PNB Housing Sees 10-15 Basis Point Reduction in Cost of Funds Following Ratings Upgrade: CEO Ajai Shukla

PNB Housing CEO Aims for AAA Rating, Eyes Boost in Profitability

Six months into his tenure as managing director and chief executive officer of PNB Housing, Ajai Shukla is working towards obtaining a top-tier credit status for the shadow bank. From its current AA rating, Shukla expects PNB Housing to upgrade to a AAA rating in the near future.

The upgrade could lead to a reduction in borrowing costs by 10-15 basis points, providing much-needed support to the housing financier's profitability. To achieve this goal, Shukla plans to focus on foraying into micro-housing loans and pressing the pedal on corporate loans. These initiatives are expected to bolster yields and contribute to the company's growth.

Improving Loan Quality

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PNB Housing has made significant improvements in its loan quality over the past quarter. The gross non-performing asset (NPA) ratio has reduced from 1 percent to 0.93 percent in Q4 FY26. Additionally, the efficiency of the X bucket or bucket zero has improved from 97-97.4 percent to 98 percent. The overall gross NPA has decreased both in terms of percentage and absolute terms, giving comfort on the quality of the book.

Shukla attributes this improvement to the company's focus on controlling the X bucket efficiency and reducing the bouncing of loans. He plans to educate customers on the importance of timely payments and implement data-driven collection or AI-based collection to improve the efficiency of the early bucket.

Cost of Funds and Funding Mix

The cost of funds is expected to remain stable, with around 17-18 percent of liabilities coming from fixed deposits. Shukla does not anticipate any further rate reduction and expects the company's cost of borrowing to decrease by at least 10-15 basis points if it achieves a AAA rating.

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Affordable Housing Loans

PNB Housing plans to increase its share of affordable housing loans to improve yields and diversify its book. The company aims to operate in the 14-15 percent yield segment, which is currently untapped. Shukla believes that affordable housing loans will provide a better return on investment and help the company grow.

Corporate Lending Business

In the corporate lending business, PNB Housing will focus on niche markets with good demand, absorption, and quality builders. The company will target projects with sizes of at least Rs 1,000-2,000 crore and will aim to lend around 30-40 percent of the overall project cost. Shukla believes that this approach will provide a lucrative business opportunity while minimizing risk.

Debt and Equity

PNB Housing has enough equity at 27-28 percent capital adequacy and plans to raise around Rs 6,000-6,500 crore of debt every quarter. The company does not anticipate any requirement to raise additional debt or equity this fiscal.

Regulatory Compliance

Shukla believes that good governance is a culture that should be followed regardless of the company's classification under scale-based regulations. PNB Housing is expected to cross Rs 1 lakh crore in assets in six-seven months and may not be classified as an upper-layer NBFC. However, the company will continue to follow high standards and governance principles.