Ladies and gentlemen, good morning and welcome to the PNB Housing Finance Limited Q3 and 9M FY 2026 earnings conference call. As a reminder, all participant lines will remain 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 the conference call, please signal the operator by pressing Star then zero on your touch-tone telephone. Please note that this conference is being recorded. I will now hand the conference over to Mr. Chaitanya Yadav, National Head of Corporate Planning and Investor Relations for opening remarks. Thank you. And over to you.
Thank you. Rhian. Good morning and welcome everyone. We are here to discuss PNB Housing Finance Q3 and 9-month FY 2026 results. You must have seen our business and financial numbers in the presentation and the press release shared with the Indian stock exchanges and are also available on our website. With me we have our management team led by Mr. Ajai Kumar Shukla, Managing Director and CEO of the company. We will begin this call with the performance update by the management team followed by an interactive Q & A session.
Please note that this call may contain forward-looking statements which exemplify our judgment and future expectations concerning the development of our business. These forward-looking statements involve risks and uncertainties that may cause actual developments and results to differ 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 44 of the investor presentation. With that I will now hand over the call to our MD and CEO Mr. Ajai Kumar Shukla. Over to you, sir.
Good morning, everyone. I am pleased to present our quarter three and nine-month financial FY 2026 performance. Let me give you some industry update and guidance. This quarter the RBI announced an additional 25 basis point reduction in the repo rate bringing it down to 5.25% with immediate effect. With this step, the RBI has delivered a cumulative 125 basis points cut in 2025 marking one of the most meaningful easing cycles in recent years. This latest policy action is a clear positive for the real estate sector as we close out the year. It builds on the earlier rate reductions and further strengthens home buying affordability particularly in the affordable and mid segments. The customers are more sensitive to interest rate movements.
The decline in EMIs is expected to draw first-time buyers back into the market supporting sustained demand momentum. With housing prices across the top seven cities rising by around 10%-15% over 2025, the rate cut acts as an important catalyst to preserve affordability. It offsets part of the price appreciation witnessed during the year and ensures that home ownership remains accessible to a wide base of buyers. Overall, the combination of softer borrowing cost, resilient buyer sentiment and stable economic fundamentals positions the housing market on a strong footing as we move into 2026. Let me talk about the performance of the PNB Housing Finance Limited. The retail loan book grew by 16% YoY to INR 81,931 crore as on 31st December 2025. The total loan book of the company stood at INR 82,232 crore as on 31st December 2025.
The affordable and emerging market segment now accounts for almost 39% of the retail loan book with continued focus on collections. Our credit cost for quarter three, 2026 remains at - 19 basis points. The gross NPA stood at 1.04% as on 31st December 2025. The affordable portfolio continues to season. We have witnessed some upstream delinquencies and an expected trend at this stage of the business cycle. Importantly, the LGD level remains well within industry benchmark for the affordable housing segment. We remain deeply focused on maintaining portfolio discipline and continue to work towards achieving our long-stated target of 1%-1.1% NPA. NIM remains stable at 3.63% during the quarter. We achieved ROA of 2.57% for nine months financial year 2026 on an annualized basis. Let me now talk about it in more detail on the performance achieved during the quarter as far as disbursement is concerned.
During the quarter, overall retail segment disbursement grew by 16% YoY, reaching INR 6,217 crore. Within this, the affordable segment saw a 15% YoY drop and 4.5% quarter on quarter decline in disbursement driven by our strategic decision to recalibrate affordable business in few challenging geographies due to government ordinance. However, the emerging market segment continued to outperform, delivering a strong 25% YoY growth in disbursement as these impacted pockets stabilize. As these impacted pockets stabilize, we expect affordable disbursement to revert back to growth trajectory of Q4 financial year 2026. The Prime segment delivered 20% YoY growth despite the broader pressure on yields following the rate cuts. Looking ahead, our strategic priorities remain unchanged. We will continue to reinforce our focus on scaling the affordable and emerging market segment given their strong underlying demand and long-term growth potential.
Also, we are going to start construction finance business in a calibrated way over 20-24 months at least. Apart from that, we are also going to start emerging developer finance with average ticket size up to 25 crore-30 crore range in selected cities to improve our yield and NIM. As far as loan book is concerned, the retail loan book grew by 16% YoY as on 31 December 2025. The loan book for emerging markets and affordable segment grew 31% YoY reinforcing our commitment and focus on these segments. As stated earlier, the company continues to focus on growth in emerging and affordable segments which contribute 39% of retail book. The corporate book now stands at INR 272 crore as on 31st December 2025. The total loan book stood at INR 82,203 crore and assets under management is at INR 86,048 crore. The total live accounts serviced by the company crossed 3.6 lakhs.
