PNB Housing Fin - Fast Growing HFC

The whole IPO fund might not be added to Reserves .
Is it true to assume everything gets added to Reserve and enhance the book value? Its just a question

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Good post @amitayu

I have following comments

  1. It is fastest growing, market will recognise this over a period of time
  2. Ticket size is higher 32 lakh, this size demand is slowing in city
  3. It still has yet to see one cycle, so we don’t know how NPA will do
  4. Nim is low
  5. Management quality is superb
  6. Valuations are reasonable/undervalued for 35% growth
  7. Now we have too many HFC stocks to play this sector

Disc : tracking closely

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I didnt invest in pnbhf for two reasons. The loan book is very new just two years old average age of loan book. This is a very risky proposition as high probability of defaults as low commitment from home owners early in the tenor.

Secondly there are some book padding issues. Cost of funds lower than hdfc and lichf. How is that even possible as the two are better rated.

The only positive is carlyle is an investor. And they have done well with multiple hfs in the past. Nikhil Mohta of carlyle is super smart…

I will wait for one two quarters of post ipo numbers to look again further


The other thread related to Canfin Homes has relative comparison between all all HFCs.I found it very useful.
Dislosure:Invested during IPO and added during recent corrections

Hi @sinha124 .Here is my following points

  1. Yes, The main reason of higher ticket size because PNBH’s partly due to the fact that it has been so far largely present in the urban areas. As they already started foray into affordable housing and Tier 2 and Tier 3 cities , the ticket size look like set to decrease from current 32 Lacs ,

  2. NIM was low due to higher leverage and will see improvement post fund raising. Also As the business scales up the operating cost structure(which is relatively higher than other HFCs) would also get reduced.

  3. Yes agreed the Loan Book is not fully seasoned . I believe PNBH will be able to control its credit cost and have NPAs at par with other pvt sector players due to high quality of management.

Discl: Invest and Biased.

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A comparison is available here


The share of risky construction finance(real estate developers) loans has increased from 5.8% in FY14 to 9.5% as on 30th June 2016. Higher defaults due to slippages in this segment due to current real estate recession(and demonetisation impact) can have big impact on NPA. Any thoughts how they are managing?

“High Quality Management”…I will take this with a pinch of salt. Quality management is not a thing you want to associate with PSU lenders

If that’s the case why 3000 crs is not added in Reserves?

@Ankchandak Where did you get the information that 3000 crs is not added in Reserves? Before providing any conclusion at first do read the DRHP document and also do your homework. It will help you and us both.

@umang_1991 Is it applicable for Canfin Homes Management Also?

Discl: Invested in Canfin and PNBHFL .

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I will read the DRHP thoroughly and come back to , Regarding Reserve, from the latest balancesheet along with H12017 results you can check the reserves6BE12728_2EB1_4F88_9BD8_BDE517E0E04F_155740.pdf (465.6 KB)

My understanding is book value is Equal to Shaheholders fund mentioned in balance sheet .
And its mentioned as 2379 Crs while the current market cap is 13,765 .
So based on that P/B comes as 13,765/2379 ~ 6
Is my calculation is wrong based on the latest balance sheet .
Or is there something I am missing?

Wasnt the ipo post Q2, so how did you get the latest balance sheet?

It will come with Q3 results.

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Oh, My bad.
@amitayu sorry for the trouble :slight_smile:

No Issue at all :slightly_smiling_face:. To make this thread more informative we need to research more on this company and will exchange our views .

You may want to look at the number of branches of PNBHF and its Loan book. If my memory serves me right, it used to be something like ~900crs per branch. How is that possible unless the book understates builder loans, or PNB has transferred its home loans to PNBHF. If true, this questions the sustainability of the growth in asset book of PNBHF.

Thanks Amitayu for the thread. The biggest short term risk for PNB in my opinion are as follows:

a. Gross NPA being the lowest- could creep up in this environment

b. Loan to real estate developers is another potential trouble spot.

c. Competition is increasing in HFC

But Track record is excellent.So if they deliver it is a good bet. I am closely watching it now.

Dear Yogesh

Excellent comparison. To understand better what is inside credit costs.?
India bulls is scoring on many KPIs still considered very risky. Why. Is it because of their risky loans ? I guess NPAs comparison is missing.

IPO proceeds need to be added to Networth of FY16 to arrive at book value. Here is the working
PNB Housing Ltd
P/BV FY17E Working Rs. Cr
Net worth FY16 2144
PAT FY17E (20% growth) 409
Issue Money 3000
Total Networth FY17 E 5554

Pre-issue shares 12.69

of Shares issued IPO 3.87

Total No.of shares (cr) 16.56

BV FY17E 335
CMP 830
P/BV FY17 E 2.48

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@pranav_pratap It is due to their Unique Operation Model , After stake acquisition by Destimony (Carlyle Group’s entity) The managment initiated a restructuring program titled ‘Project Kshitij’ in 2011. The intent was to centralize and standardize business processes, sourcing strategies and credit policies. They made changes to the organization structure, developed a robust IT platform and introduced a fresh marketing initiative. As per this restructuring, 47 branches were positioned to act as the primary points of sale and assist with the origination of loans, various collection processes ,sourcing public deposit service etc while the processing hubs were positioned to provide support functions such as such as loan processing, credit appraisal and monitoring etc. Most Importantly they have more than 7000 channel partners (in house team + external hire ) which helped them to grow their business in rapid pace. This is the reason also their OPRX is higher than other HFCs but will decrease gradually once the business scaled up.

Thanks for clarifying Amitayu!

Their business model must be unique to manage such large volumes with few branches. I will look into this when I can devote some time.

I remember that when PNBHF was growing its loan book at a frenetic pace, PNB’s loan book of small ticket HF loans did not grow. That made me a bit suspicious whether PNB was shifting its home loan book to PNBHF. I had written about it on CanFin board about two years earlier, but afterward, I stopped tracking PNBHF.