Summary
PNB Housing Finance Limited - Q3 FY26 Earnings Call Summary Thursday, January 22, 2026 11:00 AM
Event Participants
Executives 6 Ajai Kumar Shukla (MD & CEO), Chaitanya Yadav (National Head - Corp. Planning & IR), Jatul Anand (Executive Director), Mukesh Aggarwal (Chief Sales Officer - Retail), Valli Sekar (Chief Business Officer - Affordable), Vinay Gupta (CFO)
Analysts 9 Abhijit Tibrewal, Avinash Singh, Bunty Chawla, Harshit Toshnival, Himanshu Taluja, Kunal Shah, Nidhesh, Nischint Chawathe, Viral Shah
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Retail Loan Book | ₹81,931 crores | +16% YoY; Affordable and Emerging segments now represent 39% of retail book. |
| Total Loan Book | ₹82,203 crores | +14% YoY; Corporate book reduced to ₹272 crores following large foreclosures. |
| Net Interest Income (NII) | ₹772 crores | +11% YoY; Growth supported by retail book expansion despite yield pressure. |
| NIM (%) | 3.63% | -4 bps QoQ; Impacted by lower disbursement yields and corporate book reduction. |
| Gross NPA (%) | 1.04% | -15 bps YoY; Stable QoQ; Management targets long-term range of 1.0%-1.1%. |
| Credit Cost (%) | -0.19% | Negative due to ₹49 crore recovery from written-off pools (Retail/Corporate). |
| Cost of Borrowing | 7.50% | -19 bps QoQ; Driven by repo rate cuts and ongoing bank negotiations. |
| PAT | ₹520 crores | +7.7% YoY; Driven by benign credit costs and stable operating margins. |
| ROA (%) | 2.57% | +9 bps YoY (9M FY26); Management guides for 2.5%-2.6% sustainable range. |
| CRAR (%) | 29.46% | High capital adequacy with Tier 1 capital at 28.92%. |
Geographic & Segment Commentary
- Affordable Housing: Disbursement saw a 15% YoY drop and 4.5% QoQ decline due to strategic recalibration in Southern markets (specifically Tamil Nadu) following government ordinances. Management expects a revert to growth in Q4 FY26 as the regulatory environment and collection trends stabilize.
- Emerging Markets: Segment continues to outperform with 25% YoY growth in disbursements and 31% YoY growth in the combined Affordable/Emerging loan book. These segments are the primary engines for the 17-18% retail growth guidance.
- Prime Retail: Delivered 20% YoY growth despite broader yield pressures. Strategy focuses on a 45/55 split between self-employed and salaried individuals to maintain risk-based pricing advantages.
Company-Specific & Strategic Commentary
- Construction Finance (CF) & Developer Finance: Company is re-entering CF in Tier 1 cities and launching “Emerging Developer Finance” with ticket sizes of ₹25-30 crores. These segments are expected to be NIM-accretive with yields between 11%-12.5%, though capped at 8-10% of the total book.
- Geographic Expansion: Total branch network stands at 358 (79% in Affordable/Emerging). Plans include adding 40-50 new branches annually, targeting 70-80 total additions across FY26-27 to deepen presence in Tier 2 and Tier 3 cities.
- Asset Quality Management: Reported a fraud in a legacy corporate account (sanctioned ₹275 crores) which was already 100% written off in FY23; legal measures are underway with no further financial impact.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Retail Loan Growth | 17% - 18% | Targeted for FY26; supported by Q4 seasonal highs and Affordable recovery. |
| NIM | 3.6% - 3.7% | Sustainable range; expected to improve as CF and Developer Finance scale. |
| ROA | 2.5% - 2.6% | Driven by recoveries for next 4-5 quarters and shift to high-yield segments. |
| Opex to ATA | 1.0% - 1.1% | Management intends to maintain efficiency even with branch expansion. |
| Loan Mix (Aff/Emer) | 45% - 50% | Medium-term target for the share of the retail book (currently 39%). |
Risks & Constraints
| Risk | Context |
|---|---|
| Yield Compression | Back-book yields are facing pressure from repo rate cuts and BT-outs (19% runoff rate). Management is offsetting this through lower incremental borrowing costs (7.2%). |
| Regulatory/Ordinance Risk | Recent MFI-related ordinances in Southern India caused a temporary slowdown in Affordable disbursements. While stabilizing, any further local regulatory shifts could impact growth. |
| Asset Quality Seasoning | As the Affordable portfolio seasons, management noted expected delinquency trends; however, they remain within industry benchmarks. |
Q&A Highlights
Southern Market Weakness
- Question: What caused the slowdown in Affordable disbursements in the South? (Abhijit Tibrewal)
- Answer: A government ordinance impacted market sentiment and collection strategies in Tamil Nadu. The company proactively restricted ticket sizes and slowed growth, but is now returning to original policies as the situation has normalized. (Ajai Kumar Shukla, Valli Sekar)
New Segment Rationale (CF & Developer Finance)
- Question: Why re-enter Construction Finance given past experiences? (Kunal Shah)
- Answer: CF and Emerging Developer Finance will be capped at 8-10% of total book. These will have separate underwriting policies. Average ticket sizes will be ₹25-30 crores with yields of 11-12.5%, providing a necessary boost to NIM as prime yields soften. (Ajai Kumar Shukla, Vinay Gupta)
Yield and Margin Walk
- Question: What caused the 25 bps drop in yields this quarter? (Nidhesh)
- Answer: 10 bps was due to the foreclosure of a large corporate account at the end of Q2. The remaining 12-15 bps resulted from lower disbursement yields and runoff pressure in the Prime segment. (Vinay Gupta)
Credit Cost Sustainability
- Question: How can ROA remain stable once negative credit costs normalize? (Bunty Chawla)
- Answer: Company has a written-off recovery pool (₹650 crores corporate, ₹350 crores retail) to support P&L for 4-5 quarters. Long-term, high-yield segments (Affordable/CF) and operating leverage from scale will offset normalized credit costs of 20-25 bps. (Ajai Kumar Shukla)
Key Takeaway
PNB Housing Finance delivered a steady Q3 FY26, characterized by a 16% YoY growth in the retail loan book and a healthy ROA of 2.57%. Despite a temporary contraction in Affordable disbursements due to regulatory headwinds in Southern India, the company maintained its 17-18% retail growth guidance for the full year. Strategically, the firm is shifting toward higher-yielding segments, with Affordable and Emerging markets now comprising 39% of the retail book and a planned re-entry into Construction Finance and Emerging Developer Finance (yields 11-12.5%). While yields saw a sequential compression of 23 bps due to corporate foreclosures and prime segment competition, management is successfully offsetting this with lower incremental borrowing costs (7.2%). Asset quality remains robust with GNPA at 1.04%, supported by significant recoveries from legacy written-off pools. The company appears well-positioned to leverage recent repo rate cuts to drive volume in Q4, while maintaining a cautious, calibrated approach to its new developer finance verticals.
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