Ladies and gentlemen, good day and welcome to PNB Housing Finance Limited Q4 and FY 2024-2025 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I will hand the conference over to Ms. Deepika Gupta Padhi, National Head, Treasury and IR. Thank you, and over to you, ma'am.
Thank you, Neeraj. Good evening and welcome, everyone. We are here to discuss PNB Housing Finance Q4 and FY 2025 results. You must have seen our business and financial numbers in the presentation, and we have carefully shared with the Indian Stock Exchanges and are also available on our website. With me, we have our management team, led by Mr. Girish Koushik, our Managing Director and CEO. We will begin this call with the performance update by the management team, followed by an interactive Q&A session. Please note, this call may contain forward-looking statements which exemplify adjustments and future exceptions concerning the development of our business. These forward-looking statements involve risks and uncertainties that may cause actual development and result in different materially from our expectations. PNB Housing Finance undertakes no obligation to publicly revise any forward-looking statement to reflect future events or circumstances.
A detailed disclaimer is on slide number 53 of the investor presentation. With that, I will now hand over the call to Mr. Girish Koushik. Over to you.
Hi. Good evening to all the investors, and thanks for taking time out. It's my pleasure to address you today as we review the dynamic developments in India's housing finance sector and share an update on our performance during the quarter and the year. Housing finance industry has shown remarkable resilience and growth. While regional disparities remain, we are delighted at the tremendous opportunity in expanding deeper into underserved regions. Further, government support has been a strong enabler, with initiatives like PMAY 2.0 injecting momentum into the affordable housing space. Housing finance companies have responded proactively, offering customized products and flexible solutions to meet the aspirations of a broader spectrum of customers. As per ICRA, the housing finance industry is expected to continue its growth momentum, with 13%-15% ongoing growth expected for FY 2025-2026. The profitability of the HFCs is projected to remain healthy, supported by low credit costs.
Coming to PNB Housing Finance Limited, we had a stellar run in the current financial year and achieved significant milestones during the year. Let me talk about them and update on the performance of our guidance shared last year. Despite the challenging operating environment, we achieved retail loan book growth of 18.2% year-on-year, surpassing our guidance of 17% to INR 74,882 crores as of 31 March 2025. The total loan assets of the company crossed INR 75,000 crores after 23 quarters, to reach INR 76,765 crores as of 31 March 2025. The affordable and emerging market segment continued to increase their share in the retail loan asset and is at 26% as of 31 March 2025, from 21% on 31 March 2024. Our affordable segment loan assets have performed phenomenally and crossed a significant milestone of INR 5,000 crores on 31 March 2025.
Despite being a late entry in the affordable segment, this achievement is a testimony to our conviction in the available opportunity, ensuring ripe execution and presence across the time period. Retail disbursement increased by 26% year-on-year, with affordable and emerging segments contributing 40% during the quarter. Recoveries from written-off pool grew 2x, from INR 100 crore to INR 336 crore in the current year. The gross NPA reached close to 1%, which is at 1.08% by the end of the financial year. Ensure stable minimum of 3.7% during the year, achieved ROA of 2.55% for FY 2024-2025 versus 2.2% in FY 2023-2024. With the strong performance of the company, I'm pleased to announce that the Board of Directors recommended a dividend of INR 5 per equity share for FY 2025. This is subject to the shareholders' approval. Let me now talk about a few details on the performance achieved during the year.
Disbursement: our disbursement grew by 25% during the year to INR 21,972 crore. The disbursement during quarter four grew by 23% year-on-year and 27% quarter on quarter to INR 6,854 crore. Affordable and emerging market segments contributed 40% in quarter four and 36% in FY 2025 of total retail disbursement. As planned, we opened 51 branches in quarter four, FY 2025, for affordable and emerging market segments. The total Pan India branch network of the company stands at 356, including 200 for affordable and 60 for emerging market segments. Taking the vision of the regulator forward to develop Northeast states, we have expanded our reach to an affordable branch in Guwahati. With a large presence Pan India, we are ready to capitalize the opportunity available in affordable and emerging market segments in Tier 2, 3, and 4 cities.
On asset quality, the gross NPA improved to 1.08% as of 31st March 2025, as compared to 1.5% on 31st March 2024 and 1.19% as of 31st December 2024. During quarter three, FY 2025, one corporate account, which slipped into stage two, has now been rolled back to stage one. With focused collection effort, we sold 537 retail properties, as compared to 268 in FY 2024. We recovered INR 336 crores from written-off pool, which includes INR 178 crores from retail and INR 158 crores from corporate pool during FY 2025. The company has a remaining written-off pool of around INR 1,000 crores in corporate and around INR 400 crores in retail. To further our commitment to the vision of housing for all, we are proud to share our partnership with MoHUA and NHB to spearhead the inter-subsidy scheme of the PMAY 2.0 initiative.
The scheme was applicable from 1st September 2024, and since then, the company has closed over 5,500 applications, amounting to over INR 750 crore, which are eligible under the PNB scheme. Our diversified liability profile, improved credit rating, and continuous engagement with the lenders enabled us to reduce the cost of borrowing by 15% during the year to 7.86% versus 8.01% in FY 2024. In FY 2025, PAT increased by 28.2% year-on-year to INR 1,936 crore, leading to an ROA of 2.55% and ROE of 12.19%. The capital adequacy ratio is 29.38%, and Tier 1 is 28.39% as of 31st March 2025.