As far as geographical presence is concerned, the total pan-India branch network of the company is 355 with the affordable and emerging market segment accounting for 79% of total branch network. Our expanding footprint in Tier 2 and Tier 3 cities positions us well to capture increasing demand in these markets. Aligned with our long-term growth ambitions. We expect to add 40 to 50 new branches annually to deepen our presence in Tier 2 and Tier 3 cities. If I talk about asset quality, the gross NPA improved to 1.04% as on 31st December 2025 as compared to 1.19% on 31st December 2024 and 1.04% as on 30th September 2025. During the quarter we recovered 49 crore from retail and corporate segment. The company has a remaining write-off pool of around 650 crore corporate and around 350 crore in retail.
As far as borrowing cost is concerned, our cost of borrowing improved by 19 basis points sequentially to 7.50% in Q3 2026 driven by ongoing negotiations with banks and the impact of repo rate cuts. As far as margin is concerned, NIM remains in line with our guidance level at 3.63% for the quarter versus 3.67% in quarter two financial year 2026. Profitability return on asset stood at 2.57% annualized in nine months financial year 2026 as compared to 2.48% in nine-month financial year 2025. Our ROE is at 12.31% annualized at nine months financial year 2026. Let me reiterate that we will continue the guidance of retail loan growth in the range of 17%-18% with higher focus on emerging and affordable segment. With this I would like to hand over the call back to Chaitanya. Thank you so much.
Yeah, thank you sir. I will now request Vinay, our CFO, to talk about the financial numbers.
Thank you, Chaitanya, and a very good morning to everyone. I am pleased to walk you through our financial results for the quarter ended 31st December 2025. As you have already heard, our total loan book as of 31st December stood at INR 82,200 crore, growing 14% year-on-year. Our retail loan book grew 16%, reaching to INR 81,930 crore. Affordable and emerging market segments grew 31% year-on-year put together and now constitute around 39% of our overall retail loan book. Let me start with an overview of our financial performance this quarter. Our yield declined to 9.72 versus 9.95 in Q2FY 2026. This is driven by a reduction in corporate book. As we mentioned at the end of previous quarter, there was one large corporate account which got foreclosed.
So that led to a reduction in our mix of corporate book and impacted 10 basis points on my yield. We covered it largely through reduction in cost of borrowing but there is still some marginal impact which was left out on the NIM. Also the impact was there due to lower disbursement yields and higher runoffs. At the same time our cost of borrowings improved by 19 basis points sequentially to 7.5% in Q3 driven by ongoing negotiation with banks and the impact of repo rate cuts. The incremental cost of borrowing improved to 7.2% in Q3 as compared to 7.42% in the previous quarter. Our net interest income during the quarter was INR 772 crores which is a growth of around 11% year-on-year. NIM as I mentioned is at 3.63% compared to 3.67% in Q2 FY 2026.
Our operating expenses grew 16.7% and 10.5% quarter on quarter to 240 crores versus 217 crores in Q2. This increase includes one-time expense of 6 crore on account of implementation of new labor codes. Plus there is a timing difference in ESOP. There was a release last quarter on account of exit of previous MD and now the cost is normalized so this cost looks a bit of an aberration. Overall, our OpEx to ATA for Q3 is 1.09%. We continue to maintain our OpEx to ATA guidance of being range bound between 1 to 1.1%. Our pre provision operating profit has grown 8.4% and ex one-offs it has grown 10% year-on-year. Credit cost continues to be benign. It is 19 basis points negative. As MD sir also clarified. We recovered around 49 crore from write-off pool during the quarter. Stood at 520 up 7.7% year-on-year. ROA improved by 9 basis points on a year-on-year basis at 2.57% in 9 months. FY 2026 ROE is at 12.3%. Our overall CRAR stands at 29.61% with Tier 1 capital at 29.06%. Our debt-to-equity is now 3.63. Our book value stands at INR 719 . With this, I now hand it over back to Chaitanya for taking the call forward.
Thank you. Vinay. Rhian. We can now open the call for the Q & A please.
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Ladies and gentlemen, if you wish to ask a question, please press star and one. You can take the first question. We take the first question from the line of A bhijit Tibrewal from Motilal Oswal Financial Services Limited. Please go ahead.
