Business Standard

Market volatility challenge to

PNB HFC's equity plans, says
ICRA

Further delay in fundraising will postpone the expected improvement in the

leverage profile and limit the cushion available for absorbing contingencies.
The capital market bloodbath due to the Covid-19 outbreak poses a challenge
to PNB Housing Finance’s plan to raise Rs 1,700 crore in equity capital in the
near term.

Also, further delay in fundraising will postpone the expected improvement in

the leverage profile and limit the cushion available for absorbing
contingencies, according to rating agency ICRA.

The agency has downgraded rating for HFC’s non-convertible debentures and
tier II bonds from “AA+” to “AA” due to weakening of its asset quality,
especially in the wholesale loan portfolio”. The rating revision factors in delays
in its fundraising plan along with the lower-than-expected planned equity
infusion.

PNB HFC recently took the board'’s approval to raise up to Rs 1,700 crore of
equity, which is lower than the previously envisaged amount, ICRA said.
Further, considering the concentrated risk in this profile and the challenging
operating environment, the company’s economic capital requirements have
increased.

Its stock closed 4.97 per cent down at Rs 161.6 per share on Friday (April 3) on
the BSE.

The company’s assets under management (AUM) stood at Rs 86,297 crore at

the end of December 2019. Punjab National Bank (PNB) and The Carlyle Group
had a stake of 32.65 per cent and 32.22 per cent, respectively, as of December
31, 2019.

The firm has witnessed moderation in growth in portfolio given the market
conditions and the same is expected to remain so in the near term.

The risks are mitigated by the good collateral cover maintained for exposures,
its risk management systems and processes, which support ability to
proactively manage the portfolio as demonstrated in the past.