Given the industry outlook and the business performance so far, sharing our FY 2026 guidance with you all: retail loan growth 18%, affordable loan book on 31 March 2026 will be INR 9,500 crore, corporate disbursement will be in the range of INR 1,500-INR 2,000 crore, NIM will be stable, credit costs remain benign due to recoveries from written-off pool, ROA would be in the range of 2.5%-2.6%. As we progress, we will continue to focus on profitable growth while sustaining the asset quality. With this, I would like to hand over the call back to Deepika.
Thank you, sir. I'll now request Vinay Gupta, our CFO, to talk about our financial performance.
Good evening, everyone, and a very warm welcome to our annual call. I am pleased to announce strong Q4 and FY 2025 financial numbers driven by robust company performance. I will now cover some of the financial parameters in more detail. With growth in retail loan book by 18%, our retail interest income has grown 17% year-on-year. Our total interest income grew 13% year-on-year to INR 1,900 crores and INR 1,906 crores in Q4 FY 2025. Coming to borrowings, the company continues to have diversified and cost-effective long-term financing sources, which resulted in a decline in cost of borrowing by 15 basis points year-on-year to 7.86% in FY 2025. Cost of borrowing for Q4 was at 7.84%, one basis point higher than Q3 FY 2025. This is on account of higher cost of deposits, and it has been almost similar lines that we have been in previous quarters.
During the year, the company has received INR 5,000 crore from National Housing Bank and has sourced $350 million from ECB. With improved liquidity in the market and rate cut, we expect the borrowing cost to reduce from this quarter onwards. Net interest margin improved by five basis points in Q4 FY 2025 to 3.75% in comparison to 3.7% in the previous quarter. The increase in margin includes temporary gains due to higher disbursements and loan assets in March 2025 without corresponding increase in borrowing. This will normalize next quarter. Gross margin improved to 4.27% in Q4 versus 4.1% in Q3, driven by 27% higher disbursements during Q4, and it also includes one-off on account of interest received on income tax refunds. Our operating expenses grew by 18% year-on-year to INR 208 crore versus INR 176 crore in Q4 FY 2024 and INR 203 crore in Q3 FY 2025.
This increase is largely on account of new branch additions that we have done in affordable and emerging market verticals at the beginning of this financial year. We have added another 50 branches in Q4, which will start reflecting in OPEX in Q1. However, we would be able to offset this with economies of scale in existing businesses. Our OPEX to ATA guidance remains in the range of 1% - 1.1%. Led by strong revenue growth, our pre-provision operating profit has grown 14% year-on-year to INR 646 crores at our overall level. Operating profit for retail has grown by 16% year-on-year. Credit cost stood at 32 basis points negative for Q4 and 21 basis points negative for FY 2025. Happy to share that we have recovered INR 336 crores from written-off pool during FY 2025.
Happy to share we have also reported a PAT of INR 550 crores in Q4, which is up 25% year-on-year and 14% quarter on quarter. For FY 2025, PAT grew by 28% to INR 1,936 crores. ROA improved to 2.55% for FY 2025 versus 2.2% in FY 2024. ROE stands at 12.19% in FY 2025. Coming to capital, our total CRAR is set at 29.38%, with Tier 1 at 28.39%. Debt to equity is stable at 3.7 times. Our March 2025 net worth stands at INR 16,863 crores, and our book value is now at INR 649. With this, I now hand over back to Deepika for taking this call.
Thank you, Vinay. I'll now request Dilip Vaitheeswaran, Chief Sales Officer for Prime and Emerging Business, to give segmental performance updates.
Thank you, Deepika, and good evening, friends. Welcome to the call. Appreciate you taking the time out. I'm delighted to share with you that we had another very good quarter on the Prime and Emerging Markets businesses. To give you a color on disbursement, we disbursed about INR 5,500 + crores across both these businesses, a growth of 17% year-on-year and a sequential growth of 25 %+ quarter on quarter. The NHL business, where we are trying to increase our growth rate, we managed to disburse INR 1,800 + crores here in the quarter, year-on-year of 40 %+ over last year Q4. Let me now give you a color of both businesses. I'll start with emerging markets first. Disbursements in emerging markets grew at 33% year-on-year for the entire FY 2025. In fact, for Q4, they grew at 40% year-on-year. The share of emerging markets business, like Mr.
Kousgi explained, along with Roshni, is going up at an enterprise level. This business now is being generated at a yield increment of 41 basis points over the Prime business. Even within emerging markets, NHL is growing up strongly. NHL, as a share of overall disbursements in emerging markets, stands at 42% for Q4 of FY 2025. Now, in the emerging markets business, we opened a few more new branches. Along with the new branches and a set of existing branches, which are now being redesignated as emerging market branches, the total distribution size in emerging markets goes up to 79 branches as compared to 50 branches at the beginning of FY 2025. This just goes to show that we are more and more focused on growing this segment, which is more margin-aggressive for the enterprise.