Yeah. Good morning, sir and thank you for taking my question. First of all, congratulations to Ajai Shukla on assuming the role of MD and CEO at PNB Housing. Sir, first question on the affordable book. You have called out in the presentation and in your opening remarks as well that you have restricted ticket sizes in certain geographies. So just trying to understand which geographies are this right? And what are the underlying reasons for restricting ticket sizes. If you could just help us understand that.
Thank you, Abhijit. As far as affordable book is concerned, we saw some challenges in especially in some part of southern market. It was not all across India. So we recalibrated our strategy in those markets. This was primarily because of some government ordinance, and that is already. That phase is already out. I think we will rework, and we will come back again on the new methods of defining our affordable strategy for the southern market. I mean, this ordinance that you're talking about is. Is it the MFI ordinance? That came last year, almost a year back. Yeah, it was, it was that. But it impacted the affordable business also. Because when you know any information comes to the market, it impact the other segments also. Got it. And these are not geographies or customers which have got impacted by tariffs or anything. Right.
So there was some partial impact on geography also. So for example you know Tamil Nadu, we saw some challenge. Challenge because of, you know that we decided to reevaluate our strategy in Tamil Nadu market. And since the market is you know again stabilized and government ordinance is also now, you know stabilized now I think we will be focusing again on those marke ts.
Got it. So the second question I had was, I mean late last night you declared a corporate account as a fraud account despite you having called out that you've written off this account back in FY 2023. So just trying to understand, I mean this come up during any of your RBI or NHB inspections.
A related question here is, I mean while you've been around here for a little over a month now, have you had a chance to take stock of the loan book? Basically, how is the asset quality and would you need to take any higher provisioning on the book in the coming quarters?
As far as this, you know, the fraud which we reported, as you rightly said, we already written off this account in 2022-2023. There is no material adverse effect on financial of the company. We are currently undertaking appropriate legal measures in this case. The amount sanctioned was INR 2.75 crore. We reported INR 2.75 crore. The current outstanding is around INR 2.37 crore. Since it was already provisioned so no financial impact, you know. I don't think, you know, on the asset quality front, Abhijit, we don't foresee any increase in any of the segments. We are adequately provisioned across all the stages and that may continue.
I mean then, I mean declaring this account as a fraud. Now was there some technical reason behind it?
Yeah, it was basically due to some recent developments which have happened in that particular account. And hence as per the process, after following the due process, you know of giving principles of natural justice we have then decided to declare it as a fraud.
Okay. And so then the last question I had was, I mean have you made any PLR changes in the last quarter or any changes effective January this year?
No, not yet. No.
So this is all from my side.
Maybe I'll come back in the question. Thank you. And I wish you and your team the very best. Thank you. We take the next question from the line of Viral Shah from IIFL Capital. Please go ahead.
Hi. Thanks for the opportunity and congratulations Ajai, on the new role. It has been now one month since you joined P NBHF . I just wanted to understand see from your perspective, first of all what is it that you are finding it say different versus your expectations when you are joining. And secondly, more importantly, if there is any change or an update to the strategy of say growing the share of affordable emerging. Any see anything within the underwriting or the collection practices where you think you can make it more robust, any of those things. What will be your views on this piece? Thank you.
Viral. You know, I think you know, last 30 days what I observed that we are on the almost similar kind of path which you know, any other housing finance company works. And as already said and I reassured that we'll continue the guidance which has already been given in the market. We'll focus on our emerging and affordable business. So there will not be much change in the strength strategy of the organization will continue and will further improve and explore the opportunities where we can get that better yield. And NIM, I don't see any challenges as when I also confirmed that on the quality of portfolio because even in affordable also we are much better than any affordable company, you know, in this industry. So I don't see there is any change as far as quality and all those things and just as part of this only.
So I think earlier guidance with regards to say the share of affordable and emerging mix stated number was 40% and then I think couple of quarters back there was some reclassification emerging and we had kind of highlighted that we can the percentage now can look higher. Do you want to give any percentage target over a medium term?
Yeah. So we had, we currently we are 39% and we are expecting this to grow by 45%-50% in the range of 45%-50% as a share.
Right. The emerging and affordable.
Emerging and affordable. Yeah, put together.
Got it. And just on the question that I asked, sorry if I am repeating but with regards to the underwriting practices or collection practices, you don't anticipate any change because of which there can be any disruption to our growth or anything.
No, I don't see that there will be any, you know, deception because I think things are going very well as far as underwriting and collection both.
Got it, and my second question, Vinay, was to you: how soon can we get to see or converge our overall cost of funds to, now, the incremental cost of funds of 7.2%, and what would be our, say, medium-term NIM trajectory guidance? If you could help us with that.
