Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil AA+/Stable’ rating on the long-term debt instruments and bank facilities of PNB Housing Finance Ltd (PNB Housing). The rating on the short-term debt instruments has been reaffirmed at ‘Crisil A1+’.

 

Crisil Ratings has also withdrawn its rating on the redeemed non-convertible debenture (NCD) of Rs 150 crore and Rs 200 crore of lower Tier II bonds (See Annexure 'Details of Rating Withdrawn' for details) on receipt of independent third-party confirmation. The withdrawal is in line with Crisil Ratings’ policy on withdrawal of ratings.

 

The overall rating continues to factor in strong capitalization metrics and established market position in the housing finance space. Further, the comfortable earnings profile also supports the overall credit profile of the company. The rating also factors the brand-sharing benefits that PNB Housing derives from its parent, the Punjab National Bank (PNB, rated: 'Crisil AAA/Crisil AA+/Stable/Crisil A1+’). These strengths are partially offset by intense competition in the housing finance segment and sustenance of the comfortable asset quality.

Analytical Approach

Crisil Ratings has consolidated the business and financial risk profile of PNB Housing and its subsidiary given the managerial, operational and financial linkages. The ratings also factor in the brand-sharing benefits from the parentage of PNB

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

• Strong capitalisation metrics: PNB Housing’s capitalisation metrics remain strong with the company’s networth increasing to Rs 16,863 crore as on March 31, 2025, from 14,974 crore as on March 31, 2024. Tier-I, and overall capital adequacy ratio (CAR) also stood healthy at 28.4%, and 29.4%, respectively, as on March 31, 2025 (27.9% and 29.3% as on March 31, 2024), leaving adequate headroom to support envisaged growth. The leverage levels also stood comfortable at 3.7 times as on March 31, 2025 (same as on March 31, 2024); substantially low from the peak levels of 9.6 times as on March 31, 2019. Gearing is expected to remain around 5-6 times on a steady state basis.

 

• Established market position in the housing finance space: PNB Housing is amongst one of the largest housing finance companies in India with asset under management (AUM) of Rs 80,397 crore as on March 31, 2025 (Rs 71,243 crore as on March 31, 2024). The company continued to sustain healthy growth momentum with disbursements of Rs 21,972 crore in fiscal 2025; the highest since fiscal 2020 when disbursement was Rs 18,626 crore. Of the total AUM of Rs 80,397 crore as on March 31, 2025, Rs 75,765 crore is the own-book, while balance is the off-book.

 

PNB Housing is focusing on building a strong retail franchise; given this, share of retail in own loan book increased to ~99% as on March 31, 2025, from 76% of loan assets as on March 31, 2019. As part of retail strategy, the management traditionally has been focusing on lending to the prime segment, which constitutes ~74.3% of own book as on March 31, 2025. In fiscal 2024, the company started extending affordable loans and started targeting emerging markets in fiscal 2025. In a short span of time, these segments have shown healthy growth momentum and have contributed ~25.7% of the own book as on March 31, 2025. However, in terms of disbursements, these segments contributed ~36% of total retail disbursements in fiscal 2025.

 

The corporate book stands at only ~1.3% (Rs 963 crore) of the own book as on March 31, 2025. Going forward, retail will continue to comprise majority of overall loan assets, while, on corporate lending, the company intends to take only selective exposures on projects which are near completion and of relatively lower ticket size.

 

• Brand-sharing benefits with PNB as a promoter: PNB Housing continues to benefit from branding support from its parent, PNB (28.1% ownership as on March 31, 2025). Crisil Ratings believes PNB will remain amongst the largest shareholders of PNB Housing in the near term. Crisil Ratings believes that PNB’s continued association as promoter along with shared brand name, benefits PNB Housing in a trust-sensitive environment for non-banking finance companies (NBFCs) and housing finance companies (HFCs). Crisil Ratings also notes that with the shareholding of PNB being less than 30%, PNB Housing is paying a royalty which is the higher of 0.2% of revenue and 2% of profit after tax (PAT) subject to a minimum charge of Rs 14.97 crore and a maximum charge of Rs 30 crore per year.

 

The shared brand name has helped the company to maintain a well-diversified resource profile, wherein it has been able to raise funds at competitive rates. The shared brand name has also supported the company in deposit mobilisation, as the company has consistently raised fixed deposits, and it now constitutes around 28% of overall on-book borrowings (excluding securitisation). Adding to the diversity in its resource profile, the company has an adequate proportion of bank loans constituting 38% of the total on-book borrowings, funding in the form of commercial papers is 5% and through debentures and subordinated debt is 10% as on March 31, 2025. Other funding sources include refinance from NHB (14%) and external commercial borrowings (ECBs; 6%).

 

Additionally, supported by the long-standing relationships of both PNB Housing and PNB with banks, insurance companies, provident funds, corporates and pension funds, multilateral agencies (IFC and JICA) and mutual funds.  Nevertheless, PNB Housing is managed by an independent management team, comprising professionals with strong domain knowledge and extensive experience in the mortgage business.

 

• Comfortable earning profile: PNB Housing’s profitability has improved with return on managed assets (ROMA) of 2.3% in fiscal 2025 from 2.0% in fiscal 2024 and 1.4% in fiscal 2023. This is driven by stable NIMs and lower credit costs. The company has managed NIMs of 3.3% in fiscals 2025 and 2024 (3.1% in fiscal 2023) despite competitive pressure on yields. Credit costs fell to -0.2% in fiscal 2025 from 0.2% in fiscal 2024, driven by high recoveries/writeback, largely from pool of the corporate book that was written off in the past. Crisil Ratings understands that there will be some recoveries happening from those books in this fiscal as well, which should further support profitability.