Now, coming to the Prime markets, here also we had a very good quarter on all fronts. We managed to increase our disbursements by 13% year-on-year for all of FY 2025. The Prime book grew by 11% to about INR 55,600 + crores. Another key agenda here is to restrict runoff. Runoff for entire FY 2025 stood at 17%. This is down by 80 + basis points year-on-year. Here also, the NHL mix has grown against 26% in Q4 of FY 2024. The NHL mix in FY 2025 for Q4 was 30 %+ . We had opened 35 new branches across Prime and Emerging Markets in this year. Happy to update that they contributed to 13% of overall disbursements in Q4 of FY 2025. Now, in line with our focus on profitable growth and margin-aggressive businesses, we have also set up a dedicated NHL team.
This team will source exclusive NHL business, starting with 10 clusters in top cities. As we speak, in fact, we have also come up with a new customer offering, a complete full tenure fixed-rate offering for non-housing loans. This is a one-of-a-kind product, which currently is not available across the industry. We believe this will be a game changer for increasing our NHL mix further. To summarize, we have sustained the growth in business momentum through geography or managing channel partnerships, retention, asset quality. We have had a good quarter on all these fronts, and we are now ready to increase our business further in the coming years. We believe that FY 2025 overall has been a testimony to the fact that our core business franchise is in very, very good shape, and we will only move forward on growth, on margins, and asset quality. Thank you.
I hand the call back to Deepika.
Thank you, Vinay. I'll now request Vikas Vishwakarma, our Chief Sales and Collection Officer for affordable business, to update on the business performance.
Thank you, Deepika. Good evening, everyone. It's my distinct pleasure to share with you the exceptional progress we have made in our Roshni business over the last quarter of the year. We concluded the year with a remarkable loan book of INR 5,070 crores, representing a phenomenal year-on-year growth of 183%, up from INR 1,790 crores as of 31st March 2025. This also reflects a robust 32% growth over the preceding year. Our disbursements tell an equally compelling story. In Q4 of FY 2025 alone, we disbursed INR 1,291 crores, delivering a 100% growth over INR 645 crores in Q4 of the previous year. On a sequential basis, we saw a 40% increase, up from INR 920 crores in the previous quarter, demonstrating a strong momentum and a market acceptance.
Over the past year, we have added 40 new branches, taking our total footprint to 200 branches across 130 + potential districts in 15 states. I'm happy to report to you that these branches are fully operational and already started contributing significantly to our business. We have forayed into two promising new markets, namely Punjab and Northeast, with plans to deepen our presence in the coming fiscal. We are thrilled to open our first branch of PNB Housing Finance in Northeast at Dibrugarh. Our pan-area operations are well-balanced across three zones: North Zone contributing 36%, West Zone contributing 33%, and South Zone contributing 30%. This geographical balance ensures resilience and consistency in our growth. The state of Tamil Nadu posts the highest TAM, followed by Uttar Pradesh and Madhya Pradesh.
To further strengthen our reach, we have embedded over 2,100 connectors under our SARC program and partnerships with more than 500 channel partners, who are all powered by 1,200 + vendors who handle the legal, technical, FI, FTU-related activities. On the technology front, we have implemented advanced digital solutions to enhance our operational agility and scalability. The last quarter was our best ever in terms of logins, sanctions, disbursements, and the foundation for continued growth. On the portfolio front, we have made significant headway. Self-employed sourcing rose to 44%, up from 42% last quarter and 37% a year ago. Informal income segment sourcing grew to 30%, up from 26% last year, forming a sizable part of our book now. 73% of the portfolio is within the ticket size of INR 2.5 million, and 30% of our portfolio remains non-housing loans.
On incremental yields, at 11.7% this quarter, sequentially down the previous quarter, however higher comparatively to the last year. Generally, competition is higher in the last quarter, which results in lower incremental yields. With focus on higher-yielding products and from Tier 3 and Tier 4 markets, we will increase the yields in the coming quarters. Importantly, portfolio quality remains very strong. Bounce rates are well-controlled at 11%, and NPAs are impressively as low as 0.21%. We are incredibly proud of what we have accomplished. With this momentum and strong foundation we have laid, we are confident of closing the upcoming financial year with a loan book approaching INR 9,500 crore. Thank you all for your continued support and trust. I'm handing over back to Deepika. Deepika, thank you very much.
I'll now request Jatul, our Chief Credit and Collections Officer for Retail Business, to talk about the performance.
Yeah, thank you, Deepika. Good evening, everyone. Credit underwriting has been a driving force towards building a healthy portfolio, followed by sustainable growth. The company has a well-diversified book exposure across all industries, with majority cases having low and mid-ticket size and a healthy mix of salaried and self-employed profiles. During Q4 2025, the company witnessed an upward take in onboarding, sanctions, and disbursements across all verticals: Prime, Emerging, and Roshni. With all the checks and balances in place, the company has been able to calibrate the portfolio quality. The delinquency book during the last few quarters is well within the tolerable limits and is one of the critical monitoring parameters for the company at all end of it. Last 12 months, onboarding witnessed 30 + of 0.13% and negligible NPA at 0.03%.
Going to last 24 months' disbursements, the 30 + range at 0.48% with 90 + of 0.14%. Now, taking over more on retail collections, the company continued its pattern of sequential reduction in gross NPA quarter on quarter, reaching nearer to 1% by end of FY 2025. Similar positive results were also replicated across other buckets through a focused approach on granule field collection performance plan, focus on rollbacks and normalization of cases in early buckets, efficient leverage of legal machinery to reduce NPAs by higher number of possessions to surface, and other legal actions available on a parallel basis. Now, taking over to the dual success stories of right of recovery and distressed property disposal, it gained further impetus in Q4 FY 2025, recording newer highs.
