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PNB Housing Finance shares rally 11% on good show in Sept quarter

Kolkata: PNB Housing Finance shares rose as much as 11% in Friday’s trade before closing up 10 % at Rs 490.90 after the company reported less-than expected bad loans vaulting over analysts’ who red flagged a likely deterioration of asset quality for the entire sector in the next few quarters.

Asset quality for housing finance companies (HFC) may worsen for both retail loan as well as construction finance segments, rating company ICRA said, pointing out that gross non-performing assets of HFCs’ home loan segment are likely to rise to 1.3-1.5% over the medium term from the current level of 1.2%.

In contrast, PNB Housing’s gross NPA ratio stood at 0.84% of total loans as on September against 0.45% a year back, better than the industry average. Net NPA stood at 0.65% as against 0.35% in the same period. The housing finance company announced the financial results after markets closed on Thursday.

Its net interest income and net profit grew by 36% and 45% respectively year-on-year.

“The numbers are better than expectations,” said Sanjeev Jain, VP, equity research, at Sunness Capital India Pvt Ltd.

PNB Housing shares eased from a high of Rs 558 when the broader Sensex rose 37.67 points to 37058.

“The stock was already beaten down from the last one year. On the fundamental front, PNB Housing is fundamentally sound. Any positive visibility on its business front will help boost the stock price. Also, it has made excess provision out of the benefit from the recent corporate tax cut. So going forward, it will support its earnings,” Jain said.

PNB Housing April-September loan disbursement, however, shrunk as it cut down wholesale loans. Disbursements stood at Rs 12,604 crore against Rs 18,172 crore in the same period, in sync with the sectoral trend.

"The company has taken a cautious stance on loan disbursement, which is likely to remain muted until equity capital is raised," Motilal Oswal Institutional Equities said, adding that the company increased its stage 1 & 2 provisions by 20 basis points quarter on quarter to 0.80%. The exposure to the five accounts in the watch list reduced to Rs 830 crore in first half from Rs 910 crore in FY19. The company is holding 33% provisions against these accounts.

PNB Housing is in the process of raising Rs 2,000 crore equity by this year.

On-book housing loan portfolio for HFCs and non-banking finance companies grew slower at 3% year-on-year for the quarter ended June 2019 owing to lower disbursements in the first quarter and higher portfolio sell-downs, ICRA said.
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