So this NIM, as of now, due to pressure on account of runoff and the new disbursements, yields already running lower than our portfolio yields. So that pressure is going to continue. We are offsetting it with the reduction in cost of borrowing.
So we continue to maintain the guidance of NIM between 3.6-3.7. Post Q4 we will recalibrate looking at, you know, once the stability happens on repo, how it is going to play out in the next year and once we launch CF, once we launch this developer finance, I think these will obviously add on to our overall yield profile. So next year probably we might see, you know, some expansion once these new seg ments start delivering.
Got it. I think this was my question from my end. Thank you so much and all the very best.
Thank you.
Thank you. We take the next question from the line of Kunal Shah from Citigroup. Please go ahead.
Continuing on the question with respect to say the under the new management just wanted to understand any key priorities that would be there or maybe it's the business as usual. Any key priorities from your end. And in terms of the ROA, we are still guiding for 3.6%-3.7% ROA. We still have the benefit of CD recoveries which is there. So maybe in terms of taking the NIMs up and what would be the aspirational ROA target over next three odd years.
So thank you Kunal. So let me, you know, slightly correct here. I think. You're talking about, you know, NIM or you're talking about ROA.
No, no. So I was saying like margins, we are guiding for 3.6%-3.7% margins. Okay. And we still have the benefit of the recoveries which would eventually go away over the medium term. So then maybe in that scenario of steady margins and maybe some normalization of credit cost, how do we see the ROAs panning out over two to three years?
I think this will be in the range of 2.5%-2.6%. ROE will remain stable at the rate of 2.5%-2.6%. If I tell you that 9-month financials FY 2026 our ROA 2.57% as of now and which will be in the range of 2.5%-2.6%, 2.65% only or will be in that range only.
Just to add on, Kunal, there are three levers as MD sir also mentioned. We are starting CF so that will definitely support us on the NIM. Secondly, we are also starting a small developer finance which is also going to be a new vertical where every ticket size will range between 25-30 and yields will be in the range of 11%-12%. So that will also be NIM accretive. And on cost of borrowing again we have few levers like you know, if the rating upgrade happens in a quarter or two that will also lead to substantial benefits on our cost of borrowing. So these factors apart from shift that we are making towards emerging and affordable, it will be somewhere around 50% let's say by end of next year. So by then we would have some benefit. And after that these things will definitely support the current NIM profile. Actually it will help in improving the NIM profile.
Yeah. In terms of this small developer and CF, we had gone through that cycle and we had run down this entire portfolio. So maybe learning from the past experiences, any differences in the business model that we would now incrementally cater to and how much would it scale up to? Maybe is there any cap in terms of the proportion we would want to or maybe can it get towards like 3%-5% of the AUM over a 3-year period or n o, we'll not be so aggressive.
Yeah. So Kunal, I think you know what we have planned is that we will be having almost 8%-10% of my total book as our exposure in construction finance and emerging developer portfolio. Any given point of time it would be in the range of 8%-10% only. That's the maximum exposure. Exposure we want to keep. That call will remain the retail business as well as far as policy is concerned. So emerging developer and the construction both will have a separate policy.
Okay. There will be difference between both the policies because where the emerging developer financing will end, the you know, construction finance will start. So we are in the process of designing emerging developer policy. The construction policy is already in place and you know that's how we have started, you know, sourcing business also. But soon you will see that in the c ell will start in Q4 or maybe first quarter of Q1.
Sure. One last question, if I can squeeze in that's with respect to affordable again. So you are maybe when you mentioned like you have recalibrated the growth in some geographies and ticket size cap in select geographies.
Overall, when we look at it, it's like still the ticket size of more than 15 lakhs is something which is coming up, which is coming down actually. So is that maybe in terms of the ticket size capping or this is something similar to what you indicated, challenges in southern market? And even in terms of the repayment rates in affordable housing, when we look at it with the disbursements which have been there of 786 crores, we are still seeing almost 600 crores of operations. So there's hardly been any rundown which has been there in that portfolio. So maybe what could be the reason for that? So the repayment prepayment run rate still appears to be quite low in the affordable housing. Yeah. And where should we aim this segment to grow, say over next 12 months in terms of the growth ratios.
Yeah, hi, this is Valli Sekar. See, regarding this, you know, disbursement which you are asking about in Q4, the ticket size will slightly go down because now there is a slighter concentration towards the PMAY as well, so the ticket size from the last year has slightly come down also, and this recalibration is particularly in the southern markets, as you all are aware that Tamil Nadu used to be our number one contributor in terms of the business, so when we faced that, you know, ordinance issue in the first quarter end, by second quarter we had recalibrated certain policies in certain branches and on the ticket sizes also, so the effect has come as a spiral effect on the quarter three.
