Rationale

 The rating on the Rs. 875-crore non-convertible debenture (NCD) programme of PNB Housing Finance Limited (PNBHFL) has been withdrawn in accordance with ICRA's policy on the withdrawal and suspension of credit ratings and as requested by the company. The rated instrument had no amount outstanding against the same. The revision in the outlook factors in the improvement in PNBHFL's leverage and the reduction in the share of the wholesale segment in its total portfolio. Moreover, PNBHFL has witnessed some recoveries from its stressed corporate exposures. The company reported a gearing of 5.6 times as on December 31, 2021 (managed gearing1 of 6.6 times) against 6.7 times (managed gearing of 8.1 times) as on March 31, 2021. PNBHFL resolved 11 accounts amounting to ~Rs. 333 crore in 9M FY2022. The rating reaffirmation continues to factor in PNBHFL's established track record in the mortgage finance industry, its experienced management team, and diverse funding profile with demonstrated refinancing ability. ICRA notes that PNBHFL has reduced its corporate exposure, which declined by ~50% since December 2019 and stood at ~12% of the assets under management (AUM) as on December 31, 2021 against ~16% as on March 31, 2021. This was supported by sell-down and accelerated prepayments of around Rs. 2,294 crore in the corporate book in 9M FY2022. Further, ICRA expects that the company will continue to benefit from the shared brand name with its promoter, i.e. Punjab National Bank {PNB; rated [ICRA]AA+ (Stable)}, which helps PNBHFL leverage its franchise and raise funds, thereby supporting its financial flexibility. Nevertheless, the rating remains constrained by the weak asset quality indicators with reported gross non-performing assets (GNPAs) of 7.6% as on December 31, 2021 against 5.9% as on September 30, 2021 (4.4% as on March 31, 2021). ICRA notes that the reported GNPAs are elevated partly due to Reserve Bank of India's (RBI) clarification dated November 12, 20212 , which has led to an increase in the GNPAs by 1.4% and due to reduction in loan book on account of stated objective of the company to reduce corporate exposure. A deterioration in the asset quality was witnessed in the retail as well as the corporate book. Additionally, PNBHFL had a restructured book of ~Rs. 2,483 crore (4.4% of its loan book) outstanding as on December 31, 2021, which was restructured under the Covid-19 restructuring packages announced by the RBI. The performance of the restructured book under moratorium remains a monitorable.