Improved ratings, cheap NHB funds helped bring down borrowing cost, says PNB Housing Finance CEO Girish Kousgi

Girish Kousgi- PNB Housing Finance MD- CEO

PNB Housing Finance’s borrowing cost declined in the July-September quarter on improved ratings and availability of cheap funds through the National Housing Bank (NHB), managing director and chief executive officer Girish Kousgi told Moneycontrol in an exclusive interview.

In the September quarter, the average borrowing cost of the non-banking finance company reduced by 8 basis points (bps) sequentially and 19 bps on a yearly basis.

“We got ratings upgrade in quarter four of last year and quarter one of this year that has helped us to bring down the cost. We had access to NHB funds since last year… at a lower cost,” Kousgi said, adding these helped the company reduce borrowing costs.

The average cost of borrowing was 7.84 percent against 7.92 percent in the June quarter and 7.99 percent in the year-ago period, the company said in its investor presentation.

Earlier this year, India Ratings, ICRA and CARE Ratings upgraded the company’s ratings to “AA+” from “AA” with a “stable” outlook.

Kousgi talked to Moneycontrol about how the company improved its ratings, lowered borrowing costs and more. Edited excerpts of the interview:

Can you give guidance for the net interest margin (NIM)?

The margin for us is not shrinking. On a yearly basis, it has marginally gone down because corporate book is degrowing and that has had an impact on interest income and revenue. If you compare on a yearly basis, the margin would have come down, but if you look at the last two, or three quarters, the margin is maintained.

Now, the corporate book is down to about Rs 1,500 crore. We'll be restarting corporate in about two months’ time that will start helping us more on margins.

We'll be able to maintain the margin at 3.6 percent to 3.65 percent for the next two quarters.

How did the cost of borrowing come down in the September quarter?

We got a ratings upgrade in quarter four of the previous year and quarter one this year, which has helped us to bring down the cost.

We have had access to NHB funds since the past year and these funds come at a lower cost. We have various sources to borrow funds, given the company's performance, and when our ratings upgraded, we were able to source at a slightly lower cost. All these things have helped us to reduce the cost of borrowing.

Whenever the rate cut happens, the cost of borrowing will go down. Notwithstanding that, we'll be able to bring down costs from now. We will see some benefit in the next two to three quarters.

If the cut happens, the entire industry’s cost of borrowing will go down. At the same time, yields will also go down. Notwithstanding that, we'll be able to bring down cost in the next two, three quarters.

What about the sanction pipeline for the next quarter?

Normally, the sanction pool will grow in the range of about 28 to 30 percent.

What is your outlook on disbursement and AUM?

In H2, we'll be able to do a little over Rs 12,000 crore. For AUM, we have guided 17 percent growth. We are at 16.2 percent already and 17 percent is for the whole year. March to March, our book will grow by a minimum of 17 percent on retail.

Do you see any impact of harmonisation of housing finance companies and NBFCs’ norms?

We have enough room. We have literally zero impact. Our deposit in the overall liability mix, it's about 31 percent. It's quite healthy and our aspiration on doing the deposit book is very less and we'll be able to maintain at that level only. We'll be able to maintain it at that level.