 

However, given the company being in an expansion phase to grow into newer segments such as affordable housing and emerging market loans and therefore operating expenditure (opex) as a % of average managed assets could see some uptick. The same stood at 1.0% and 0.9% in fiscals 2025 and 2024, respectively. But, as management aims to focus on high-yielding affordable and emerging market loans, it should support overall profitability. Nevertheless, the management’s ability to continue to contain credit costs and maintain a healthy earnings profile remains a key monitorable.

 

Weaknesses:

• Intense competition in the housing finance segment: PNB Housing is one of the top housing finance players; however, the company continues to face intense competition from banks, which account for a dominant share of the housing finance market. Crisil Ratings believes that PNB Housing will remain one of the leading HFCs and maintain its market share, but it may face price-based competition over time amid increased focus by banks on this segment. PNB Housing, with focused efforts to grow into an affordable and emerging markets segment and selectively augment its corporate book, should support its ability to maintain its market position, but the company’s ability to demonstrate the same will be seen over time.

 

• Improved asset quality; sustenance monitorable: The asset quality metrics have improved since March 31, 2022, with gross stage III assets declining to 1.08% (Rs 816 crore) as on March 31, 2025, from 1.50% (Rs 984 crore) as on March 31, 2024, 3.83% (Rs 2,270 crore) as on March 31, 2023, and 8.13% (Rs 4,705 crore) as on March 31, 2022. On a two-year lagged basis, gross stage III assets for home loans stood at 1.3% and one-year lagged for loan against property (LAP) was 1.8% as on March 31, 2025.

 

The improvement in gross stage III assets is driven by controlled incremental slippages and recoveries/resolutions as well as write-offs. Moreover, the company has tightened its underwriting policies and practices, relooked at business strategies and geographical presence to contain the stress in asset quality.

 

In the wholesale portfolio, most of the stressed accounts have slipped to gross stage III in the past couple of years. However, PNB Housing has also managed recovery from some of these accounts via exits. This is also evident from the reduction in absolute wholesale gross stage III assets to nil as on March 31, 2025, from 3.3% (Rs 68 crore) as on March 31, 2024. Going forward, Crisil Ratings expects the slippage from the wholesale portfolio to remain relatively controlled with low legacy corporate book outstanding. Even in the retail portfolio, the early bucket delinquencies have been improving in both home loan and LAP segments, which indicate that asset quality will likely remain rangebound.

 

However, given the company’s focus on growing in relatively riskier segments such as affordable and emerging market housing loans, there could be some impact on asset quality going forward. Thus, the performance of newer segments and the company’s ability to maintain comfortable overall asset quality as the portfolio grows will remain a key monitorable.

Liquidity: Strong

PNB Housing's asset-liability maturity profile is strong. The asset liability management (ALM) statement as on March 31, 2025, is comfortable with positive cumulative mismatch across all time buckets. As on March 31, 2025, the company had liquidity of Rs 6,549 crore in the form of cash and cash equivalents (Rs 3558 crore) and unutilised CC/WCDL lines (Rs 2991 crore). Additionally, it also had Rs 4,400 crore of unutilised bank lines on the same date. This liquidity is sufficient to meet repayments (including CP) for more than next three months.

Outlook: Stable

Crisil Ratings believes the company will continue to maintain its comfortable leverage and should also be able to improve its earnings profile and maintain healthy asset quality while scaling up operations.

Rating sensitivity factors

Upward factors:

• Sustenance of market position and/or improvement of the same while maintaining healthy growth and asset quality
• Improvement in earnings profile with RoMA sustaining over 2.5 to 3%

 

Downward factors:

• Deterioration in asset quality over an extended period
• Weakening of capitalisation metrics with steady state gearing remaining beyond 7 times
• Weakening of earnings profile

About the Company

PNB Housing was set up in 1988, as a deposit taking HFC registered with the National Housing Bank (NHB), promoted by PNB. The company is primarily engaged in the business of providing Housing Loans (HL) and Loan Against Property (LAP) which constitutes ~99% of the overall AUM of Rs 80,397 crore as on March 31, 2025. The remaining 1% is constituted by other products such as Construction Finance (CF), corporate term loans etc.

 

In December 2009, PNB sold 49% stake in PNB Housing and entered into a strategic partnership with Destimoney Enterprises Pvt Ltd (owned by NSR Partners). During fiscal 2017, Destimoney Enterprises Ltd transferred equity shares in PNB Housing to its holding company i.e. Quality Investments Holdings (QIH; part of the Carlyle Group) pursuant to the specific distribution of its assets as per winding up scheme. Subsequently, in April 2023, with the successful completion of the rights issue, as on March 31, 2024, Carlyle Group became the largest shareholder with 32.7% shareholding, and PNB’s shareholding had reduced to 28.1% with the remaining shareholding being held by large domestic and foreign institutional investors. However, on May 2, 2025, QIH completely sold its shareholding in the company through multiple transactions done during the year. Thus, PNB now holds 28.1% shareholding in the company as on date

Key Financial Indicators

Particulars	Unit	Mar-25	Mar-24	Mar-23	Mar-22
Total assets	Rs crore	82,520	72,405	66,874	65,730
Total income (net of interest expense)	Rs crore	3,140	2,796	2,631	2,136
Profit after tax	Rs crore	1936	1508	1,046	836
Gross NPA	Rs crore	816	984	2,270	4,705
On-book Gearing	Times	3.7	3.7	4.9	5.4
Return on managed assets%	%	2.3	2.0	1.4	1.1

%PAT by average Managed Assets (Total Balance Sheet assets + Off-book assigned / securitised assets

Any other information: Not applicable