But now in quarter three since the ordinance, you know, has been retaken back now the now we have again come back with the policies and by Q4 we will be coming back again as usual in, in those markets. And the, the guidance remains the same. We'll be growing quarter on quarter in the, in the, you know, in 25%-30% is the level of growth which we are expecting and yeah.
O kay. Yeah, that's helpful. Yeah, thank you. Thank you. And all the best. Yeah.
T hank you.
Thank you.
Thank you. We take the next question from the line of Nischint Chawathe from Kotak. Please go ahead.
Most of my questions have been answered, you know, just a small one on, you know, competition, you know, on the affordable side, you have kept, you know, the incremental rates are stable sequentially. Do you see competition in the sector and do you see these rates going down? And likewise in the Prime side, given the fact that we are probably towards the fag end of rate cuts, do you see the intensity of competition to reduce?
So, Nischint, I think the competition is all across in this industry. So I think it's a very competitive industry. In affordable also there is enough and good competition as we see in Prime business. But just that competition is there. There would not be much impact on the pricing because the range wherein we are operating is already very competitive pricing in the market. So I don't see there would be much more price drop in the market, especially in affordable segment. I think this will remain as it is. And as far as Prime is concerned, Prime there is definitely.
Yes, you know, because of recent repo rate cut, there is a challenge in the market from nationalized banks and the private sector banks. But we will segment ourselves in a very different way. So close to, you know, 45% of our portfolio is self-employed and 55% salaried. So we get better, you know, margin in self-employed. That is why we are able to maintain our margin a nd NIM.
Have you called out a difference in rates between salaried and self-employed?
So, so yes, there is a risk-based pricing. So we always use pricing. So salaried rates are always softer than, you know, self-employed.
Got it and got it. And you know, you're increasing the share of construction finance and emerging developers, sort of technically increasing the risk profile of the company to some extent. You know, in this backdrop, you know, do we really see, you know, a rating upgrade, you know, given the fact that the risk will incrementally be slightly higher?
So yes, definitely the construction finance business is always a riskier business in the market. But I think the kind of policy and underwriting standard we are going to set and we have said, I think, you know, we will sail through, you know, easily. Also there is a cap on the overall growth. We are not going to grow very aggressively here. It will remain, you know, range bound between 5%-7%, you know, in the next two to three years. So it will not grow so aggressively and large part is still retained. So that is not going to be a challenge, and you are expecting an upgrade probably in next one or two quarters. Yes, I mean we are hoping for it.
Sure, sure. Thank you very much and all the best. Thank you.
Thank you.
Thank you. We take the next question from the line of Nitesh from Investec. Please go ahead.
Thanks for the opportunity and good morning. So first question is on yield. There is a 25 basis points decline in yields in this quarter. So if I look at the share of corporate that has slightly gone up and I think share of emerging plus affordable has also been gone up, going up. So what explains the sharp drop in yield? Have we taken a price reduction on our back book? Because I see incremental yields are also broadly stable. So what is driving this sharp yield reduction and how you see yields going forward?
Yeah, see Nitesh, as I mentioned out of this 25 or 23 basis points. 10 basis points is on account of one large corporate account which got foreclosed at the end of previous quarter. So since the book mix between retail and corporate has gone down and that was a large account of around INR 340 crore or so that got foreclosed. So that has impacted my yield mix for this particular quarter specifically by 10 basis points. The rest 12 to 15 basis points is on account of, you know, disbursement yield being lower than the book yield and you know, the higher runoff pressure, you know which entire industry is going through on the Prime and Emerging segment.
And how do you see yields going forward?
Going forward we should see. So this 10 basis points obviously is one-off for this quarter. Unless we see more runoff happening on the corporate side, this should not impact again. Then the next 10-12 basis points is something which will remain and that is what we need. We are trying to offset through the reduction in cost of borrowing.
Sure. And secondly, the runoff rate has also increased. You also mentioned that. But if I look at the calculated repayment rate was around 15% till Q1 and it has now increased to almost 19% in this quarter. So this how much is balance transfer out of it and how do you see what we are doing to arrest this? So as you rightly mentioned, yes, it has gone up from 15-16 to around 19 now. And large part of this is on account of BT outs. The increase is actually on account of BT outs. And this is true because of the current rate cycle we are trying to manage.