Recovery from written-off pool in retail was INR 49 crores for the quarter, taking the annual recovery to INR 178 crores as compared to INR 68 crores last year same time. Disposal of repossessed properties also witnessed staggering performance, with 174 properties sold through auction in Q4, taking annual disposal to 537 as against 268 properties of last year same time, doubling the numbers. Taking the Q forward, as we step into the new financial year, the plan for retail collections is to capitalize and build on successes of the last financial year, further uplift performance through rigorous reviews of the portfolio, tighter control of flows, and faster resolutions. Thank you, and now I'd like to hand over back to Deepika.
Thank you, Jatul. I'll now request Anubhav Raj, Chief Information Officer, to talk about our initiatives and programs.
Thank you, Deepika. A very good evening to all. PNB Housing Finance continues to move forward and strengthen its technology landscape and foundation to drive business and modern tech capabilities. Our long-term technology vision is to be recognized in a large tech-led digital player in the housing finance ecosystem, partnering with various fintechs, banks, aggregators through scalable digital platforms and technology services which are integrated end-to-end. Our technology transformation agenda that was initiated in Q4 2024 is in the final stages of completion now. In the Q4 of FY 2025, we have launched the new deposit core platform for sourcing, servicing, renewing, and managing of our term deposits for customers. This system replaces our legacy core deposit system and delivers improved performance, API integration capabilities, and additional workflow controls. The new platform is under stabilization and user adoption phase.
In Q4 FY 2025, we have also successfully set up a full-scale disaster recovery setup on cloud, and the same was tested successfully. This setup will ensure IT resilience and failover capabilities and enhance our business continuity posture. The new cloud-based disaster recovery setup was successfully tested in this quarter for all systems and applications in the floor. The overall scalability and performance of the new platform that we have implemented as part of transformation in the last 12 to 18 months was successfully demonstrated with the higher transition volume that was handled in Q4, which was done in a seamless manner. Pilot launch of the new LOS for Prime and Emerging Business will now be announced and rolled out across branches during Q1 and Q2 of FY 2026.
Lastly, we remain focused on the threat of cybersecurity and have set up a 24/7 information security monitoring capabilities center and continue to build resilience in our technology platforms in line with new and emerging cybersecurity tech landscape. Information access for all users is also controlled using relevant tools, which work purely on a zero-trust architecture model. We have recently further augmented our information security capabilities by introducing additional AI-based monitoring capabilities for our email landscape as well as for our internal network traffic monitoring. Thank you very much. Handing it over back to Deepika.
Thank you, Anubhav. Neera, we can now open the floor for the Q&A .
Thank you very much, ma'am. Ladies and gentlemen, we will now begin with the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and one to ask a question. The first question is from Lana Pranish from ICICI. Please go ahead.
Question one on this affordable yield.
Pranish, sorry to interrupt.
Your audience is not here. Can I request a repeat of the question from the beginning, please?
Yeah. Is it better now?
Yes.
Okay. Yeah. Hi, sir. Congrats, that's a great set of numbers.
Sir.
Just two things. One on this affordable yield side. We have seen a pretty sharp fall on sequential basis to 40 basis points. Is this due to some seasonality or sort of how one should rate this drop in yield on a sequential basis?
Look, we have to increase the increase and we will increase it. In Q4, we had focused more on volume and also with this PMMY ISS coming into picture. Because of these two reasons, it is slightly lower. I would say in a sense, this is seasonal and from Q1, it will pick up further. Our idea is to take it to about 1.65 in FY 2026.
Okay. Okay. I mean, so is it fair to assume that, let's say, anything above INR 1,000-odd crore yields will be very competitive to achieve that volume? I mean, just wanted to get a sense how one should rate these data points in terms of INR 1,200 crore of business and a 40 basis points of yield growth.
If you look at any Q4 of the year, it will be slightly seasonal because of too much of focus on everyone trying to build up volume. In that sense, it is seasonal. Otherwise, we are very clearly focused on increasing yield. Our plan is to take yield to about 1.65 in affordable yield.
Perfect. Perfect. Last question from my side on the disbursement momentum, right? Just wanted to have the share. I mean, what would be the share from BTE of Q4 disbursements and how much it would be from, let's say, core volume increase?
Sorry, core? Come again? Core?
BTE and non-BTE.
For us, I think on okay, we are into three different businesses, so let me try to address this business side. If you look at Prime, I think the BTE and BTE house is almost similar. On emerging yields, the BTE is slightly more, about 2%-3% more than the BTE house. In affordable, I think largely it is BTE and BTE house is negligible.
Okay. Okay. Any numbers you want to put in?
Overall, out of 17%, what we talk about closure, BTE would be about 5.5%-6%.
5.5%-6% BTE on that basis?
BTE out.
BTE out. Okay. Okay. And BTE in?
BTE would be about 8%.
Overall basis, right?
Yeah, overall.
Okay. Okay. Okay. That's it from my side. Thank you.
Thank you. Next question is from the line of Viral. Please go ahead. The lines for the participant dropped. We move on to the next question. Next question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead.
