The results of the second quarter in PNB Housing Finance provide comfort, but the key is liquidity

PNB Housing Finance Ltd managed to dispel some concerns about its liquidity position, reporting good results for September. With the support of a healthy 43% increase in managed assets, the lender from the housing sector recorded a 33% increase in net profit and an increase in the basic income by 25.4%.

Having said that, his discounted prices dropped to 14% from 25% in the previous quarter, indicating that the lender is not stable in terms of liquidity.

In fact, analysts believe that its payments may continue to fall due to pressure on liquidity.

PNB Housing Finance has an ALM gap (liability management) of ₹ 530 crore over a period of one to three months and a cumulative gap of cr 900 crore in less than one year. In other words, the company will have to approach ₹ 900 crore liquidity to maintain credit growth.

Analysts at Jefferies India Pvt. Ltd noted that the share of commercial paper (CP) in the total GNP Housing Finance loan fell to 13% from 17%.

This, combined with the fact that the lender was able to raise over 6,000 crore per CP for over a month, should provide investors with comfort.

Nevertheless, the cost of loans increased, which would reduce margins and spreads. Management runs spreads with a value of 205-215 basis points.

This leads us to a bad credit position. PNB Housing Finance has an impeccable rate of unpaid credit and continues to do so. His grossly bad loans as a percentage of the loan portfolio amounted to only 0.45%.

This may be at risk because it has a cro 280 crore exposure to Supertech Ltd, a developer in a difficult situation. The exposure is categorized as standard.

Book of non-housing loans increased faster by 54% thanks to loans from the real estate sector and construction financing. While the loan book is diversified, the lender has seen faster growth in the more risky parts of the book.

The shares of PNB Housing Finance were under pressure from other NBFC companies (non-banking financial companies) in September, when liquidity problems hit the NBFC.

The 30% fall since September in the housing division of the GNP caused that the valuations are modest and the transaction value is a multiple of 1.7 times its estimated book value for the financial year20.