-8% of our AUM as an assigned pool. Hence, I think and let us be candid, this is also a time for a controlling stake sale. So, I do not want to be seen in the capital market raising
capital. The entire, I would say equations will go haywire. I still feel that I can manage these sort of levering level till about as I have been maintaining the last quarter of calendar year 2019 or the first calendar quarter of 2020.

(mrai74) #569

The kind of carnage happening in broader markets specially in HFC / NBFC space seems to have caused major damage to the ongoing process of stake sale in our company. It looks like promoters & others waiting for offloading their stake might be expecting atleast 150% valuations from current levels, which no one can guarantee or majority will go with seeing 3 digits figures for this scrip.

I wish to invite serious discussion on possibilities of process getting halted or postponed due to bad market scenario as it may not fetch the expected valuations for promoters.We already saw other company in same space meeting similar fate with stake sale. I personally see that bidders / retailers will loose faith in such processes if they keep on failing (its pure guess work that our company will dump off the process due to poor valuations)

(Ashwin H) #573

To everyone, it is well known that PNB HF has an exposure to IREO. And in this context I had posted if anyone knows from concalls / otherwise what that exposure is ? For some reason that post was taken off as “off-topic” and I am unclear why !!! ?

Can some one answer the above question ? Also, if some one can let me know how this violates the forum guidelines, I would appreciate