But I think it will remain somewhere around 18%-19% till the rate stabilizes. So till quarter one. You know, Nitesh, the BT in was higher than the BT out. After the softening of rates, you know, and repo rate cut by the RBI, the trend of BT in has changed. So if I talk about, you know, this quarter earlier the story was, you know, whatever was the BT in approximately same was the BT out. But now there is a difference between BT in and BT out of almost 2%, you know, month on month. So quarter three there was a difference of almost 2% because the rates are softened. So you know, customers are looking for better prospects or maybe where they can get a better rate. So this challenge is not with us. I think this is the industry challenge which the industry is facing.
Whenever there is a sharp rate cut, you will see this trend.
Sure. And then lastly if you can also speak about the yields in the corporate. In the construction finance book. So on the emerging developer you mentioned yield of around 11%. What will be the yield in the construction finance book of ticket size of more than 30 crores.
So yield I think you know it would be in the range of around, you know you can safely say between 12 %- 12.5%. That would be the range in construction finance because in the Emerging segment you mentioned the yield of 11%. So I thought the emerging it will start from 11% because he. So this emerging developer will have a combination of cities like Delhi and all those.
So the Prime, the super Prime developer of this segment will definitely look for a better range. So it will start from 11% but it will go up to 13% and 14% also. So overall we'll maintain in the range of you know 12.5%-12.75%. So largely the corridor would be between 12%-12.25%.
Sure. Thank you sir. That's it from my side.
Thank you. Thank you.
Thank you. We take the next question from the line of Bunty Chawla from ASK Investment Managers. Please go ahead.
Thank you sir. Thank you for giving me the opportunity. Firstly on this as you said that you recorded the fraud switches in already written up. So any internal implications or any steps needs to be taken internally in the system because of this. If you can highlight on that.
No, I don't think so. Thank you for the question first of all. I don't think there is any internal implication because there's the process which have to be followed. So we followed the process and already the legal measures are going on. So I don't think there is any internal implication of this.
Okay. That was very helpful, sir. And secondly, as you mentioned that you will be able to sustain the 17% growth for retail segment for this year also. So that gives, if you see the Q4 number in terms of disbursement, slightly higher on a sequential basis like 45-50%. Is it possible after you have already said that we are now moving to normalization in terms of affordable. So this gives a large task in terms of disburseme nt in Q4.
Yeah. So, so always in the industry the Q4 disbursement is always high. So currently on YoY basis we are at 16%. So 18% should not be a challenge because that's how the you know historically you see the data talks about. So I think we'll be able to achieve those numbers.
Okay. And lastly you said we will be able to maintain the margin 3.6%-3.7% along with the stability in ROE of 2.5%-2.6%. But as we see currently we are in the end of cycle of the negative provision next year it should be normalization of credit costs and all. So what drives you to give the confidence of ROA remaining stable at this level?
So there are two aspects of this. First of all, I think we have a pool there. In at least 4 to 5 quarters, we will have a recovery from our write-off pool. So that's the first confidence. The second confidence is that, I know, once we will improve over this affordable business and emerging business from the level of 39% to 45% to 50%, that will give us better yield as well as since we are going to start our corporate construction finance and the emerging developer finance, that will also give us edge to maintain the higher business volume and the higher yield. So this will maybe if at all we don't get much, you know, relief from Q4 to Q6 quarter then I think by the time this business will build and will compensate from the scale of business and the margin.
Okay, so you are saying that the recovery will continue still for next four to five quarters. So on that basis what should be the normalized credit cost for FY27?
So FY 2027 I think it would be. We are expecting, you know if I talk about next year from 27 onboarded. Good. The range of 20-25 basis points.
Th at was very helpful. So thank you and congratulations.
Thank you.
Thank you. We take the next question from the line of Avinash Singh from Emkay Global Financial Services Ltd. Please go ahead.
Yeah, good morning. Thanks for the opportunity again a bit kind of continuing on that ROA and NIM question. So I mean currently that NIM is like 3.6-3.7 that you kind of reaffirmed. And if we were to look at NIM plus fee probably close to 4.1 odd % now.
I mean beyond the 45 quarters where you have this benefit of provision reversal, a normalized credit cost probably if it is going to be within a 20 basis point assuming that, okay, anyway you are going into per thousand probably basically this is a kind of a reversal of nearly 40 odd basis points in terms of the where credit cost is so mathematically speaking to maintain ROA and also with your kind of, you know, growing book the financial leverage will mathematically work against that, your NIM we'll see now. So when you are looking say for 2.8 or even beyond two point kind of a current level of ROA. Basically that requires a NIM plus fee to go up mathematically by nearly 50 basis points.
