CARE downgrades ratings of PNB Housing Finance Limited

The Credit Rating Agency, CARE has downgraded the credit rating of PNB Housing Finance Limited's Bank Borrowings, NCDs and Fixed Deposits to 'CARE AA' (Outlook Stable) from 'CARE AA+' (Outlook Negative). The rating agency has revised the Outlook from 'Negative' to 'Stable'.

As per CARE;

"The revision in the ratings of PNBHFL factor in deteriorating asset quality of the company with rise in absolute Gross NPAs to Rs.1,856 crore, translating in GNPA of 2.75% on loan assets as on March-20, up from 1.75% as on Dec-19 which has been mainly due to increasing stress levels in the underlying assets, especially in the company's corporate portfolio in recent years. The rating action also takes into account the delay in planned equity infusion as PNBHFL needs to raise substantial capital in order to bring down its on-book gearing levels (~9x as on Mar-20) which has become especially important in view of the increased portfolio vulnerability of the wholesale book. As per management of PNBHFL, the company intends to raise upto Rs.1,700 crore of capital via rights issue in the near term that would be crucial for sustaining the growth in its loan book and reduce its leverage levels.

Company's profitability profile has moderated with return on total assets (RoTA) at 0.80% as on March-20 (vs 1.64% as March-19) on account of elevated provisioning costs (including provisions related to Covid-19) during FY20. PNBHFL has built in provisions in its book and the total provision as a percentage of CARE adjusted average total asset stood at 1.55% as on March 31, 2020 as against 0.26% as on March 31, 2019.

While the company has sufficient liquidity to meet it's near term obligation, but with lower than expected scheduled inflows coupled with scheduled liability related outflows, the liquidity profile could moderate if the current challenging environment gets prolonged.

The ratings, however continue to derive strength from its experienced management team, brand linkages with/ and expectation of continued support from Punjab National Bank (PNB); promoter of PNBHFL, strong market position as the fourth largest Housing Finance Company (HFC) in the country (by assets as on March 31, 2020), well diversified resource profile as demonstrated by its ability to raise funds despite the tight liquidity environment seen since Sept-18 and adequate liquidity with company having liquid cash and bank balance and investments of Rs.14,269 crore as on May 30, 2020 which are sufficient to take care of short term debt obligations of upto 3 months (till Sep-20)."

Shares of PNB Housing Finance Ltd was last trading in BSE at Rs.210.05 as compared to the previous close of Rs. 212.65. The total number of shares traded during the day was 28442 in over 1295 trades.

The stock hit an intraday high of Rs. 215.1 and intraday low of 208.35. The net turnover during the day was Rs. 5971776.

Source : Equity Bulls

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