Yeah, greeting everyone. Thank you for taking my question. First things first, just trying to understand, Girish said that BTE in was 8% at the overall level. If you could also share the number in the affordable book, what proportion of the disbursements in Q4 and full year 2025 came from BTE in the affordable book?
On book, I think it is 8% is BTE in and BTE out is 6%. We get net close to about 2%. Talking about business specifically, affordable BTE in is about 12%.
BTE is 12%. This was what? Q4 disbursements?
Yeah.
Okay. For full year FY 2025?
No, I was talking about the, see, if we talk about overall affordable, the BTE in is about 21%-22%. And in affordable, what BTE out is hardly about 1%-2%. If you take Prime, it's about 20%. And emerging also will be on similar lines. The only thing is in Prime, the BTE in is equal to BTE out. We do not gain anything on BTE. On emerging, we gain about 3%. On affordable, largely it is BTE in, BTE out is very good. Overall, on the book, what we lose is about close to 6% on BTE out. BTE in is 8%.
Got it. This is clear. The second thing I wanted to understand is how should we look at margins in FY 2026? The reason I ask is, I mean, when we look at large HFCs like you, in a declining rate environment, they speak about transitory NIM compression. In our case, because we are also matching it up with the product mix change in favor of emerging and affordable, how are we kind of looking at NIMs evolve over the next couple of quarters as well as this full year FY 2026?
NIMs should be stable. When I say stable, if I have to give you a range, it will be between 3.6-3.65. The reason for that is very clear, even in spite of cutting policy rate because of mix change and also because of corporate business. Cost would slightly go down because we are expecting maybe by the end of this year, maybe a rating upgrade. Because of these reasons, our cost would go down. Because of mix change, the yields would go up. Because of corporate restart, it will impact on the yield and margin, and therefore margin will be stable.
Got it. Lastly, I mean, if I recall correctly, Dilip, in my opening remarks you guided for a retail loan growth of 18% year over year and ROA of 2.5%-2.6% in FY 2026. Is that right?
Correct.
Got it. I mean, just trying to understand this better, maybe three or four quarters back, you had suggested that these provision right backs will continue. This year, for almost the whole of this year, we saw those provision right backs continue. Earlier in the call, during your opening remarks, you spoke about the INR 1,000 crore corporate write-off pool, INR 400 crores of retail write-off pool. Now, I mean, are we looking for another maybe three or four quarters of these right backs, provision right backs continue?
Yes, yes. Whole of FY 2026, we'll see write backs. And credit cost will be negligible.
Got it. Got it. This is useful. Thank you so much. Congratulations again on a very, very strong quarter. Wish you the very best.
Thank you. Next question is from Nishan Shah from MLP. Please go ahead.
Hi, sir. Congrats for the good set of numbers. Just elaborating on the previous question on the headwinds from the repo rate cut. Fair play, we have some levers from product mix change. Do you see some headwinds to just growth itself? Because while, yes, there will be margin compression or yield compression on incremental bulk, does that kind of also result in lower growth? You are seeing some of your large HFCs also start to cut rates in line with the repo rate cuts of the large banks. Should we think about growth probably in the Prime segments or in the corporate segments tapering down a bit and probably affordable trying to pick up the slack? How should we think about that?
I think two things. If you look at a strategy, a strategy has been to grow the Prime book slower, emerging faster, and much faster affordable book. With rates going down, demand will further go up, which means volumes will increase. For us, cutting policy rate would not impact us for two reasons. One, our focus is on margins. When the rate goes down, we would fine-tune the yield in such a way that the margin is protected. Adding to this, the product mix change and also corporate. This would enable us to maintain margins. This should further propel demand, and this would improve. Our focus is very clear. Our focus is on all the three, but Prime will grow at a slower pace, affordable, and emerging at a faster pace.
Okay. Fair enough. What should we think of the blended company growth to kind of come in at for this year?
We have guided retail growth of about 18%, retail book growth 18%, and corporate we plan to do about INR 1,500-INR 2,000 crore.
Got it. That's 18% in corporate, the slowdown in the Prime book as well as the acceleration in the affordable book?
In fact, FY 2025, there were lots of challenges, which I've spoken in my previous learning course. In spite of all the challenges, we had guided for 17% retail growth. We ended up with 18.2% retail growth. FY 2026 is going to be far, far better than FY 2025 for the industry.
Just to double-click on that point, FY 2026, we still had broadly rate discipline being maintained by a lot of the large banks. Now it's like when there's, say, a 100 basis points rate cut cycle, it's compulsory, right? Everything will have to compulsorily kind of flow through. Does that kind of create—so I'm just trying to understand, please, how is the environment in FY 2026 easier than in FY 2025 when FY 2026 is the one which is going to see the brunt of the rate cuts?
See, in FY 2026, definitely there'll be cutting policy rates. It could be 50, it could be 75, it could be 100 basis points. It could be anywhere between 50-100 basis points, right? This would definitely have an impact because of the lag effect, right? We have baked this into our business plan, and based on that, we are saying that we'll be able to protect the margin. On one side, this would impact the margin because of the lag effect. Because everyone, including PNB Housing, we have our own PLR that is broadly linked to the general interest rate scenario in the market. Whenever policy rate goes down, sooner or later, when our cost goes down, we pass on that benefit to our customers, right? However, there'll be a bit of lag.
To offset that, we have a plan in place in terms of mix change and corporate.
Okay. Fair enough. I will take more questions offline. This is very useful. Thank you.