So, I mean, of course there are push and pull factors, but are you sort of confident because we have very limited scope in OpEx, what I understand, and of course credit cost side at like 40 basis points for reversal. So, do you see, mathematically speaking, that the 50 basis points is push and pull factors. Taking this, let's put NIM and fee to four and a half odd % because that will be kind of a required level to deliver this 2.5%-2.6% ROA. Thanks.
So, yeah, so I think you rightly said that there would be impact of almost 40 to 50 basis points to get that kind of ROA.
I think we are very pretty much confident that would be able to do it because the kind of yield and the NIM you know we'll get in my construction finance and my small emerging developer funding I think this will. This will help us but scale up business will also help us because when the business scales up you know the your cost always goes down because it gives you know benefit of your book also. So I don't think there will be any challenge on that.
So yes thanks. Also beyond FY 2026 I mean what is kind of for the now you are going to start sort of a new segment and all so medium term growth guidance or aspiration. What's that level?
So we are working on that. We'll come back on that.
Got it, thank you, all the best sir.
Thank you.
We take the next question from the line of Himanshu Taluja from Aditya Birla Sun Life AMC Ltd. Please go ahead.
Hi, sir. Thanks for the opportunity. Just a couple of questions at my end. Can you just, given that you in your opening remarks you called out certain with respect to a few challenges in the southern market related to the MFI ordinance which triggered some calibration. Is there anything apart from this? Is there any other, basically any other challenges with respect to overheating of these geographies b ecause we are seeing various players operating in the southern markets are seeing some slowdown. Can you just call out, is there any apart from this and how do you plan to react to this situation? Second is on the affordable housing.
We are seeing some of the industry bureau data which suggests that there is volume softness in the ticket size of up to INR 25 lakhs for the industry. How do you plan to deliver growth if the industry volumes remains on a muted? If you can just help us how do you plan to deliver growth in the affordable or can we see some bit of calibration in the growth for next few quarters as well in the affordable housing? Thanks. And then I have one more question.
Yeah, Himanshu. Hi. So as far as this MFI ordinance issue was there, it was an issue that came up in the end of Q1 where the spiral effects continued in Q2. Also in our collections we found some heat coming in the delinquency. Early delinquencies were coming. So we immediately took a proactive action.
And because that being our biggest contributor of the business numbers, we immediately got into ticket sizes and we have already given in one or two of our meetings that we, you know, converted the country as Tier 1, 2, 3, 4 and we bifurcated the ticket size as per the Tier 3 and T ier 4 markets as well. So now by, you know, by end of October-November festivities the ordinance circular has again come from the government and we find the situation normalized. And by end of December we are finding even the collections strategy becoming normal. So now again we will go back into our original policies because we had completely slowed down there. Now we will go back and come back to the original policy.
And secondly, regarding up to 25 lakh cases, see, I would have slightly deviated, you know, statement on this because with PMA coming in all the players are getting into more into EWS and LIG. So it might be a very temporary slowdown. But I would not say because the PMAY everybody is getting into it because it is until five years the customer cannot leave out of us doing a BTO. It is a very good proposition which has come which is given by the government. So everybody is following that. So taking that in queue, you know, we will be in the same level of growth which we were posting in the previous quarters. Yes, we were growing very rapidly in the first two years because we were a startup mode.
But now we will come as per the industry standard to 20%-25% quarter on quarter growth ongoing. Himanshu?
Yeah, sure. Just the last question. What proportion of the PMAY? What proportion of the PMAY is in the total disbursement currently? So probably what proportion that will be in terms of the total disbursement PMAY contribution.
The PMAY 2.0 is not. See, it is just started. So because the pool is building up now. Till now if I see the ballpark number it would be the subsidy which our customers have got is around in the range of INR 7-8 crore the which subsidy has been given. I think there were some challenges and teething trouble in initial days of the when the program was launched. Some technical challenges which have been sorted. Now the process is also smoothened because government had NHB in.
Government has taken, you know, different measure for that and they sorted it out. Now I think this will scale up and it will move very fast in terms of getting subsidy to the customer, but as of now you talked about the contribution is very low because the process was slightly cumbersome.
Okay, but can you expect this PMAY 2.0 to be the game changer in the next six to nine months? Probably from a post six to 12 months basically. Can it become a game changer in terms of your disbursement volumes?
Yeah, so no it may not be very high game changer I would say but definitely it will be game changer because there is enough push from the government and the National Housing Bank also to promote this.
