PNB Housing Finance shares climbed 14% today. Here's why

Shares of PNB Housing Finance shares climbed over 14 per cent in Monday's trade after rating agency ICRA upgraded the housing finance company's non-convertible debentures (NCDs) rating to ‘ICRA AA+’ from ‘ICRA AA’, keeping the outlook 'stable'.

Following the development, the HFC stock rose 14.47 per cent to hit high of Rs 720.40 on BSE. Despite the gain, the PNB Housing stock is still down 10 per cent year-to-date. ICRA said the rating factors in the sustained improvement in PNB Housing Finance Limited’s credit profile, driven by the improved asset quality metrics and the strengthened capitalisation profile.

"The HFC has an established track record in the mortgage finance industry with assets under management (AUM) of Rs 68,549 crore and loan book of Rs. 62,337 crore as on December 31, 2023. The reported gross non-performing assets (NPAs) declined to 1.7 per cent as on December 31, 2023 from 3.8 per cent as on March 31, 2023 (8.1 per cent as on March 31, 2022), aided by the sale to asset reconstruction companies (ARCs), write-offs, recoveries and lower incremental slippages," ICRA said.

PNB Housing's managed gearing declined to 3.9 times in December 2023 from 5.6 times in March 2023 (6.3 times in March 2022), driven by the Rs. 2,494-crore fresh equity capital raised in 9M FY2024. In ICRA’s opinion,

PNBHFL is well capitalised to support its envisaged growth plans in the near-to-medium term.

"ICRA has also revised its rating approach and applied the implicit parent or group support approach for arriving at the rating for PNBHFL. The change in the rating approach factors in Punjab National Bank’s articulation that it intends to remain the sole promoter of PNBHFL and extend financial and other forms of support, when required, to the extent allowed within the regulatory guidance/framework," ICRA said.

PNB is expected to hold a stake of more than 26 per cent in the HFC's equity. PNB Housing company also benefits from the shared brand name, which helps it leverage its franchise and raise funds, supporting its financial flexibility, ICRA said.