Thank you.
Thank you. Next question is from the line of Viral Shah from IIFL Capital Please go ahead.
Yeah, hi. Thank you, sir. Sir, two to three questions. One is you mentioned on the possibility of a rating upgrade towards the end of the year. Can you tell us what gives you that confidence? Say have you interacted with the credit rating agencies? I'm asking this in the context that, of course, there is also the October 4th circular of RBI. If it comes through, then maybe potentially PNB may have to reduce the stake to, say, 20% odd levels. Of course, there probably could be a glide path. Again, not sure whether even that circular is coming or not. Given that uncertainty, what gives us that confidence and more so the rating agencies? That's one.
See, we got the last upgrade in quarter four of last year and quarter one of FY 2025. Generally, there is a cooling period. If you see the company's performance in the last five quarters, this quarter included, I think all the performance metrics have improved, right? We are sure that this performance will continue for the next few quarters. Basis this, we feel that there'll be a rating upgrade. Commenting on Paracor, I think it's too early because even the circular is not rolled out yet. I think that is too premature to discuss on that. Looking at a short to medium-term view, I think very clearly we have a handle on our yield and margins. We expect that end of this financial year, we should get an upgrade on the rating.
Okay, sir. Second question is with regards to, I would say, the management kind of, say, continuity beyond, say, when the PE presence kind of goes away, more so from the perspective, again, from a longer-term perspective, how does the governance and all those things kind of play out in that scenario?
See, PNB Housing Finance is a professionally managed organization. Management is quite strong. We have a very strong bench. Today, if you look at PNB as a promoter, they hold about 28%. The next highest is by a private equity player, which is about a little over 10%. I don't think so anything will change at all.
No, sir. But once, say, if the PE goes away, then basically, what's the view of, say, the parent? Because how do they then want to run it? Just if you can comment.
No, we have no view on that. I think as of now, we are focused on operational things of the company. In the last few quarters, the stake has been changing, and we have seen that, we witnessed that. Nothing really has changed in the performance of the company, so it will continue.
Got it, sir. Last is on the PLR rates. You have not taken any PLR rate cut as yet, right, for the total 50 basis points cut that has already come?
Not yet, yes. Yeah.
Do you have any plans? If at all, say, over what period you may want to consider that? I know it's an ALCO decision, but just some thoughts, if at all.
We keep reviewing. I think whenever it is the right time, then we will take a call.
Okay, sir. Fair enough. Thank you so much and all the best.
Thank you.
Thank you. Next question is from the line of Aabhas Verma from East Green Advisors. Please go ahead.
Yeah. I'm Aabhas Verma .
Yes, sir.
Yeah. Good evening, sir. Thank you for the opportunity. I have two quick questions. My first question is, going forward, what steady-state mix between salaried and self-employed customers will you see on the loan portfolio? Any broad guidance would be helpful. That is my first question.
See, at a disbursement level, again, we have three different businesses. If you have to talk about Prime, it will be 65-35. Emerging would be 60-40. And affordable, 50-50. This is at the origination stage, disbursement stage. At a portfolio, it will take a lot of time because today, the mix is about 70-30. It will take time for the mix to change at a portfolio level.
Okay. Okay. Thank you so much.
My second question is for the corporate loan book that we build from here on, what will be the average ticket size and the yield on that? If you could help on that.
Average ticket size should be in the range of INR 175-INR 200 crore. We started off the last financial year with a small sanction. We will continue. This year, we plan to disburse about INR 1,500-INR 2,000 crore.
Okay. And about the yield, what sort of yield are you expecting on the?
Yield should be about 12%.
Sorry?
Yield should be about 12%.
12%?
Yeah.
Okay. Thank you so much. That is it from my side.
Thank you. Next question is from the line of Siraj Khan from Ascend Capital Partners. Please go ahead.
Hello. I'm Audible.
Yes, you are.
Go ahead.
A couple of clarifications before I ask my question. For affordable book, in the opening remarks, it was said INR 9,500 crores is the target for FY 2026. Is that correct?
That's right.
Okay. That would imply we would want to, for FY 2025, we did approximately INR 3,400 crores of disbursements. That would mean we have to do somewhere in the region of more than INR 5,000 crores considering the BP and etc. Would that be a fair assumption?
No, in the affordable BP out, it's hardly anything, as I mentioned. As of March 2025, the book is about INR 5,070 crores. We plan to take it to INR 9,500 crores. Disbursement should be about close to INR 5,000 crores. You're right.
INR 5,000 crores. Okay. A data-keeping question, and then I'll come to the main question. In the past quarter, we were showing also in the slide the sanctions that we did in the quarter. What was the Q4 sanction? Just to identify the sanction to disbursement ratio for the quarter.
Generally, the ratio between disbursement to sanction is about 66%-67%. We have disbursed a little over INR 1,200 crore in quarter four.
The sanction rate is somewhere in the region of 66% for Q4?
Yeah, about 16%-70%.
66%. Okay. Great. My question comes with respect to the branch expansion. In the last quarter, we added a significant amount of branches to reach 200 branches for the year. What is the number that we plot for FY 2025? How will it be distributed? Will it be again like this year, rear-ended maybe towards H2, or will it be spread out? That is first.