And you know that is how I think this again some meeting is going to happen in few parts of the country where you know few of the you know further deliberation will happen and I think government focus is clearly on to improve this and because the overall amount which they value credit is substantial to facilitate to the underprivileged customers.
Okay, sure. Just a small. If you can just provide. Even if Valli can provide this data point for the affordable housing. How's the 6 MOB and 12 MOB for vintage portfolio for the affordable housing. How these numbers are trend and yeah thanks.
We will get back to you separately.
Sure, sure. Sure. Thank you.
Yeah, thank you.
Thank you. We take the next question from the line of Harshit Toshniwal from Premji Invest. Please go ahead.
Hi sir. Am I audible?
Yeah, yes, you're audible.
The question was related to the 10 basis point impact which you mentioned because of the corporate one-off account rundown. When I look at our corporate developer loan movement this quarter from, I think, INR 319 crore to INR 250 crore. Since we haven't done any disbursement, I think probably the net repayments are not very high to the tune of INR 70-INR 80 crore itself. So actually if you can help me tie up that 10 basis point impact on the yield, it seems too large for our rundown of INR 70 crore number itself. How should we look at that 10 basis points and you mentioned that next quarter onwards the reversal will happen for that 10 basis points. So should we expect that the yields of 9.55% which we have come to normalized number would be 9.72%. A normalized number would be 9.85% to look at from the next quarter.
Yeah, as you mentioned. So it should not be compared with the. You know, this runoff happened at the end of previous quarter. So the runoff happened on 30th of September. So the 30th of September book was already lower by 350. So it has changed actually run down at the end of Q2. So hence it is not showing in the runoff. But it is. If you see Q2 beginning book and then compare, you will be able to see the difference.
Got it? Got it, sir. In that case then my 9.72% reported this quarter. Shouldn't this be the normalized base rather than? Why would that 10 points normalize?
No, no. That's right. This. I was explaining walk of yield versus previous quarter. So it has impacted negatively versus previous quarter. But this is a new normal now. 9.72% which will continue going forward.
Okay. Got it. Got it. Sure, sir. Okay. Okay. Okay.
Thank you.
Thank you. We take the next question from the line of Praful Kumar from Dymon Asia Capital. Please go ahead. Praful, please unmute your line and proceed with your question. Since there is no response, we will move on to the next question which is from the line of Prithviraj Patil from Investec. Please go ahead.
Most of my questions have been answered. I just had one question on the disclosures that were given. So Affordable, Prime and Emerging. Have we changed any classification there? Because I see that the Q3 FY 2025 numbers are different from the ones that were reported earlier. I just wanted to know if there's any classification change there. Thanks.
So. So there is no change of classification. The classification as it is the geography, the segment is. There's a difference of only segment of geography. So what we were following, we are following still. So there is no classification change. Rather we'll increase our footprint in emerging and affordable segment.
Okay. Thank you.
Thank you. We take the next question from the line of Umesh Jain from Kotak Life Insurance. Please go ahead. Umesh, please unmute your line and proceed with your question.
Hi. Sorry. Can you hear me?
Yes. Please go ahead.
Yeah, thank you for the opportunity. Have you answered the reason for no change in the branch addition? If I look at the branch addition in the affordable and emerging market, we have not seen sequential change. While from last couple of quarters there was a very strong healthy branch expansion. And how should we see this number going forward in Q4 in FY 2027?
So Umesh, I think you know the practice which we are following is that at the end of last quarter we add new branches. If you see why it has not happened sequentially in three quarters. Because this quarter we'll add some 30, 35 to 40 branches which will reflect as operational in quarter one of next year.
Sure. And what will be net branch addition in FY 2027?
2027? We are expecting 50 branches. Almost.
50 branches put together a nd what will be the affordable mix?
So, 50 branches, if you are talking about end of 2027, it would be around 75, 20 branches. But because these branches which will come up in quarter four will actually replace in 2027 plus 2027 branches will also be working on that. So, the total number of branches put together for this year, next year, would be around 70 to 80 branches.
Sure.
And majority would be affordable. And majority would be affordable in tier three, tier four cities.
Thanks.
Thank you, ladies and gentlemen. With that, we conclude the question-and-answer session. I now hand the conference over to the management for their closing comments.
Thank you, everyone, for joining us on the call. If you have any questions unanswered, please feel free to get in touch with Investor Relations. The transcript of this call will be uploaded on our website, www.pnbhousing.com. Thank you for your participation.
Thank you on behalf of PNB Housing Finance Limited, that concludes this conference call. Thank you for joining us. And you may now disconnect your line.