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What Was The Impact of PNB Fiasco On PNB Housing Finance?

As you may be aware, Punjab National Bank (PNB) has been embroiled in financial irregularities worth more than Rs 13,000 crore, involving Nirav Modi and his associates. This has raised concerns among PNB customers, who are worried about their deposits and transactions with the bank. Even though PNB’s business fundamentals look strong, concerns are still being raised by various investors and customers.

The PNB fiasco is also having a domino effect on its subsidiaries and promoted entities. Linking the PNB fiasco with the health of PNB Housing Finance may just be a negative perception without any evidence to back at. From the past trend and financial performance it seems that PNB Housing Finance is doing quite well and is building from strength to strength every year. Here are some facts that show that PNB Housing Finance remains strong as ever, despite the PNB fiasco.

No major impact on stock prices

While stock price of PNB has nosedived since the fiasco, the stock price of PNB Housing Finance has not seen much correction. Infact, the stake sale news by shareholders has led to a traction in the share price as seen in recent days. PNB stock was around Rs 195 in January 2018, but now it is trading at around Rs 75. This is a fall of more than 61 percent in just around 5 months. In comparison, stock price of PNB Housing Finance has remained stable in the range of Rs 1,100 and Rs 1,300 since January. As a matter of fact, stock price of PNB Housing Finance had hit a high of Rs 1,419 in May 2018. This clearly shows that the investor community may have its doubts on PNB, but it is quite bullish on PNB Housing Finance.

Strong business fundamentals

PNB Housing has been growing from strength to strength every year and its business fundamentals remain strong. Many reports available publicly indicate that the company has been performing autonomously without any overlap from the parent, which has led to its growth pattern. Even when PNB’s ratings have been effected due to existing crisis, credit ratings of PNB Housing have not seen any change, establishing trust on its independent business operations. Here’s a brief overview of the financial results of PNB Housing.

  • Strong Revenue & Profit growth: PNB Housing registered revenue growth of more than 40 percent during the last financial year; from Rs 3,908 crore in FY 17 to Rs 5,517 crore in FY 18. Net profit also registered a significant growth of more than 58 percent; from Rs 524 crore in FY 17 to Rs 829 crore in FY 18.
  • Low NPA: The NPA of PNB Housing has remained below the industry average since 2012. In FY 18, PNB Housing’s gross NPA was 0.33 percent, which is lower than the industry average.
  • Assets Under Management (AUM): PNB Housing’s AUM has consistently grown over the years. During the last year, the AUM grew by more than 50 percent; from Rs 41,492 crore in FY 17 to Rs 62,252 crore in FY 18.
  • Accelerated growth in Disbursement: PNB Housing has witnessed fast-paced growth in loan disbursements over the years. During the last year, the growth in loan disbursement was more than 60 percent; from Rs 20,639 crore in FY 17 to Rs 33,195 crore in FY 18. PNB Housing’s loan disbursements have witnessed healthy growth across the North, South and West regions. The company had 84 branches across India as reported in FY17-18 financial results.

Robust credit rating

PNB Housing has remained a favorite of credit rating agencies over the years. PNB Housing’s current credit ratings are:

  • Fixed Deposits: CARE AAA | FAAA with stable outlook by CRISIL
  • Bonds/NCDs: CARE AAA | IND AAA/RWN with stable outlook by India Ratings (Fitch Group)| CRISIL AA+ with Stable outlook | ICRA AA+
  • Bank Loans Long Term Rating: CARE AAA | CRISIL AA+ (Outlook – stable)
  • Commercial Paper Program: CARE A1+ | CRISIL A1+

Creating value for shareholders

PNB Housing has consistently delivered higher returns to its shareholders. Both Earning Per Share (EPS) and Dividend Per Share have witnessed significant growth over the years. EPS grew by more than 35 percent during the last year; from Rs 36.72 in FY 17 to Rs 49.89 in FY 18. Dividend Per Share grew by 50 percent; from Rs 6 in FY 17 to Rs 9 in FY 18.


As is evident from above facts and figures, PNB Housing Finance has remained largely unaffected by the PNB fiasco. There may have been some ramifications on customer and market sentiments, especially when the irregularities were initially reported in PNB. However, the doubts regarding PNB Housing’s health have been mostly dispelled now. Customers and investors have realized the fact that PNB Housing functions in an independent manner, and it won’t be affected by the PNB fiasco. The strong financials, sound fundamentals, healthy credit rating and buoyant stock prices are leading to a bullish sentiment by shareholders and investors alike. 

By: Satyam Prakash

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