We are at now 356 branches as of March 2025. The plan is to take to 500 by March 2027. Affordable, which is now 201, will take us to about 300 branches. The rest would be largely in emerging. All the branch expansion will happen in affordable and emerging. Close to 150 branches will open in the next two years, that is FY 2026 and 2027. That would largely be in affordable and emerging.
Would that be, say, for affordable specifically, would that be 50-50 in each year, or will it be more in the next year?
It will be almost 80%-85% in affordable and the balance 15% in emerging.
Understood. Understood. Sir, with respect to the pricing, I think many of the previous participants have told this. My question is slightly different from the yield. With the yield, average yield for the whole book in specifically the affordable was approximately 12%, 11 point something percent on an average basis. As and when the yields do come down with the rate cuts, how do you think that it will sustain? Will it go above 12%, or will it be somewhere in the region of 11 .5 , 11 to 11 and a half, or maybe?
It will go over 12% because if you remember our earlier yield was the target was 13%. With the policy cut, we have now revised that to about 12.65%. Our yield will go up to 12.65%. We have taken that yield over.
Okay. Based on that, the overall book yield would then, I think, go somewhere north of 10.2-10.5? The incremental yield I'm talking about.
Yeah. Because emerging, the yield what we're targeting is 10.25. Let me talk about FY 2026 because we really do not know to what extent there'll be a swing in policy rate, right? Therefore, let's talk about FY 2026. FY 2026, the target for affordable is to take the yield to 12.65. Emerging is 10.25, and prime will be about 9.5-9.6. If you take disbursement blended yield, it should be in excess of about 10.2-10.25.
Understood. Understood. Thank you. I'll get you on back in a little for more questions.
Sure.
Thank you. Next question is from the line of Abhishek Jain from ALCO Advisors. Please go ahead.
Thanks for the opportunity and congrats for your strong set of numbers. Sir, my first question on the change in the business mix in this quarter. In this year, we have done around 26% from emerging and affordable housing. How do you see the change in the business mix in FY 2026 and 2027? How much improvement is possible in the ROA and ROE funds?
On a long-term basis, we have guided that this mix should touch 40% by FY 2027. Right now, we are at 26%. Next year should be around 32%-34%, and then it will reach 40%.
At that point, what would be the ROE? In this quarter, we have seen a very good improvement on the ROE. What is your medium-term target for ROE?
See, right now, ROE or ROA has upside on account of recoveries from written-off pool, which is to the extent of around 40 basis points. Excluding that, we are at maybe 2.2-2.25. By FY 2027, on a steady state, we want to reach to around 2.5-2.6 without the support of recovery.
Okay. My last question on the outlook for the affordable housing industry. What are the key levers of the growth in FY 2026, and how do you see competition over there?
See, for affordable, especially now, there is a lot of focus from government as well. PMAY 2.0 inter-subsidy scheme, there's a lot of demand for that inter-subsidy scheme. Even otherwise, from EWS and LIC and part of MIG, there's a lot of demand. Affordable industry should do well. The growth should be much higher compared to emerging and prime. Since our focus is more on affordable, that's the reason we are planning to take a book from INR 5,000 crores to about INR 9,500 crores, which is almost about 80%-90% growth in the book.
In the next two years?
No, no. By March 2026, affordable book to INR 9,500 crores. By March 2027, affordable book will be INR 15,000 crores. March 2027, I reiterate, our retail loan book is going to be INR 100,000 crores. Out of INR 100,000 crores, affordable will be INR 15,000 crores. Emerging will be INR 25,000 crores, and the balance INR 60,000 crores will be prime book.
Okay, sir. Thanks, sir. That's all from my side.
Thank you.
Thank you. That includes all the participants. Kindly, respect to two questions per participant. I am joining the queue again for a follow-up question. Next question is from the line of Aditi Navel from RSPN Ventures. Please go ahead.
Yeah, hi sir. Thanks for taking my question. I just have one question in the affordable segment. The bounce rates sequentially over the last few quarters have been inching up. What is the bounce rate that we are comfortable with in this particular segment?
I think if you look at the industry, bounce rate is in the range of 15%-16%. We are at about 11%, 10.5%-11%. I think this portfolio, we are very comfortable as long as it is under 15%. Today, it is 11%. We will take a lot of pride because we also have built a book largely from low risk and medium risk. As we increase our business change segment, we will be in line with the market. Today, we are much below market in terms of bounce rate. I think give or take another 18 months, I think we will get close to that. We will be very comfortable as long as it is below 15%.
Understood. Thank you so much.
Thank you. Next question is from Manav Shah from Arete Holdings. Please go ahead.
Yeah, hi. Good evening, sir. My question is on the credit cost. This year, we had around INR 160 crore of negative credit cost because of the recoveries. Next year also, you're guiding that recovery could be higher than the credit cost. My question is, this year, we had almost 35 basis points flow through to the ROA because of savings in the credit cost. If I look at FY 2027, we might end up at our usual 20-25 basis points kind of credit cost. That means it would be a negative delta of almost 50-60 basis points in a couple of years. My question is, how do we get from that? How will we recover that 50-60 basis points of negative impact that our ROA will have from the credit cost?
Currently, we are at 2.75% ROA, which could go down to maybe 2.25%-2.3% because of negative credit cost turning to credit cost expense.
If you look at our recovery pool, I think whole of FY 2026, the credit cost is going to be negative because of the recovery, right? In FY 2027, we will not get that much support because we will not have really pool available. In the meanwhile, we would have built our corporate book. We would have increased our share of affordable and emerging. Also, parallelly, we are trying to increase yield in all the three segments, I think barring quarter four, right? Today, the NIM is about 3.6-3.7. By FY 2027, NIM will go to over 4.1. With that standalone, the credit cost is going to be about 25 basis points, and ROA will be 2.5, 2.6.
Okay, okay. That is what I wanted to hear. You are working towards getting that NIM to above 4.1% kind of a number?
Yes.
All right. Thank you so much. Thank you.
Thank you. Next question is from the line of Siraj Khan from Ascend Capital Partners. Please go ahead.
Thank you very much for the follow-up. With respect to the pricing strategy, and again, this is kind of related to both the emerging and affordable segments. Again, the affordable segments are drop in the yields for Q4 because of seasonality and competition across the board in other HFCs and even your affordable HFCs. We have seen the incremental yields dropping. Although you are saying that the yields will be above 12%, my question was, would it be in our benefits to not go too much ahead and stay like a cost leader? Are we doing this by design, or is it happening by default that kind of we are getting the benefits of being like a low-cost leader in the space with respect to the yields?
No, I think we are very, very clear in our strategy. See, if you look at affordable business, there are three segments: low risk, medium risk, and high risk. The strategy for us is going to be focus on 20% from high risk, 60% from medium risk, 20% from low risk. This would give us a yield of about 12.65%. We would neither be at the bottom in terms of pricing nor at the top. We will be somewhere in between, and our yield is going to be 12.65%. That is our strategy.
Understood. Understood. I was just wanting to understand whether this was by design or something. Any specific buckets of ticket size? Say, for example, I can see from the presentation that the less than INR 3.5 million ticket size is the predominant one. Even in the specific subsegments with respect to the 10-15 or 15-25, any specific band of ticket size that you see is showing good growth in the specific subsegments of this ticket size? Secondly, any specific geography that you see that we are seeing any early signs of, you can say, with respect to asset quality troubles or any specific region, even with the ticket size and the geography?
In terms of average ticket size, today we are at about INR 1.5 million-INR 1.6 million. I think once we increase volumes, it will be around INR 1.4 million. In terms of geography, I think south is doing well for us, north is doing well, west is doing well. I think our strategy would continue. We do not have any pocket or a geography which is a clear no-go for us. We are pretty much comfortable because we have our experience. We have industry experience. As of now, all the geographies are doing pretty well in terms of portfolio quality, and we will remain focused on all these geographies. In future, if there is a need, there might be a small peak here, but I think by and large, our strategy is going to be the same.
Understood. Because looking at some of the results of some of the HSEPF, they were speaking about a few issues in the southern region and a bit of issues in the Chandigarh region. I was like, because we have a good presence in these areas, are we seeing any risks or are we seeing anything on the ground in these specific regions in our book? Or maybe.
Not at all. Not at all. Northeast is doing well, west is doing well, north is doing well. We have not seen any threat.
Thank you very much.
Thank you. Next question is from the line of Harshit Toshniwal from Premji Invest. Please go ahead.
Hi sir. Congratulations on the question. The question is the cost of funds this quarter. I think when we look at the sequential decline, is it that a lot of the cost benefits have passed on, or what has led to this decline, if you can help us know? Given our mix, if you can help us that within the bank loans, how much would be MCLR linked, and how much would be the REPO EBLR linked? If you can also help that, how should we expect the cost of funds to pan out next year?
There is no sequential decline, but year on year, we have seen a decline of 15 basis points, and this has largely happened post the rating upgrade for us in Q4 and Q1 as we financially look. More or less, we have now received the benefit of the rating upgrade, which is in the range of 15 basis points as of now. Out of the total loan book, I mean, the term loans that we have, around 40% of it is linked to REPO, and the rest is linked to MCLR, which are also short-term in nature, roughly mostly one month and three months. Translation, again, depends because we are also watching while REPO is obviously being repriced immediately in some cases, and in some cases, it takes two to three months. On the MCLR side, there is still no action as such from banks.
It depends on when we see that transmission to start happening. What we are expecting is somewhere around 10-15 basis points reduction over a period of next two to three quarters in our cost of borrowing services.
Sir, just on one thing. I think when we look at this 40%, maybe I think 50 basis points reduction, if I take that, I think 20-25 basis points of reduction in my overall cost of funds can be from this. On the public deposits also, there should be—I am just wondering that when you are saying a 15 basis points reduction on a full-year basis, are we being conservative here?
No, see, 40% of 40%. Overall, term loans are 40% of our total borrowing. Within that term loan, 40% is linked to REPO. On an overall basis, it is 16% roughly, not 40%. On that also, transmission comes with a lag. Maybe it takes two to three months for certain banks to reprice. It will come, but yes, the impact is 15-16 basis points, which is direct. The remaining is linked to MCLR, which will be over a period of time.
Understood. Got it, sir. In that context, when we look at our margins this year to next year, given the fact that in the time also, we have not yet taken PLR cut anything right now, there will be an increased competition. Obviously, as you said, corporate loan, etc., and mixtures will help. Still, maintaining the margins, do you think that it would be the best-case scenario? Because for a 15 basis points decline only, and still for our prime and emerging, the rate cut and the.